Apparently, water did the trick, loosening up the red gunk on the sword enough that it could be wiped clean, leaving nothing but gleaming gold. Hellboy's so pleased by it that the close shot with the arrow is even more of a shock than it otherwise might've been.

"Son of a--" he exclaims, his head rocking back in the one concession to the instinct to dodge that's available to him in his seated position. He puts the towel down in his lap and plucks the wrecked stump of the cigar out of his mouth, looking at it with narrowing eyes and tightening lips. For a long moment, he looks incredibly angry and like he's about to scramble to his hooves and start some mayhem... but then he takes a deep breath in and out, and settles back down.

"Okay, pal," he calls out into the darkness, with the tensely even tone of someone restraining his temper, "I can understand you maybe didn't want me at your fire, but that was a perfectly nice cigar you just ruined. Now, I'm going to put my sword away. If you shoot me, it'll probably just piss me off, so don't do that. How about you come take a seat, and we can chat like civilized folks."

Hellboy does indeed put his sword away, switching it to his left hand and sheathing it in the scabbard slung on his back, slowly so that his unseen assailant can see how non-threatening he's being. This may not be the most tactically wise move, but he's right about arrows being more of a nuisance than a danger. Just in case, though, his Right Hand is not laying idle in his lap; instead, he's holding it up like he's being mugged, where it can readily move to block any arrows aimed at his face.