Following the test results of RCS-1 on Monday I was very fortunate to be able to have an extensive chat with Arrow CEO Marshall Abbott.

I first asked him about the excellent well result and how the campaign has been so successful operationally. There is no doubt that this well was way better than expected particularly in the Carbonera formation which will be onstream this week and brought to appropriate capacity very carefully.

Indeed it is not only this well that has been a great success, the previous well, RCE-2 seems to be the gift that keeps on giving and is already producing some 500 b/d more than previously expected. These two wells alone are delivering better than modelled production and that is without making any efforts to raise flows unnecessarily fast.

On the political front, following the elections and the narrow success of Gustavo Petro to the Presidency it had been considered that as a left wing candidate he had had a strongly anti oil and gas stance. It seems that since taking office he has somewhat softened his stance and as oil and gas accounts for some 40% of exports and 5% of GDP it is already unlikely that the sector will be hi   t too hard. Add to that it seems that he will have no support from either house nothing major will be enacted.

I think that it is the initial ban on new licence grants and a ban on fraccing that may stick, Mr Abbott reminded me that with its huge acreage position they are in no need of new licences nor do they partake in fraccing.            

An increase the tax rate from say 25% to maybe 35% wouldn’t be the end of the world as with its 12% royalty on light oil Colombia is still rated as being in the top decile in the world for fiscal regimes.

Shareholders in Arrow can expect an updated CPR with its much more robust price deck and the company are well up with its production hopes. As a result of recent drilling the first target of 3,000 b/d by early next year looks to be eminently achievable whilst the longer term aim of some 10,000 b/d looks like being on within 3/4 years and I wouldnt bet against them on this front. The shares have fallen by 25% on political worries which I think are overdone, in my view the upside for Arrow is very substantial indeed.