Arrow Explor. Regulatory News (AXL)

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ARROW ANNOUNCES Q1 2023 INTERIM RESULTS

CALGARY, May 30, 2023 - 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, announces the filing of its Interim Condensed Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the quarter ended March 31, 2023 which are available on SEDAR (www.sedar.com) and will also shortly be available on Arrow's website at www.arrowexploration.ca.

Q1 2023 Highlights:

· Recorded $6.9 million of total oil and natural gas revenue, net of royalties, more than double compared to 2022 (Q1 2022: $3.4 million).

· Adjusted EBITDA of $4.3 million, more than seven times compared to 2022 (Q1 2022: $0.6 million).

· Average corporate production up 43% to 1,635 boe/d (Q1 2022: 1,144 boe/d).

· Realized corporate oil operating netbacks of $58.31/bbl due to increased production allowing operating cost to be spread over more barrels.

· Cash position of $12.3 million at the end of Q1 2023.

· Generated positive operating cashflows of $2.4 million (Q1 2022: negative $0.1 million).

· Drilled three successful wells at Rio Cravo Este (RCE) resulting in material production additions.

Post Period End Highlights:

· The Carrizales Norte-1 (CN-1) well has been drilled and reached its target depth, and is currently under production testing.

Outlook

· Arrow anticipates two additional wells to be drilled at Carrizales Norte by year-end.

· Arrow anticipates two additional wells at RCE by year-end to target the Gacheta formation which was successfully tested at commercial rates in RCE-2.

· Arrow plans to drill two development wells at the Oso Pardo Block in the Middle Magdalena Basin.

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

"Arrow has had a strong start to 2023, including the drilling of three RCE wells and the CN-1 well, which is expected to have a significant impact on the Company's production and reserves, as well as establishing a new core area. The 3D seismic West Tapir project has completed shooting, is currently being processed and is expected to further evaluate the 2D recognized fault prospects. The Arrow Team continues to strive towards excellence and increasing shareholder value."

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

The Company maintained its overall production and continued improving its operations. This has allowed the Company to continue to improve its balance sheet and its business profile. In early 2023, the Company increased production on its Tapir block through drilling the RCE-3, RCE-4 and RCE-5 wells, offset by the current production shut in at its Ombu block. There has also been a decrease in the Company's natural gas production in Canada due to natural declines.

Average Production by Property

For the three months ended March 31, 2023, the Company's average production was 1,635 boe/d, which consisted of crude oil production in Colombia of 1,222 bbl/d, natural gas production of 2,459 Mcf/d and minor amounts of natural gas liquids from the Company's Canadian properties. The Company's Q1 2023 total production was 43% higher than its total production for the same period in 2022.

Discussion of Financial Results

During Q1 2023 the Company continued to realize strong oil prices, offset by decreased gas prices, as summarized below:

(1)Non-IFRS measure

Operating Netbacks

The Company also continued to realize positive operating netbacks, as summarized below.

 (1)Non-IFRS measure

The operating netbacks of the Company continued improving in 2023 due to increasing production from its Colombian assets, and consistent crude oil prices, which were offset by decreases in natural gas prices and increases in royalties and operating expenses for natural gas.

During Q1 2023, the Company incurred in $4.3 million of capital expenditures, primarily in connection with the drilling of the three RCE wells, civil works completed in Rio Cravo and shooting 100 km2 of 3D seismic in the Tapir block to highlight existing leads and prospects for drilling. This acceleration in operational tempo is expected throughout 2023, funded by cash on hand and cashflow.

ARROW PARTICIPATING INTEREST IN THE TAPIR BLOCK

By way of a private commercial contract with the recognized interest holder before Ecopetrol S.A., Arrow is entitled to receive 50% of the production from the Tapir block. The formal assignment to the Company is subject to Ecopetrol's consent.

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 COVID-19, 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

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.

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, 2023 AND 2022

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, 2023

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 Condensed Consolidated Statements of Financial Position

In United States Dollars

(Unaudited)

Commitments and contingencies (Note 13)

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

On behalf of the Board:

 signed "Gage Jull" Director signed "Anthony Zaidi" Director

Gage Jull Anthony Zaidi

Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

In United States Dollars

(Unaudited)

The accompanying notes are an integral part of these interim condensed 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 condensed 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 condensed 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 550, 333 - 11th Ave SW, Calgary, Alberta, Canada, T2R 1L9 and the registered office is located at 1600, 421 - 7th Avenue SW, Calgary, Alberta, Canada, T2P 4K9.

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, 2023. 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, 2022.

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, 2022, except for the adoption of new accounting standards effective January 1, 2023. 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, 2022.

Adoption of New Accounting Standards

The Company adopted amendments published by IASB to IAS 8 Changes in Estimates vs Changes in Accounting Policies and to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. These amendments were adopted by the Company from January 1, 2023 but they did not have a material impact on the Consolidated Financial Statements.

3. Restricted Cash and deposits

(i) Balance comprised of deposits held as collateral to guarantee abandonment expenditures in the Tapir and Santa Isabel blocks.

(ii)  Pursuant to Alberta government regulations, the Company was required to keep a $317,123 (CAD $429,182; 2022: $424,398) deposit for the Company's liability rating management ("LMR"), which is held by a bank with interest paid to the Company. The remaining $256,765 pertain to commercial deposits with customers, lease and other deposits held in Canada.

4. Trade and other receivables

As at December 31, 2022, other accounts receivable included a $1,070,825 receivable from a partner in the Tapir block and corresponds to reimbursable capital expenditures incurred on the Tapir block.

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

7. Property and Equipment

Effective February 9, 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 is for an initial term of three months and the Company, together with its partner and the ANH, is monitoring this suspension to define next steps.

8. Promissory Note

The promissory note was issued to Canacol Energy Ltd. ("Canacol"), a related party to the Company, as partial consideration in the acquisition of Carrao Energy S.A. from Canacol. The promissory note bears interest at 15% per annum, and, on October 18, 2021, Arrow and Canacol entered into a Seventh Amended and Restated Promissory Note agreement with a current balance payable of $ 1,958,603 as at March 31, 2023 which shall be paid no later than June 30, 2023. The Company has granted a general security interest to Canacol for the obligations under the Promissory Note.

9. Lease Obligations

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

As at March 31, 2023, the Company has the following future lease obligations:

10. 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 (2022: 2.50% to 3.75%) and between 3.55% and 4.13% in Colombia (2022: 3.55% and 4.13%) with an inflation rate of 3.0% and 3.5%, respectively (2022: 3.0% and 3.5%). The majority of costs are expected to occur between 2023 and 2033. 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 $5,006,281 (2022: $4,480,074).

11. Derivative liability

Derivative liability includes warrants issued and outstanding as follows:

Each warrant is exercisable at £0.09 per new common share for 24 months from the issuance date and are measured at fair value quarterly using the Black-Scholes options pricing model. The fair value of warrants at March 31, 2023 and December 31, 2022 was estimated using the following assumptions:

The following table summarizes the warrants outstanding and exercisable at March 31, 2023:

12. 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, employees and consultants options to purchase a number of non-transferable common shares not exceeding 10% of the common shares that are outstanding. 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 status of the Company stock option plan as at March 31, 2023 and December 31, 2022 and changes during the respective periods ended on those dates is presented below:

The Company recognized $132,240 as share-based compensation expense (2022 - recovery of $62,919) for the three months ended March 31, 2023, with a corresponding effect in the contributed surplus account.

13. 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. In aggregate, the Company has outstanding exploration commitments of $17.8 million as at March 31, 2023. The Company have made applications to cancel its commitments on the COR-39, Macaya and Los Picachos blocks.

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 the individuals as a result of their service.

Letters of Credit

At March 31, 2023, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $2.8 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, or any of them, the ANH could decide to cancel the underlying exploration and production contract for a particular block, as applicable.