CALGARY,
AB, Feb. 9, 2023 /CNW/ - (TSX: ARX) ARC
Resources Ltd. ("ARC" or the "Company") today reported its fourth
quarter and year-end 2022 financial and operational results as well
as its year-end 2022 reserves.
ARC generated record production and funds from operations per
share in the fourth quarter of 2022. In 2022, annual average
production, net income, funds from operations, and free funds flow
were the highest of any year in ARC's 26-year history.
HIGHLIGHTS
Fourth Quarter 2022 Results
- ARC delivered record average production of 359,730
boe(1)(2) per day (61 per cent natural gas and 39 per
cent crude oil and liquids). Production per share(3)
increased 16 per cent year-over-year and was in-line with Company
guidance despite weather related downtime in December.
- ARC generated free funds flow of $603
million(4) ($0.96
per share)(5), funds from operations of $986 million(6) ($1.56 per share)(7) and cash flow from
operating activities of $878 million
in the fourth quarter. ARC invested $383
million into capital expenditures(4), in-line
with Company guidance.
- ARC's market diversification strategy resulted in an average
realized natural gas price of $8.31
per Mcf(7); $2.73 per Mcf,
or 49 per cent, greater than the average AECO 7A Monthly Index
price.
- ARC distributed 68 per cent or $411
million ($0.65 per share) of
free funds flow for the period to shareholders through base
dividends and share repurchases, with the remainder used to reduce
net debt to $1.3
billion(6) or 0.4 times funds from
operations(6).
- ARC repurchased 17 million shares during the fourth quarter.
Since renewing its NCIB on August 30,
2022, ARC has repurchased 35 million common shares,
representing 53 per cent of its allotment under the current
NCIB.
- ARC recognized net income of $741
million ($1.18 per share),
compared to net income of $678
million ($0.96 per share) in
the fourth quarter of 2021.
Year-end 2022 Results
- ARC generated record free funds flow in 2022 of $2.3 billion ($3.42
per share), representing a 58 per cent increase compared to 2021
free funds flow per share. ARC distributed 71 per cent or
$1.6 billion ($2.43 per share) of free funds flow to
shareholders with the remainder used to further strengthen ARC's
balance sheet by reducing debt by $0.7
billion and net debt by $0.5
billion.
- In the second quarter of 2022, ARC entered into a long-term
natural gas supply agreement with Cheniere Energy, Inc.
("Cheniere"). The agreement commences with the commercial operation
of Train 7 of the Corpus Christi Stage III expansion which is
expected in 2027. ARC will deliver natural gas to Cheniere through
existing pipeline capacity and will receive a liquefied natural gas
("LNG") price based on Platts JKMTM (Japan Korea
Marker), after deductions for fixed LNG shipping costs and a fixed
liquefaction fee.
- ARC recognized net income of $2.3
billion ($3.47 per share)
compared to net income of $787
million ($1.25 per share) in
2021. Cash flow from operating activities was $3.8 billion and funds from operations were
$3.7 billion ($5.60 per share).
- ARC executed its 2022 capital program safely and efficiently.
Cash flow used in investing activities totaled $1.4 billion, with capital expenditures of
$1.4 billion delivering record
average production of 345,613 boe per day (61 per cent natural gas
and 39 per cent crude oil and liquids) in 2022.
- Market diversification resulted in an average annual realized
natural gas price of $8.15 per Mcf;
$2.59 per Mcf, or 47 per cent greater
than the average AECO 7A Monthly Index price for the period.
- In January 2023, ARC received
certification under Equitable Origin's EO100TM Standard
for Responsible Development for its Ante Creek asset. With this
certification and prior certifications received in 2022 for Kakwa
and the Company's northeast BC assets, 100 per cent of the
Company's assets are now certified under this global standard,
representing the largest certified production base in Canada.
Year-end 2022 Reserves(1)(8)
- ARC's before-tax net present value ("NPV") of proved plus
probable ("2P") reserves, discounted at 10 per cent, increased 49
per cent to $34.00 per
share(9) or $21.1 billion
at December 31, 2022. The increase
was driven by positive technical revisions and extensions and
improved recovery, particularly at Kakwa, along with stronger
commodity prices and reduced share count.
- ARC grew its reserves per share in all categories between
14 per cent and 22 per cent. Proved producing ("PDP") reserves
increased 22 per cent per share to 549 MMboe, primarily due to out
performance at Kakwa where PDP reserves increased by 17 per cent.
PDP finding, development and acquisition ("FD&A") costs
including future development costs ("FDC") of $8.31 per boe(10) equated to a 5.2
times(10) PDP recycle ratio.
- 2P reserve replacement from development has been 140 per
cent of production or greater for 15 consecutive years, and at
year-end 2022 just 17 per cent of ARC's total drilling inventory
was booked in the 2P category. ARC's Attachie asset, which will drive the next
phase of production and reserve growth, comprised less than four
per cent of total 2P locations with just 34 undeveloped drilling
locations booked.
ARC's consolidated financial statements and notes (the
"financial statements") and Management's Discussion and Analysis
("MD&A") as at and for the three months and year ended
December 31, 2022, are available on ARC's website at
www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com. The disclosures under the sections entitled
"Netback" and "Non-GAAP and Other Financial Measures" in ARC's
MD&A as at and for the three months and year ended
December 31, 2022 (the "2022 Annual MD&A") are
incorporated by reference in this news release.
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___________________________________________
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|
(1)
|
ARC has adopted the
standard six thousand cubic feet ("Mcf") of natural gas to one
barrel ("bbl") of crude oil ratio when converting natural gas to
barrels of oil equivalent ("boe"). Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 6
Mcf:1 bbl is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Given that the value ratio based
on the current price of crude oil as compared to natural gas is
significantly different than the energy equivalency of the 6:1
conversion ratio, utilizing the 6:1 conversion ratio may be
misleading as an indication of value.
|
|
(2)
|
Throughout this news
release, crude oil ("crude oil") refers to light, medium, and heavy
crude oil product types as defined by National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). Condensate is a natural gas liquid as defined by NI
51-101. Throughout this news release, natural gas liquids ("NGLs")
comprise all natural gas liquids as defined by NI 51-101 other than
condensate, which is disclosed separately. Throughout this news
release, crude oil and liquids ("crude oil and liquids") refers to
crude oil, condensate, and
NGLs.
|
|
(3)
|
Represents average
daily production divided by the diluted weighted average common
shares outstanding for the respective three months ended December
31.
|
|
(4)
|
Non-GAAP financial
measure that is not a standardized financial measure under
International Financial Reporting Standards ("IFRS") and may not be
comparable to similar financial measures disclosed by other
issuers. See "Non-GAAP and Other Financial Measures" in the
2022 Annual MD&A for information relating to this non-GAAP
financial measure, which information is incorporated by reference
into this news release. See "Non-GAAP and Other Financial
Measures" of this news release for the most directly comparable
financial measure disclosed in ARC's current financial statements
to which such non-GAAP financial measure relates and a
reconciliation to such comparable financial measure.
|
|
(5)
|
Non-GAAP ratio that is
not a standardized financial measure under IFRS and may not be
comparable to similar ratios disclosed by other issuers. Free funds
flow, a non-GAAP financial measure, is used as a component of the
non-GAAP ratio. See "Non-GAAP and Other Financial Measures"
in the 2022 Annual MD&A for the non-GAAP ratio for the
comparative period and other information relating to this non-GAAP
ratio, which information is incorporated by reference into this
news release.
|
|
(6)
|
See Note 16 "Capital
Management" in the financial statements and "Non-GAAP and
Other Financial Measures" in the 2022 Annual MD&A for
information relating to this capital management measure, which
information is incorporated by reference into this news
release.
|
|
(7)
|
See "Non-GAAP and
Other Financial Measures" in the 2022 Annual MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
|
(8)
|
GLJ Ltd. ("GLJ")
conducted an Independent Qualified Reserves Evaluation ("Reserves
Evaluation"), dated February 8, 2023 and effective December 31,
2022, which was prepared in accordance with definitions, standards,
and procedures in the Canadian Oil and Gas Evaluation ("COGE")
Handbook and NI 51-101. The Reserves Evaluation was based on GLJ
forecast pricing and foreign exchange rates at January 1,
2023.
|
|
(9)
|
See "Non-GAAP and
Other Financial Measures" of this news release for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
|
(10)
|
Non-GAAP ratio that is
not a standardized financial measure under IFRS and may not be
comparable to similar financial measures disclosed by other
issuers. Netback per boe, a non-GAAP ratio, and capital
expenditures and adjusted net capital acquisitions, both non-GAAP
financial measures, are used as components of the non-GAAP ratio.
See "Non-GAAP and Other Financial Measures" of this news release
for the non-GAAP ratio for the comparative period and other
information relating to this non-GAAP ratio.
|
FINANCIAL AND OPERATIONAL RESULTS
|
(Cdn$ millions, except
per share amounts(1), boe amounts,
|
Three Months
Ended
|
Year
Ended(2)
|
|
and
common shares outstanding)
|
September 30,
2022
|
December 31,
2022
|
December 31,
2021
|
December 31,
2022
|
December 31,
2021
|
|
FINANCIAL
RESULTS
|
|
|
|
|
|
|
Net income
|
867.8
|
741.0
|
678.0
|
2,302.3
|
786.6
|
|
Per share
|
1.32
|
1.18
|
0.96
|
3.47
|
1.25
|
|
Cash flow from
operating activities
|
1,103.6
|
878.3
|
668.7
|
3,833.3
|
2,006.5
|
|
Per
share(3)
|
1.68
|
1.39
|
0.95
|
5.78
|
3.20
|
|
Funds from
operations
|
953.0
|
986.2
|
833.6
|
3,712.5
|
2,415.4
|
|
Per share
|
1.45
|
1.56
|
1.19
|
5.60
|
3.85
|
|
Free funds
flow
|
580.1
|
602.9
|
458.7
|
2,270.6
|
1,353.6
|
|
Per share
|
0.89
|
0.96
|
0.65
|
3.42
|
2.16
|
|
Dividends
declared
|
76.7
|
93.4
|
69.5
|
318.2
|
181.4
|
|
Per share
|
0.12
|
0.15
|
0.10
|
0.49
|
0.286
|
|
Cash flow used in
investing activities
|
351.9
|
350.7
|
268.7
|
1,413.2
|
808.1
|
|
Capital
expenditures
|
372.9
|
383.3
|
374.9
|
1,441.9
|
1,061.8
|
|
Long-term
debt
|
1,126.6
|
990.0
|
1,705.3
|
990.0
|
1,705.3
|
|
Net debt
|
1,541.3
|
1,301.5
|
1,828.7
|
1,301.5
|
1,828.7
|
|
Common shares
outstanding, weighted average diluted
(millions)
|
655.4
|
630.3
|
703.0
|
663.1
|
627.3
|
|
Common shares
outstanding, end of period (millions)
|
637.6
|
620.9
|
693.5
|
620.9
|
693.5
|
|
OPERATIONAL
RESULTS
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
Crude oil
(bbl/day)
|
8,149
|
7,280
|
7,857
|
7,904
|
10,435
|
|
Condensate
(bbl/day)
|
82,203
|
82,855
|
74,220
|
78,489
|
59,958
|
|
Crude oil and
condensate (bbl/day)
|
90,352
|
90,135
|
82,077
|
86,393
|
70,393
|
|
Natural gas
(MMcf/day)
|
1,227
|
1,310
|
1,293
|
1,259
|
1,149
|
|
NGLs
(bbl/day)
|
47,108
|
51,311
|
48,299
|
49,385
|
40,084
|
|
Total
(boe/day)
|
342,034
|
359,730
|
345,831
|
345,613
|
302,003
|
|
Average realized
price
|
|
|
|
|
|
|
Crude oil
($/bbl)(3)
|
111.41
|
103.58
|
92.11
|
115.66
|
75.08
|
|
Condensate
($/bbl)(3)
|
110.35
|
107.24
|
96.90
|
118.17
|
86.04
|
|
Natural gas
($/Mcf)(3)
|
9.29
|
8.31
|
6.45
|
8.15
|
4.82
|
|
NGLs
($/bbl)(3)
|
20.72
|
28.86
|
27.65
|
27.98
|
26.16
|
|
Average realized price
($/boe)(3)
|
65.37
|
61.17
|
50.87
|
63.18
|
41.48
|
|
Netback
|
|
|
|
|
|
|
Commodity sales from
production ($/boe)(3)
|
65.37
|
61.17
|
50.87
|
63.18
|
41.48
|
|
Royalties
($/boe)(3)
|
(9.23)
|
(10.18)
|
(5.44)
|
(9.59)
|
(3.64)
|
|
Operating expense
($/boe)(3)
|
(4.69)
|
(4.37)
|
(3.50)
|
(4.44)
|
(3.86)
|
|
Transportation expense
($/boe)(3)
|
(6.08)
|
(5.70)
|
(5.47)
|
(5.90)
|
(4.79)
|
|
Netback
($/boe)(4)
|
45.37
|
40.92
|
36.46
|
43.25
|
29.19
|
|
TRADING
STATISTICS(5)
|
|
|
|
|
|
|
High price
|
19.51
|
20.49
|
13.34
|
22.88
|
13.34
|
|
Low price
|
13.12
|
17.05
|
10.20
|
11.66
|
5.88
|
|
Close price
|
16.59
|
18.25
|
11.50
|
18.25
|
11.50
|
|
Average daily volume
(thousands of shares)
|
5,315
|
4,259
|
3,173
|
6,563
|
3,160
|
|
(1)
|
Per share amounts, with
the exception of dividends, are based on weighted average diluted
common shares.
|
|
(2)
|
Comparative figures
represent ARC's results prior to the closing of the business
combination with Seven Generations on April 6, 2021, and therefore
do not reflect historical data from Seven Generations.
|
|
(3)
|
See "Non-GAAP and
Other Financial Measures" in the 2022 Annual MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
|
(4)
|
Non-GAAP ratio that is
not a standardized financial measure under IFRS and may not be
comparable to similar ratios disclosed by other issuers. Netback, a
non-GAAP financial measure, is used as a component of the non-GAAP
ratio. See "Netback" and "Non-GAAP and Other Financial
Measures" in the 2022 Annual MD&A for the non-GAAP ratio
for the comparative period and other information relating to this
non-GAAP ratio, which information is incorporated by reference into
this news release.
|
|
(5)
|
Trading prices are
stated in Canadian dollars on a per share basis and are based on
intra-day trading on the Toronto Stock Exchange.
|
OUTLOOK
ARC is well positioned to build on its 2022 record performance
over the next several years. Kakwa continues to exhibit strong
performance and ARC has regained operational momentum in
British Columbia ("BC") following
the receipt of permits on freehold lands in late 2022.
- ARC has resumed activity in BC. With more than 95 per cent of
its existing BC production base on freehold land, the Company is
well positioned as it continues to receive freehold permits
required to fully execute its 2023 capital program. This includes
the 80 MMcf/day natural gas expansion at Sunrise, one of ARC's most
profitable assets with near zero emissions.
- In January 2023, the BC
government and several of the Treaty 8 First Nations reached
agreements regarding future resource development in the province.
ARC is evaluating the details of the agreements while engaging and
collaborating with its neighbouring Indigenous communities in BC.
After understanding the new regulatory process, the Company will be
in a position to make a decision as it relates to sanctioning of
Attachie West Phase I.
-
- Total project costs for Attachie West Phase I remain unchanged
and are estimated to be approximately $700
million. This includes capital required for the construction
of the facility and initial wells required to fill it. Phase I is
estimated to pay out in approximately two years based on
US$70 per barrel WTI and $3.50 per GJ AECO.
2023 Guidance
ARC's 2023 preliminary corporate guidance is unchanged since its
announcement in November 2022. ARC
continues to monitor inflation and work proactively with its
partners across the supply chain to ensure it has sufficient access
to services to safely and efficiently execute its program.
- In 2023, ARC intends to invest $1.8
billion(1) in capital expenditures and deliver
average production of approximately 345,000 to 350,000 boe per day
(60 per cent natural gas and 40 per cent crude oil and
liquids).
- In 2024, capital expenditures are expected to decrease to
between $1.5 billion and $1.6 billion with average production forecasted
to average approximately 350,000 boe per day (60 per cent natural
gas and 40 per cent crude oil and liquids).
-
- Lower anticipated capital requirements in 2024 to sustain a
higher level of production is expected to be a result of i) lower
base declines at Kakwa, ii) lower investment in infrastructure at
Kakwa, and iii) the absence of the one-time investment required in
2023 to restore BC production.
|
(1)
|
Refer to the section
entitled "About ARC Resources Ltd." contained within the
2022 Annual MD&A for historical capital expenditures,
which information is incorporated by reference into this news
release.
|
ARC's 2022 and 2023 annual guidance and a review of 2022 actual
results are outlined below:
|
2022
Guidance
|
2022
Actuals
|
% Variance from
2022 Guidance
|
2023
Guidance
|
|
Crude oil
(bbl/day)
|
8,000 -
9,000
|
7,904
|
(1)
|
8,500 -
9,000
|
|
Condensate
(bbl/day)
|
77,000 -
81,000
|
78,489
|
—
|
79,000 -
81,000
|
|
Crude oil and
condensate (bbl/day)
|
85,000 -
90,000
|
86,393
|
—
|
87,500 -
90,000
|
|
Natural gas
(MMcf/day)
|
1,240 -
1,260
|
1,259
|
—
|
1,260 -
1,270
|
|
NGLs
(bbl/day)
|
48,000 -
50,000
|
49,385
|
—
|
47,000 -
49,000
|
|
Total
(boe/day)
|
340,000 -
350,000
|
345,613
|
—
|
345,000 -
350,000
|
|
Expenses
($/boe)(1)
|
|
|
|
|
|
Operating
|
4.00 - 4.50
|
4.44
|
—
|
4.60 - 5.00
|
|
Transportation
|
5.35 - 5.75
|
5.90
|
3
|
5.50 - 6.00
|
|
General and
administrative ("G&A") expense
before share-based compensation expense
|
0.80 - 0.90
|
1.00
|
11
|
0.85 - 0.95
|
|
G&A - share-based
compensation expense(2)
|
0.60 - 0.70
|
0.69
|
—
|
0.25 - 0.35
|
|
Interest and
financing(3)
|
0.55 - 0.65
|
0.68
|
5
|
0.65 - 0.75
|
|
Current income tax
expense as a per cent of
funds from operations(1)
|
3 - 8
|
8
|
—
|
10 - 15
|
|
Capital expenditures ($
billions)
|
1.35 - 1.45
|
1.4
|
—
|
1.8
|
|
(1)
|
See "Non-GAAP and
Other Financial Measures" in the 2022 Annual MD&A for an
explanation of the composition of these supplementary
financial measures, which information is incorporated by reference
into this news release.
|
|
(2)
|
Comprises expense
recognized under all share-based compensation plans.
|
|
(3)
|
Excludes accretion of
ARC's asset retirement obligation.
|
- ARC's 2022 financial and operational results were largely
within guidance. ARC's G&A expense before share-based
compensation expense per boe was above guidance as a result of
increased employee compensation and corporate costs. Transportation
expense per boe was three per cent above guidance reflecting higher
fuel gas expense from stronger commodity prices. Interest and
financing was slightly above the guidance range as short-term
borrowing rates increased throughout 2022.
Free Funds Flow Allocation
ARC's goal is to provide shareholders with an attractive total
return while adhering to the Company's guiding principles of
balance sheet strength, capital discipline, and a focus on
profitability. This is achieved through profitable investments in
its assets, complemented by a meaningful return of capital that
grows over time.
In 2023, ARC anticipates that the proportion of free funds flow
allocated to shareholders will increase towards the upper half of
its free funds allocation range of between 50 to 100 per cent.
Greater operating momentum in BC along with further strengthening
of the balance sheet supports an increasing proportion of free
funds flow returned to shareholders.
- Base dividend and base dividend growth compounded by share
repurchases below intrinsic value remain the optimal mechanism to
return capital.
- In 2022, ARC repurchased 10 per cent of its issued and
outstanding shares through the NCIB and increased the base dividend
by 50 per cent. ARC intends to continue to grow the base dividend
with the underlying profitability of the business, and increase it
on a per share basis as shares are retired through the NCIB or
other means.
- The current dividend level remains sustainable through the
current commodity cycle.
FINANCIAL AND OPERATIONAL RESULTS
Production and Operating Expense
Production
- ARC's production averaged 359,730 boe per day during the fourth
quarter of 2022 (61 per cent natural gas and 39 per cent crude oil
and liquids). Production per share increased 16 per cent compared
to the fourth quarter of 2021 and was in-line with Company guidance
despite cold weather and unplanned downtime that impacted volumes
in December.
- Production increased by five per cent in the fourth quarter
compared to the third quarter of 2022. This increase was driven by
growth at Kakwa, which averaged 188,183 boe per day (59 per cent
crude oil and liquids and 41 per cent natural gas).
-
- Capital efficiencies have improved at Kakwa through wider well
spacing along with a revised frac design that lowers water
intensity and overall costs after adjusting for inflation.
- Full-year production averaged a record 345,613 boe per day (61
per cent natural gas and 39 per cent crude oil and liquids).
Production was in-line with guidance and represented a 14 per cent
increase from average daily production in 2021.
- First quarter production in 2023 is expected be lower than the
fourth quarter of 2022 due to unplanned third-party outages.
Production is expected to be fully restored in February 2023 and full-year production guidance
is unchanged due to stronger than forecast base production
offsetting the impact from these outages.
Operating Expense
- ARC's fourth quarter 2022 operating expense of $4.37 per boe decreased seven per cent from the
third quarter of 2022, due to lower planned maintenance activity
and higher production. In 2022, ARC's operating expense of
$4.44 per boe was in-line with the
Company's guidance range of $4.00 to
$4.50.
- Operating expense per boe in 2023 is anticipated to average
between $4.60 and $5.00 per boe. In 2024, the water infrastructure
investment at Kakwa is expected to reduce corporate operating
expense by $0.50 per boe once it is
commissioned by reducing trucking and third-party disposal costs,
while lowering emissions.
Free Funds Flow, Funds from Operations, and Cash Flow from
Operating Activities
Free Funds Flow
- ARC generated free funds flow of $603
million ($0.96 per share)
during the fourth quarter of 2022. ARC distributed 68 per cent or
$411 million ($0.65 per share) of free funds flow to
shareholders through a combination of dividends and share
repurchases under its NCIB.
- In 2022, ARC generated record free funds flow of $2.3 billion ($3.42
per share), of which 71 per cent or $1.6
billion ($2.43 per share) was
distributed to shareholders.
Funds from Operations and Cash Flow from Operating
Activities
- ARC generated funds from operations of $986 million ($1.56
per share) during the fourth quarter of 2022, increasing by
$33 million ($0.11 per share) from the third quarter of 2022.
Lower realized losses on ARC's risk management contracts were
partially offset by increased royalties.
- Fourth quarter and full-year 2022 cash flow from operating
activities was $878 million and
$3.8 billion, respectively.
The following table details the change in funds from operations
for the fourth quarter of 2022 relative to the third quarter of
2022.
|
Funds from
Operations Reconciliation
|
$
millions
|
$/share(1)
|
|
Funds from operations
for the three months ended September 30, 2022
|
953.0
|
1.45
|
|
Production
volumes
|
|
|
|
Crude oil and
liquids
|
5.7
|
0.01
|
|
Natural gas
|
70.3
|
0.11
|
|
Commodity
prices
|
|
|
|
Crude oil and
liquids
|
9.5
|
0.01
|
|
Natural gas
|
(118.0)
|
(0.18)
|
|
Sales of commodities
purchased from third parties
|
92.1
|
0.14
|
|
Interest and other
income
|
1.7
|
—
|
|
Realized loss on risk
management contracts
|
74.4
|
0.11
|
|
Royalties
|
(46.3)
|
(0.07)
|
|
Expenses
|
|
|
|
Commodities purchased
from third parties
|
(90.5)
|
(0.14)
|
|
Operating
|
2.8
|
—
|
|
Transportation
|
2.7
|
—
|
|
G&A
|
(6.6)
|
(0.01)
|
|
Interest and
financing
|
(0.7)
|
—
|
|
Current income
tax
|
6.5
|
0.01
|
|
Realized gain on
foreign exchange
|
29.4
|
0.05
|
|
Other
|
0.2
|
—
|
|
Weighted average
shares, diluted
|
—
|
0.07
|
|
Funds from operations
for the three months ended December 31, 2022
|
986.2
|
1.56
|
|
(1)
|
Per share amounts are
based on weighted average diluted common shares.
|
Cash Flow Used in Investing Activities and Capital
Expenditures
- In the fourth quarter 2022, ARC's cash flow used in investing
activities was $351 million. Of this,
ARC invested $377 million into
capital expenditures to drill 42 wells and complete 20 wells,
primarily in Kakwa.
- ARC executed its 2022 capital program safely and efficiently.
Cash flow used in investing activities totalled $1.4 billion and delivered record annual
production. In addition to drilling 134 wells and completing 126
wells, ARC invested in infrastructure at Sunrise and the
electrification of its Dawson Phase III and IV facilities.
The following table details ARC's 2022 capital activity by
area.
|
Year Ended December
31, 2022
|
|
Area
|
Wells
Drilled(1)(2)
|
Wells
Completed(1)
|
|
Kakwa
|
104
|
81
|
|
Greater
Dawson
|
6
|
16
|
|
Sunrise
|
5
|
9
|
|
Ante Creek
|
19
|
20
|
|
Total
|
134
|
126
|
|
(1)
|
Wells drilled and
completed for operated assets only.
|
|
(2)
|
Excludes disposal
wells.
|
Returns to Shareholders
Dividends
- In the first quarter of 2022, ARC's board of directors (the
"Board") approved an increase of 20 per cent to the Company's
quarterly dividend, from $0.10 per
share to $0.12 per share.
- Subsequently in the third quarter of 2022, ARC's Board approved
an increase of 25 per cent to the Company's quarterly dividend,
from $0.12 per share to $0.15 per share, beginning with its dividend
payable on January 16, 2023 to
shareholders of record on December 30,
2022.
- During the fourth quarter and full-year 2022, ARC declared
dividends of $93 million
($0.15 per share) and $318 million ($0.49
per share), respectively.
- The dividend serves as a permanent mechanism to return capital
to shareholders over the long term. ARC's dividend is designed to
grow with the underlying profitability of the business, and be
sustainable through the commodity cycle, as the number of shares
are reduced through the NCIB.
Share Repurchases
- Since commencing its initial NCIB in September 2021, ARC has repurchased approximately
15 per cent of total outstanding shares, or 107 million common
shares, at a weighted average price of $15.55 per share.
-
- During the fourth quarter of 2022, ARC repurchased 17 million
common shares under its NCIB at a weighted average price of
$18.57 per share.
- In 2022, ARC returned 71 per cent of free funds flow to
shareholders through a growing base dividend and share
repurchases.
- Since renewing its NCIB on August 30,
2022, ARC has repurchased 35 million common shares,
representing 53 per cent of its current NCIB allotment.
- ARC will continue to repurchase common shares when the
intrinsic value of the Company's common shares exceeds the current
market trading price. ARC determines the intrinsic value using a
discounted cash flow framework under lower commodity price
assumptions and a range of discount rates.
Physical Marketing
- ARC's infrastructure ownership and committed takeaway capacity
to end markets played a critical role in mitigating AECO volatility
and capturing additional margin in periods of price volatility in
North America.
-
- ARC's average realized natural gas price during the fourth
quarter was $8.31 per Mcf, 49 per
cent higher than the average AECO 7A Monthly Index price for the
period. Market diversification included 170,000 MMBtu per day of
physical exposure to Malin, where the PG&E Malin daily price
averaged US$14.42 per Mcf during the
fourth quarter.
- Full-year 2022 market diversification activities resulted in an
average realized natural gas price of $8.15 per Mcf; $2.59 per Mcf, or 47 per cent, greater than the
average AECO 7A Monthly Index price.
Transportation Expense
- ARC's fourth quarter 2022 transportation expense per boe of
$5.70 decreased six per cent from the
third quarter of 2022. The decrease from the third quarter of 2022
reflects slightly lower fuel gas expense.
- ARC's transportation expense per boe of $5.90 for 2022 increased 23 per cent compared to
the full-year 2021. The increase reflects higher fuel gas expense
with a corresponding increase to commodity sales from
production.
Net Debt
- As of December 31, 2022, ARC's
long-term debt balance was $1.0
billion, and its net debt balance was $1.3 billion, or 0.4 times funds from
operations.
-
- ARC targets its net debt to be in the range of 1.0 to 1.5 times
funds from operations at mid-cycle commodity prices.
- Long-term debt is comprised solely of $1.0 billion of senior notes outstanding. There
were no borrowings under the Company's credit facility as of
December 31, 2022.
- During the year, ARC reduced its long-term debt by $0.7 billion and its net debt by $0.5 billion.
- In the fourth quarter of 2022, ARC renewed its credit facility,
extending the maturity date by one year to October 2026, and elected to reduce the credit
facility capacity from $2.0 billion
to $1.8 billion.
- ARC holds an investment-grade credit rating, which allows the
Company to have access to capital and to manage a low-cost capital
structure. ARC is committed to protecting its strong financial
position by maintaining significant financial flexibility with its
balance sheet.
Net Income
- ARC recognized net income of $741
million ($1.18 per share)
during the fourth quarter of 2022, an increase of $63 million ($0.22
per share) from the same period in the prior year.
- In 2022, ARC recognized net income of $2.3 billion ($3.47
per share), compared to net income of $787
million ($1.25 per share) in
2021.
-
- The increase in net income compared to the prior year was
primarily due to higher commodity sales from production.
ESG INITIATIVES
ARC continues to be recognized for its industry-leading ESG
performance. The application of emissions reduction technologies
has been the primary driver behind the Company's top-tier
environmental performance advancement of technologies through the
lifecycle will remain a key priority.
- EO100™ Certification – In January
2023, ARC achieved certification of its Ante Creek asset
under Equitable Origin's EO100™ Standard for Responsible Energy
Development. With this certification and prior certifications
received in 2022 for Kakwa and the Company's northeast BC assets,
100 per cent of the Company's assets are now certified under this
global standard, representing the largest certified production base
in Canada.
- Dawson Electrification - ARC's emissions intensity in BC
is among the lowest in North
America. In 2023, ARC will invest approximately $16 million to continue the electrification of
its Dawson phase III and IV facilities. Once complete,
electrification will result in an emissions reduction of
approximately 140,000 tonnes, which is equivalent to removing
28,000 cars or one per cent of passenger vehicles in BC off the
road each year.
- Carbon Capture & Sequestration Hub - In 2022, ARC
was awarded an evaluation permit from the Government of
Alberta that allows ARC to
evaluate the feasibility of a carbon capture and sequestration
("CCS") hub near Kakwa. The evaluation permit preserves ARC's
access to pore space in the region, while providing the opportunity
to evaluate the technical, economic and commercial feasibility of a
CCS hub.
2022 RESERVES
Highlights
For the 15th consecutive year, 2P reserve replacement from
development has been 140 per cent of produced reserves or greater
since the Company's flagship Dawson asset was commissioned in 2008.
At year-end 2022, ARC's $34.00 per
share before-tax NPV of 2P reserves registers as the highest in its
26-year history, and is based on the development of just 17 per
cent of ARC's internal estimate of drilling inventory.
- ARC's before-tax NPV for 2P reserves, discounted at 10 per
cent, was $21.1 billion, or
approximately $34.00 per share at
December 31, 2022, increasing 49 per
cent from ARC's 2P NPV per share at December
31, 2021. This is based on the development of approximately
900 gross 2P locations, which represents just 17 per cent of the
Company's total gross internal inventory estimates.
-
- ARC's before-tax NPV of $34.00
per share is based on the development of approximately 900 gross 2P
locations, which represents just 17 per cent of the Company's total
gross internal inventory estimates. 2P locations at Attachie account for less than four per cent
of total 2P locations with just 34 undeveloped locations booked at
year-end 2022.
- ARC's before-tax NPV for PDP reserves was $8.1 billion, or $13.00 per share, an increase of 61 per cent per
share compared to 2021.
- ARC's reserves increased between 14 per cent and 22 per cent on
a per share basis, reinvesting 39 per cent of funds from
operations.
-
- PDP reserves increased nine per cent (22 per cent per share)
with notable positive technical revisions as a result of strong
well performance, particularly at Kakwa. Positive technical
revisions accounted for a nine per cent increase in PDP volumes,
with Kakwa seeing the largest volume add with an 11 per cent
increase in PDP volumes.
- PDP FD&A including FDC costs of $8.31 per boe resulted in a 5.2 times PDP recycle
ratio.
- ARC's reserve life index increased on a PDP, Total Proved, and
2P basis in 2022, driven by strong technical revisions and drilling
extensions.
- ARC's NPV was determined using GLJ forecast pricing and foreign
exchange rates at January 1, 2023,
with a 10-year average WTI price of US$80 per barrel and a 10-year average AECO price
of $4.66 per million British thermal
units ("MMBtu").
- FDC for 2P reserves totaled $9.1
billion at December 31, 2022
as compared to $7.4 billion at
December 31, 2021. The increase in
FDC is primarily due to higher inflation expectations; 2P FDC
equates to five times 2023 capital expenditure guidance or 2.5
times 2022 funds from operations.
Reserves Reconciliation
|
Reserves
Reconciliation
Company
Gross(1)
|
Oil(2)
(Mbbl)
|
NGLs(3)
(Mbbl)
|
Total
Oil
and
NGLs(4)
(Mbbl)
|
Natural
Gas(5)
(MMcf)
|
Oil
Equivalent
(Mboe)
|
|
Proved
Producing
|
|
|
|
|
|
|
Opening Balance,
December 31, 2021
|
10,450
|
158,983
|
169,433
|
2,000,085
|
502,780
|
|
Extensions and Improved
Recovery(6)
|
2,108
|
50,038
|
52,146
|
420,021
|
122,150
|
|
Technical
Revisions
|
165
|
18,173
|
18,338
|
165,179
|
45,868
|
|
Acquisitions
|
—
|
—
|
—
|
—
|
—
|
|
Dispositions
|
—
|
(184)
|
(184)
|
(2,291)
|
(566)
|
|
Economic
Factors
|
292
|
1,081
|
1,373
|
18,588
|
4,471
|
|
Production
|
(2,822)
|
(46,668)
|
(49,490)
|
(459,317)
|
(126,043)
|
|
Ending Balance,
December 31, 2022
|
10,192
|
181,423
|
191,615
|
2,142,265
|
548,659
|
|
Total
Proved
|
|
|
|
|
|
|
Opening Balance,
December 31, 2021
|
18,905
|
391,476
|
410,381
|
4,647,242
|
1,184,922
|
|
Extensions and Improved
Recovery(6)
|
1,827
|
38,374
|
40,201
|
417,970
|
109,863
|
|
Technical
Revisions
|
213
|
5,020
|
5,233
|
159,650
|
31,842
|
|
Acquisitions
|
—
|
—
|
—
|
—
|
—
|
|
Dispositions
|
—
|
(184)
|
(184)
|
(2,291)
|
(566)
|
|
Economic
Factors
|
575
|
3,320
|
3,895
|
31,325
|
9,116
|
|
Production
|
(2,822)
|
(46,668)
|
(49,490)
|
(459,317)
|
(126,043)
|
|
Ending Balance,
December 31, 2022
|
18,698
|
391,339
|
410,037
|
4,794,579
|
1,209,133
|
|
Proved plus
Probable
|
|
|
|
|
|
|
Opening Balance,
December 31, 2021
|
31,252
|
576,364
|
607,616
|
6,918,191
|
1,760,648
|
|
Extensions and Improved
Recovery(6)
|
2,809
|
72,436
|
75,244
|
573,838
|
170,884
|
|
Technical
Revisions
|
214
|
8,150
|
8,364
|
38,012
|
14,700
|
|
Acquisitions
|
—
|
—
|
—
|
—
|
—
|
|
Dispositions
|
—
|
(234)
|
(234)
|
(3,153)
|
(760)
|
|
Economic
Factors
|
579
|
1,899
|
2,477
|
39,868
|
9,122
|
|
Production
|
(2,822)
|
(46,668)
|
(49,490)
|
(459,317)
|
(126,043)
|
|
Ending Balance,
December 31, 2022
|
32,031
|
611,947
|
643,978
|
7,107,440
|
1,828,551
|
|
(1)
|
Amounts may not add due
to rounding.
|
|
(2)
|
Oil includes Light,
Medium, Heavy and Tight Oil. Tight Oil makes up 98 per cent
of the total Oil.
|
|
(3)
|
Condensate and pentanes
plus represented 62 per cent of PDP NGLs reserves, 66 per cent of
TP NGLs reserves, and 67 per cent of 2P NGLs reserves for the
respective opening balances at December 31, 2021. Condensate and
pentanes plus represent 63 per cent of PDP NGLs reserves, 66 per
cent of TP NGLs reserves, and 69 per cent of 2P NGLs reserves for
the respective ending balances at December 31, 2022.
|
|
(4)
|
Total Oil and NGLs
represents the summation of Light, Medium, Heavy Oil, and Tight
Oil, and NGLs.
|
|
(5)
|
Natural Gas includes
shale gas and conventional natural gas product types, as
conventional natural gas makes up less than one per cent of total
gas and is therefore considered to be immaterial.
|
|
(6)
|
Reserves additions for
discoveries, infill drilling, improved recovery, and extensions are
combined and reported as "Extensions and Improved
Recovery".
|
Net Present Value Summary
For a summary of the GLJ forecast pricing and foreign exchange
rates used to evaluate ARC's reserves, see "2022 Independent
Qualified Reserves Evaluation" of this news release.
|
($ millions)
|
Undiscounted
|
Discounted at
10%
|
|
Before-tax
NPV(1)(2)
|
|
|
|
Proved
Producing
|
11,742
|
8,096
|
|
Proved Developed
Non-producing
|
2,627
|
1,766
|
|
Proved
Undeveloped
|
11,193
|
4,798
|
|
Total Proved
|
25,562
|
14,660
|
|
Probable
|
17,559
|
6,484
|
|
Proved plus
Probable
|
43,121
|
21,144
|
|
After-tax
NPV(1)(2)(3)(4)
|
|
|
|
Proved
Producing
|
9,863
|
6,903
|
|
Proved Developed
Non-producing
|
1,999
|
1,332
|
|
Proved
Undeveloped
|
8,445
|
3,419
|
|
Total Proved
|
20,308
|
11,655
|
|
Probable
|
13,323
|
4,847
|
|
Proved plus
Probable
|
33,631
|
16,501
|
|
(1)
|
Amounts may not add due
to rounding.
|
|
(2)
|
Based on NI 51-101
company net interest reserves and GLJ forecast pricing and foreign
exchange rates and costs at January 1, 2023.
|
|
(3)
|
Based on ARC's
estimated tax pools at December 31, 2022.
|
|
(4)
|
The after-tax NPV of
the future net revenue attributed to ARC's crude oil and natural
gas properties reflects the tax burden on the properties on a
standalone basis and does not necessarily reflect the business
entity tax-level situation or tax planning. For information at the
business entity level, seeTaxes in the 2022 Annual
MD&A.
|
Finding, Development and Acquisition Costs
- ARC delivered a 2P finding and development ("F&D") cost,
including FDC, of $16.18 per
boe(1) ($7.42 per boe
excluding FDC) from development additions in 2022, continuing to
demonstrate the high-quality nature of its Montney assets and the Company's ability to
consistently deliver strong well results through efficient
development planning and operational execution. Including net
acquisitions and dispositions, ARC's 2P FD&A cost, including
FDC, was $16.18 per boe(1)
($7.39 per boe excluding FDC).
- The year-over-year increase in F&D costs including FDC
reflects significant increase in FDC driven by inflation.
- FD&A costs are provided including and excluding the change
in FDC in the table below.
|
Including
FDC
|
F&D
Cost(2)
($/boe)
|
FD&A
Cost(2)
($/boe)
|
F&D
Recycle
Ratio(2)
|
FD&A Recycle
Ratio(2)
|
|
Proved
Producing(3)
|
|
|
|
|
|
2022
|
8.35
|
8.31
|
5.2
|
5.2
|
|
2021
|
8.48
|
16.75
|
3.4
|
1.7
|
|
2020
|
4.29
|
4.33
|
2.7
|
2.6
|
|
Three-year
Average(4)
|
7.63
|
12.80
|
4.1
|
2.5
|
|
Total
Proved(3)
|
|
|
|
|
|
2022
|
16.92
|
16.90
|
2.6
|
2.6
|
|
2021
|
7.78
|
12.68
|
3.8
|
2.3
|
|
2020
|
2.60
|
2.07
|
4.4
|
5.5
|
|
Three-year
Average(4)
|
10.24
|
12.60
|
3.1
|
2.5
|
|
Proved plus
Probable(3)
|
|
|
|
|
|
2022
|
16.18
|
16.18
|
2.7
|
2.7
|
|
2021
|
7.28
|
10.39
|
4.0
|
2.8
|
|
2020
|
2.34
|
1.89
|
4.9
|
6.1
|
|
Three-year
Average(4)
|
9.70
|
10.77
|
3.3
|
2.9
|
|
Excluding
FDC
|
F&D
Cost(2)
($/boe)
|
FD&A
Cost(2)
($/boe)
|
F&D
Recycle
Ratio(2)
|
FD&A Recycle
Ratio(2)
|
|
Proved
Producing(3)
|
|
|
|
|
|
2022
|
8.37
|
8.33
|
5.2
|
5.2
|
|
2021
|
8.08
|
16.27
|
3.6
|
1.8
|
|
2020
|
4.88
|
4.94
|
2.3
|
2.3
|
|
Three-year
Average(4)
|
7.62
|
12.60
|
4.2
|
2.5
|
|
Total
Proved(3)
|
|
|
|
|
|
2022
|
9.58
|
9.54
|
4.5
|
4.5
|
|
2021
|
7.31
|
8.11
|
4.0
|
3.6
|
|
2020
|
4.04
|
5.11
|
2.8
|
2.2
|
|
Three-year
Average(4)
|
7.47
|
8.12
|
4.2
|
3.9
|
|
Proved plus
Probable(3)
|
|
|
|
|
|
2022
|
7.42
|
7.39
|
5.8
|
5.9
|
|
2021
|
6.76
|
5.96
|
4.3
|
4.9
|
|
2020
|
2.87
|
4.37
|
4.0
|
2.6
|
|
Three-year
Average(4)
|
6.04
|
6.08
|
5.2
|
5.2
|
|
(1)
|
Non-GAAP ratio that is
not a standardized financial measure under IFRS and may not be
comparable to similar ratios disclosed by other issuers. Capital
expenditures and adjusted net capital acquisitions, both non-GAAP
financial measures, are used as components of the non-GAAP ratio.
See "Non-GAAP and Other Financial Measures" of this news
release for the non-GAAP ratio for the comparative period and
other information relating to this non-GAAP ratio.
|
|
(2)
|
F&D and FD&A
costs and recycle ratios take into account reserves revisions
during the year on a per boe basis, and include FDC.
|
|
(3)
|
The aggregate of the
exploration and development costs incurred in the financial year
and the changes during that year in estimated FDC may not reflect
the total F&D and FD&A costs related to reserves additions
for that year.
|
|
(4)
|
Three-year average
F&D and FD&A costs are calculated as the total capital
expenditures over the three prior years divided by the total
reserves additions over the three prior years. The three-year
average recycle ratio is calculated as the three-year F&D or
FD&A costs divided by the three-year average netback per
boe.
|
CONFERENCE CALL
ARC's senior leadership team will be hosting a conference call
to discuss the Company's fourth quarter and full-year 2022 results
on Friday, February 10, 2022, at
8:00 a.m. Mountain Time ("MT").
|
Date
|
Friday, February 10,
2023
|
|
Time
|
8:00 a.m. MT
|
|
Dial-in
Numbers
|
|
|
Calgary
|
587-880-2171
|
|
Toronto
|
416-764-8659
|
|
Toll-free
|
1-888-664-6392
|
|
Conference
ID
|
22313485
|
|
Webcast URL
|
https://app.webinar.net/9knZ8rXoJG0
|
|
|
Callers are encouraged to dial in 15 minutes before the start
time to register for the event. A replay will be available on ARC's
website at www.arcresources.com following the conference call.
CONSOLIDATED BALANCE SHEETS (unaudited)
As at
|
Cdn$
millions
|
December 31,
2022
|
December 31,
2021
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
57.1
|
—
|
|
Inventory
|
6.7
|
22.3
|
|
Accounts
receivable
|
863.2
|
672.0
|
|
Prepaid
expense
|
52.5
|
35.6
|
|
Risk management
contracts
|
0.9
|
0.1
|
|
Assets held for
sale
|
6.1
|
—
|
|
986.5
|
730.0
|
|
Risk management
contracts
|
13.3
|
—
|
|
Long-term
investment
|
14.5
|
2.5
|
|
Exploration and
evaluation assets
|
290.9
|
277.9
|
|
Property, plant and
equipment
|
9,300.3
|
9,265.6
|
|
Right-of-use
assets
|
770.2
|
856.1
|
|
Goodwill
|
248.2
|
248.2
|
|
Total assets
|
11,623.9
|
11,380.3
|
|
|
|
|
LIABILITIES
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued liabilities
|
1,190.9
|
761.5
|
|
Current portion of
lease obligations
|
92.4
|
109.3
|
|
Current portion of
other deferred liabilities
|
20.0
|
90.5
|
|
Current portion of
asset retirement obligation
|
16.0
|
15.0
|
|
Dividends
payable
|
93.4
|
69.5
|
|
Risk management
contracts
|
303.0
|
465.3
|
|
1,715.7
|
1,511.1
|
|
|
|
|
Risk management
contracts
|
38.1
|
171.9
|
|
Long-term portion of
lease obligations
|
702.9
|
760.0
|
|
Long-term
debt
|
990.0
|
1,705.3
|
|
Long-term incentive
compensation liability
|
48.1
|
40.8
|
|
Other deferred
liabilities
|
135.7
|
154.2
|
|
Asset retirement
obligation
|
378.3
|
535.3
|
|
Deferred
taxes
|
961.6
|
574.2
|
|
Total
liabilities
|
4,970.4
|
5,452.8
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
Shareholders'
capital
|
6,497.6
|
7,221.1
|
|
Contributed
surplus
|
39.9
|
46.3
|
|
Retained earnings
(deficit)
|
139.1
|
(1,337.4)
|
|
Accumulated other
comprehensive loss
|
(23.1)
|
(2.5)
|
|
Total shareholders'
equity
|
6,653.5
|
5,927.5
|
|
Total liabilities and
shareholders' equity
|
11,623.9
|
11,380.3
|
Refer to the accompanying notes to ARC's consolidated financial
statements as at and for the year ended December 31, 2022, which are available on ARC's
website at www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
For the three months and years ended December 31
|
Three Months
Ended
|
Year
Ended
|
|
(Cdn$ millions, except
per share amounts)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
|
Commodity sales from
production
|
2,024.4
|
1,618.5
|
7,969.9
|
4,572.6
|
|
Royalties
|
(336.8)
|
(172.7)
|
(1,209.2)
|
(400.7)
|
|
Sales of commodities
purchased from third parties
|
458.1
|
329.9
|
1,880.5
|
938.9
|
|
Revenue from commodity
sales
|
2,145.7
|
1,775.7
|
8,641.2
|
5,110.8
|
|
|
|
|
|
|
Interest and
other income
|
3.7
|
3.6
|
20.1
|
17.5
|
|
Gain (loss) on risk
management contracts
|
39.6
|
103.4
|
(999.0)
|
(1,041.6)
|
|
Total revenue, interest
and other income, and gain (loss) on risk management
contracts
|
2,189.0
|
1,882.7
|
7,662.3
|
4,086.7
|
|
|
|
|
|
|
Commodities purchased
from third parties
|
422.4
|
322.4
|
1,783.3
|
903.9
|
|
Operating
|
144.7
|
111.5
|
559.9
|
425.4
|
|
Transportation
|
188.6
|
174.2
|
744.2
|
528.3
|
|
General and
administrative
|
56.0
|
46.0
|
213.2
|
167.0
|
|
Transaction
costs
|
—
|
—
|
—
|
22.1
|
|
Interest and
financing
|
25.5
|
24.2
|
97.2
|
126.1
|
|
Impairment of financial
assets
|
4.2
|
2.0
|
6.7
|
4.0
|
|
Depletion, depreciation
and amortization
|
364.2
|
320.1
|
1,317.3
|
1,063.6
|
|
Reversal of impairment
of property, plant and equipment
|
—
|
—
|
(3.6)
|
(137.5)
|
|
Loss (gain) on foreign
exchange
|
4.7
|
(5.5)
|
(34.1)
|
(11.3)
|
|
Total
expenses
|
1,210.3
|
994.9
|
4,684.1
|
3,091.6
|
|
Net income before
income taxes
|
978.7
|
887.8
|
2,978.2
|
995.1
|
|
|
|
|
|
|
Provision for (recovery
of) income taxes
|
|
|
|
|
|
Current
|
68.5
|
(14.0)
|
288.5
|
33.7
|
|
Deferred
|
169.2
|
223.8
|
387.4
|
174.8
|
|
Total income
taxes
|
237.7
|
209.8
|
675.9
|
208.5
|
|
|
|
|
|
|
Net income
|
741.0
|
678.0
|
2,302.3
|
786.6
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
Basic
|
1.18
|
0.97
|
3.48
|
1.26
|
|
Diluted
|
1.18
|
0.96
|
3.47
|
1.25
|
Refer to the accompanying notes to ARC's consolidated financial
statements as at and for the year ended December 31, 2022, which are available on ARC's
website at www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
For the three months and years ended December 31
|
Three Months
Ended
|
Year
Ended
|
|
(Cdn$
millions)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
|
Net income
|
741.0
|
678.0
|
2,302.3
|
786.6
|
|
Items that may be
reclassified to the consolidated statements of
income in subsequent periods:
|
|
|
|
|
|
Net unrealized gain
(loss) on foreign currency translation
adjustment
|
5.1
|
(0.9)
|
(20.6)
|
(2.5)
|
|
Comprehensive
income
|
746.1
|
677.1
|
2,281.7
|
784.1
|
Refer to the accompanying notes to ARC's consolidated financial
statements as at and for the year ended December 31, 2022, which are available on ARC's
website at www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (unaudited)
For the years ended December 31
|
(Cdn$
millions)
|
Shareholders'
Capital
|
Contributed
Surplus
|
Retained
Earnings
(Deficit)
|
Accumulated
Other
Comprehensive
Loss
|
Total
Shareholders'
Equity
|
|
|
|
|
|
|
|
January 1,
2021
|
4,658.2
|
36.5
|
(1,904.1)
|
—
|
2,790.6
|
|
Comprehensive
income
|
—
|
—
|
786.6
|
(2.5)
|
784.1
|
|
Issued upon close of
Business Combination
|
2,903.5
|
10.5
|
—
|
—
|
2,914.0
|
|
Recognized under
share-based compensation plans
|
0.3
|
3.3
|
—
|
—
|
3.6
|
|
Recognized on exercise
of share options
|
17.7
|
(4.0)
|
—
|
—
|
13.7
|
|
Repurchase of shares
for cancellation
|
(321.1)
|
—
|
(24.1)
|
—
|
(345.2)
|
|
Change in liability for
share purchase commitment
|
(37.5)
|
—
|
(14.4)
|
—
|
(51.9)
|
|
Dividends
declared
|
—
|
—
|
(181.4)
|
—
|
(181.4)
|
|
December 31,
2021
|
7,221.1
|
46.3
|
(1,337.4)
|
(2.5)
|
5,927.5
|
|
Comprehensive
income
|
—
|
—
|
2,302.3
|
(20.6)
|
2,281.7
|
|
Recognized under
share-based compensation plans
|
(0.3)
|
1.5
|
—
|
—
|
1.2
|
|
Recognized on exercise
of share options
|
37.3
|
(7.9)
|
—
|
—
|
29.4
|
|
Repurchase of shares
for cancellation
|
(781.1)
|
—
|
(513.7)
|
—
|
(1,294.8)
|
|
Change in liability for
share purchase commitment
|
20.6
|
—
|
6.1
|
—
|
26.7
|
|
Dividends
declared
|
—
|
—
|
(318.2)
|
—
|
(318.2)
|
|
December 31,
2022
|
6,497.6
|
39.9
|
139.1
|
(23.1)
|
6,653.5
|
Refer to the accompanying notes to ARC's consolidated financial
statements as at and for the year ended December 31, 2022, which are available on ARC's
website at www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the three months and years ended December 31
|
Three Months
Ended
|
Year
Ended
|
|
(Cdn$
millions)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
|
CASH FLOW FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
741.0
|
678.0
|
2,302.3
|
786.6
|
|
Add items not involving
cash:
|
|
|
|
|
|
Unrealized loss (gain)
on risk management contracts
|
(317.6)
|
(384.9)
|
(280.5)
|
534.2
|
|
Accretion of asset
retirement obligation
|
3.1
|
2.6
|
11.0
|
9.5
|
|
Impairment of financial
assets
|
4.2
|
2.0
|
6.7
|
4.0
|
|
Depletion, depreciation
and amortization
|
364.2
|
320.1
|
1,317.3
|
1,063.6
|
|
Reversal of impairment
of property, plant and equipment
|
—
|
—
|
(3.6)
|
(137.5)
|
|
Unrealized loss (gain)
on foreign exchange
|
21.2
|
(7.3)
|
(28.8)
|
(22.2)
|
|
Gain on disposal of
crude oil and natural gas assets
|
—
|
—
|
(2.0)
|
—
|
|
Deferred
taxes
|
169.2
|
223.8
|
387.4
|
174.8
|
|
Other
|
0.9
|
(0.7)
|
2.7
|
2.4
|
|
Net change in other
liabilities
|
(13.9)
|
(56.4)
|
(129.2)
|
(224.8)
|
|
Change in non-cash
working capital
|
(94.0)
|
(108.5)
|
250.0
|
(184.1)
|
|
Cash flow from
operating activities
|
878.3
|
668.7
|
3,833.3
|
2,006.5
|
|
|
|
|
|
|
CASH FLOW USED IN
FINANCING ACTIVITIES
|
|
|
|
|
|
Draw of long-term debt
under revolving credit facilities
|
1,396.4
|
2,605.2
|
7,027.0
|
6,628.7
|
|
Issuance of senior
notes
|
—
|
—
|
—
|
1,000.0
|
|
Repayment of long-term
debt
|
(1,533.4)
|
(2,739.7)
|
(7,748.2)
|
(8,304.7)
|
|
Proceeds from exercise
of share options
|
2.7
|
3.4
|
29.4
|
13.9
|
|
Repurchase of
shares
|
(317.4)
|
(229.2)
|
(1,292.3)
|
(340.6)
|
|
Repayment of principal
relating to lease obligations
|
(20.3)
|
(19.8)
|
(84.6)
|
(63.0)
|
|
Cash dividends
paid
|
(76.7)
|
(47.1)
|
(294.3)
|
(133.1)
|
|
Cash flow used in
financing activities
|
(548.7)
|
(427.2)
|
(2,363.0)
|
(1,198.8)
|
|
|
|
|
|
|
CASH FLOW USED IN
INVESTING ACTIVITIES
|
|
|
|
|
Cash acquired upon
close of Business Combination
|
—
|
—
|
—
|
4.9
|
|
Acquisition of crude
oil and natural gas assets
|
(0.1)
|
(0.2)
|
(2.7)
|
(1.1)
|
|
Disposal of crude oil
and natural gas assets
|
—
|
0.7
|
11.9
|
79.7
|
|
Property, plant and
equipment development expenditures
|
(373.8)
|
(371.7)
|
(1,419.7)
|
(1,051.5)
|
|
Exploration and
evaluation asset expenditures
|
(3.6)
|
(0.7)
|
(6.4)
|
(2.3)
|
|
Long-term
investment
|
(3.3)
|
(2.5)
|
(12.0)
|
(2.5)
|
|
Change in non-cash
working capital
|
30.1
|
105.7
|
15.7
|
164.7
|
|
Cash flow used in
investing activities
|
(350.7)
|
(268.7)
|
(1,413.2)
|
(808.1)
|
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(21.1)
|
(27.2)
|
57.1
|
(0.4)
|
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
78.2
|
27.2
|
—
|
0.4
|
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
57.1
|
—
|
57.1
|
—
|
|
The following are
included in cash flow from operating activities:
|
|
|
|
|
|
Income taxes paid
(received) in cash
|
(2.4)
|
5.2
|
(1.8)
|
56.9
|
|
Interest paid in
cash
|
14.3
|
14.5
|
82.8
|
118.9
|
Refer to the accompanying notes to ARC's consolidated financial
statements as at and for the year ended December 31, 2022, which are available on ARC's
website at www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com.
NON-GAAP AND OTHER FINANCIAL MEASURES
Throughout this news release and in other materials disclosed by
the Company, ARC employs certain measures to analyze its financial
performance, financial position, and cash flow. These non-GAAP and
other financial measures are not standardized financial measures
under IFRS and may not be comparable to similar financial measures
disclosed by other issuers. The non-GAAP and other financial
measures should not be considered to be more meaningful than
generally accepted accounting principles ("GAAP") measures which
are determined in accordance with IFRS, such as net income, cash
flow from operating activities, and cash flow used in investing
activities, as indicators of ARC's performance.
Non-GAAP Financial Measures
Capital Expenditures
ARC uses capital expenditures to monitor its capital investments
relative to those budgeted by the Company on an annual basis. ARC's
capital budget excludes acquisition or disposition activities as
well as the accounting impact of any accrual changes and payments
under certain lease arrangements. The most directly comparable GAAP
measure to capital expenditures is cash flow used in investing
activities. The following table details the composition of capital
expenditures and its reconciliation to cash flow used in investing
activities.
|
Capital
Expenditures
|
Three Months
Ended
|
Year
Ended
|
|
($ millions)
|
September 30,
2022
|
December 31,
2022
|
December 31,
2021
|
December 31,
2022
|
December 31,
2021
|
|
Cash flow used in
investing activities
|
351.9
|
350.7
|
268.7
|
1,413.2
|
808.1
|
|
Cash acquired upon
close of Business Combination
|
—
|
—
|
—
|
—
|
4.9
|
|
Acquisition of crude
oil and natural gas assets
|
(1.0)
|
(0.1)
|
(0.2)
|
(2.7)
|
(1.1)
|
|
Disposal of crude oil
and natural gas assets
|
4.5
|
—
|
0.7
|
11.9
|
79.7
|
|
Long-term
investments
|
(8.6)
|
(3.3)
|
(2.5)
|
(12.0)
|
(2.5)
|
|
Change in non-cash
investing working capital
|
22.1
|
30.1
|
105.7
|
15.7
|
164.7
|
|
Other
(1)
|
4.0
|
5.9
|
2.5
|
15.8
|
8.0
|
|
Capital
expenditures
|
372.9
|
383.3
|
374.9
|
1,441.9
|
1,061.8
|
|
(1)
|
Comprises non-cash
capitalized costs related to the Company's right-of-use asset
depreciation and share-based compensation.
|
Free Funds Flow
ARC uses free funds flow as an indicator of the efficiency and
liquidity of ARC's business, measuring its funds after capital
investment available to manage debt levels, pay dividends, and
return capital to shareholders through share repurchases. ARC
computes free funds flow as funds from operations generated during
the period less capital expenditures. Capital expenditures is a
non-GAAP financial measure. By removing the impact of current
period capital expenditures from funds from operations, Management
monitors its free funds flow to inform its capital allocation
decisions. The most directly comparable GAAP measure to free funds
flow is cash flow from operating activities. The following table
details the calculation of free funds flow and its reconciliation
to cash flow from operating activities.
|
Free Funds
Flow
|
Three Months
Ended
|
Year
Ended
|
|
($ millions)
|
September 30,
2022
|
December 31,
2022
|
December 31,
2021
|
December 31,
2022
|
December 31,
2021
|
|
Cash flow from
operating activities
|
1,103.6
|
878.3
|
668.7
|
3,833.3
|
2,006.5
|
|
Net change in other
liabilities
|
43.3
|
13.9
|
56.4
|
129.2
|
224.8
|
|
Change in non-cash
operating working capital
|
(193.9)
|
94.0
|
108.5
|
(250.0)
|
184.1
|
|
Funds from
operations
|
953.0
|
986.2
|
833.6
|
3,712.5
|
2,415.4
|
|
Capital
expenditures(1)
|
(372.9)
|
(383.3)
|
(374.9)
|
(1,441.9)
|
(1,061.8)
|
|
Free funds
flow
|
580.1
|
602.9
|
458.7
|
2,270.6
|
1,353.6
|
|
(1)
|
Certain additional
disclosures for these specified financial measures have been
incorporated by reference. See "Cash Flow used in Investing
Activities, Capital Expenditures, Acquisitions, and
Dispositions" in the 2022 Annual MD&A.
|
Adjusted Net Capital Acquisitions
Adjusted net capital acquisitions is a non-GAAP financial
measure used in the determination of FD&A costs, which is a
non-GAAP ratio. Adjusted net capital acquisitions is useful as it
provides a measure of cash, debt, and share consideration used to
acquire crude oil and natural gas assets during the period, net of
cash provided by the disposal of any crude oil and natural gas
assets during the period. The most directly comparable GAAP measure
to adjusted net capital acquisitions is acquisition of crude oil
and natural gas assets. The following table details the calculation
of adjusted net capital acquisitions and its reconciliation to
acquisition of crude oil and natural gas assets.
|
Adjusted Net Capital
Acquisitions
|
Year
Ended
|
Year Ended
|
|
($ millions)
|
December 31,
2022
|
December 31,
2021
|
|
Acquisition of crude
oil and natural gas assets
|
2.7
|
1.1
|
|
Add:
|
|
|
|
Total consideration in
Business Combination
|
—
|
2,914.0
|
|
Debt acquired in
Business Combination
|
—
|
1,712.7
|
|
Remove:
|
|
|
|
Disposal of crude oil
and natural gas assets
|
(11.9)
|
(79.7)
|
|
Adjusted net capital
acquisitions
|
(9.2)
|
4,548.1
|
Non-GAAP Ratios
Finding and Development Costs
ARC calculates F&D costs as capital expenditures divided by
the change in reserves within the applicable reserves category. ARC
calculates F&D costs, including FDC, as the sum of capital
expenditures and the change in FDC required to bring the reserves
on production, divided by the change in reserves within the
applicable reserves category. Capital expenditures, a non-GAAP
financial measure, is used as a component of F&D costs.
Management uses F&D costs as a measure of capital efficiency
for organic reserves development.
Finding, Development and Acquisition Costs
ARC calculates FD&A costs as the sum of capital expenditures
and adjusted net capital acquisitions divided by the change in
reserves within the applicable reserves category, inclusive of
changes due to acquisitions and dispositions. ARC calculates
FD&A costs, including FDC, as the sum of capital expenditures,
adjusted net capital acquisitions, and the change in FDC required
to bring the reserves on production, divided by the change in
reserves within the applicable reserves category, inclusive of
changes due to acquisitions and dispositions. Capital expenditures
and adjusted net capital acquisitions, both non-GAAP financial
measures, are used as components of FD&A costs. Management uses
FD&A costs as a measure of capital efficiency for organic and
acquired reserves development.
Recycle Ratio
ARC calculates recycle ratio by dividing the netback per boe by
F&D or FD&A costs. Netback per boe is a non-GAAP ratio that
uses netback, a non-GAAP financial measure, as a component. Capital
expenditures, a non-GAAP financial measure, is used as a component
of F&D costs. Capital expenditures and adjusted net capital
acquisitions, both non-GAAP financial measures, are used as
components of FD&A costs. Management uses recycle ratio to
relate the cost of adding reserves to the expected cash flows to be
generated.
Supplementary Financial Measures
Before-tax Proved plus Probable Net Present Value per
Share
Before-tax 2P NPV per share is comprised of the before-tax NPV
for 2P reserves, discounted at 10 per cent, as determined in
accordance with NI 51-101, divided by diluted weighted average
common shares.
2022 INDEPENDENT QUALIFIED RESERVES EVALUATION
GLJ conducted a Reserves Evaluation, effective December 31, 2022, which was prepared in
accordance with definitions, standards, and procedures in the COGE
Handbook and NI 51-101. The Reserves Evaluation was based on GLJ
forecast pricing and foreign exchange rates at January 1, 2023, as outlined in the table below.
These forecasts reflect current market conditions as defined by
current forward commodity prices as at December 31, 2022. This aligns with the COGE
Handbook, effective April 1, 2021,
which states that major benchmark commodity price forecasts, up to
and including the second full forecast year, should not deviate
from current forward commodity prices by more than 20 per cent.
Reserves included herein are stated on a company gross basis
(working interest before deduction of royalties without the
inclusion of any royalty interest) unless otherwise noted. ARC's
crude oil and natural gas reserves statement for the year ended
December 31, 2022, including complete
disclosure of the Company's crude oil and natural gas reserves and
other crude oil and natural gas information in accordance with NI
51-101, will be disclosed in ARC's Annual Information Form for the
year ended December 31, 2022, which
will be available on or before March 31,
2023 on ARC's website at www.arcresources.com and under
ARC's SEDAR profile at www.sedar.com.
|
GLJ Price
Forecast(1)
|
WTI
Crude
Oil
(US$/bbl)
|
Edmonton
Light
Oil
(Cdn$/bbl)
|
NYMEX Henry
Hub Natural Gas
(US$/MMBtu)
|
AECO
Natural
Gas
(Cdn$/MMBtu)
|
Foreign
Exchange
(US$/Cdn$)
|
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
|
2023
|
75.00
|
69.01
|
97.96
|
81.89
|
4.71
|
3.50
|
4.36
|
3.10
|
0.735
|
0.790
|
|
2024
|
75.00
|
67.24
|
95.30
|
79.32
|
4.50
|
3.15
|
4.77
|
3.15
|
0.745
|
0.790
|
|
2025
|
75.43
|
68.58
|
94.50
|
80.91
|
4.27
|
3.21
|
4.47
|
3.21
|
0.755
|
0.790
|
|
2026
|
76.94
|
69.96
|
95.14
|
82.53
|
4.35
|
3.28
|
4.49
|
3.28
|
0.765
|
0.790
|
|
2027
|
78.48
|
71.35
|
95.79
|
84.18
|
4.44
|
3.34
|
4.53
|
3.34
|
0.775
|
0.790
|
|
2028
|
80.05
|
72.78
|
97.70
|
85.86
|
4.53
|
3.41
|
4.62
|
3.41
|
0.775
|
0.790
|
|
2029
|
81.65
|
74.24
|
99.66
|
87.58
|
4.62
|
3.48
|
4.71
|
3.48
|
0.775
|
0.790
|
|
2030
|
83.28
|
75.72
|
101.65
|
89.32
|
4.71
|
3.55
|
4.80
|
3.55
|
0.775
|
0.790
|
|
2031
|
84.95
|
77.24
|
103.68
|
91.11
|
4.80
|
3.62
|
4.89
|
3.62
|
0.775
|
0.790
|
|
2032(2)
|
86.65
|
|
104.31
|
|
4.90
|
|
4.99
|
|
0.775
|
0.790
|
|
Escalate
thereafter at
|
+2.0%
per
year
|
+2.0%
per year
|
+2.0%
per
year
|
+2.0%
per year
|
+2.0%
per
year
|
+2.0%
per year
|
+2.0%
per
year
|
+2.0%
per year
|
0.775
|
0.790
|
|
(1)
|
GLJ assigns a value to
ARC's existing physical diversification contracts for natural gas
to consuming markets across North America based upon GLJ's forecast
differential to NYMEX Henry Hub, contracted volumes, and
transportation expense. No incremental value was assigned to
potential future contracts that were not in place on December 31,
2022.
|
|
(2)
|
Escalated at two per
cent per year starting in 2033 in the January 1, 2023 GLJ price
forecast with the exception of foreign exchange, which remains
flat.
|
Definitions of Oil and Gas Reserves
Reserves are estimated remaining quantities of crude
oil and natural gas and related substances anticipated to be
recoverable from known accumulations, as of a given date, based on
the analysis of drilling, geological, geophysical, and engineering
data; the use of established technology; and specified economic
conditions, which are generally accepted as being reasonable.
Reserves are classified according to the degree of certainty
associated with the estimates as follows:
Proved Reserves are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
Probable Reserves are those additional reserves that
are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves.
Information Regarding Disclosure on Crude Oil and Natural Gas
Reserves and Operational Information
In accordance with Canadian practice, production volumes and
revenues are reported on a company gross basis, before deduction of
Crown and other royalties, and without including any royalty
interests, unless otherwise stated. Unless otherwise specified, all
reserves volumes in this news release (and all information derived
therefrom) are based on company gross reserves using forecast
prices and costs.
This news release contains metrics commonly used in the crude
oil and natural gas industry. These metrics do not have
standardized meanings and may not be comparable to similar metrics
disclosed by other issuers. See "Non-GAAP and Other Financial
Measures" of this news release and the definition of reserve
replacement below. Management uses these metrics for its own
performance measurements and to provide shareholders with measures
to compare ARC's performance over time; however, such measures are
not reliable indicators of ARC's future performance and future
performance may not compare to the performance in previous
periods.
- Reserves replacement is calculated by dividing the
annual reserves additions, in boe, by ARC's annual production, in
boe. Management uses this measure to determine the relative change
of its reserves base over a period of time.
This news release discloses drilling inventory in two
categories: (i) proved plus probable locations; and (ii) unbooked
locations. Proved plus probable locations are derived from the
Reserves Evaluation conducted by GLJ and account for drilling
locations that have associated proved plus probable reserves.
Unbooked locations referenced in this news release were prepared
internally by management of ARC based on the Company's prospective
acreage and an assumption as to the number of wells that can be
drilled per section based on industry standard practice and
internal review including evaluation of applicable geologic,
seismic, engineering, production and reserves information. These
unbooked locations do not have attributed reserves or resources and
are therefore unbooked locations. Of the 5,200 total drilling
locations identified herein, 888 are proved plus probable and 4,312
are unbooked locations. There is no certainty that ARC will drill
all such unbooked locations and if drilled, there is no certainty
that such locations will result in additional oil and gas reserves
or production. The drilling locations which ARC will actually drill
wells, including the number and timing thereof is ultimately
dependent upon the availability of funding, regulatory approvals,
seasonal restrictions, oil and natural gas prices, costs, actual
drilling results and additional reservoir information that is
obtained and other factors.
FORWARD-LOOKING INFORMATION AND STATEMENTS
This news release contains certain forward-looking statements
and forward-looking information (collectively referred to as
"forward-looking information") within the meaning of applicable
securities legislation about current expectations regarding the
future based on certain assumptions made by ARC. Although ARC
believes that the expectations represented by such forward-looking
information are reasonable, there can be no assurance that such
expectations will prove to be correct. Forward-looking information
in this news release is identified by words such as "anticipate",
"believe", "ongoing", "may", "expect", "estimate", "plan", "will",
"project", "continue", "target", "strategy", "upholding", or
similar expressions, and includes suggestions of future outcomes.
In particular, but without limiting the foregoing, this news
release contains forward-looking information with respect to: ARC's
2023 guidance, including planned capital expenditures (and the
commodity prices at which such capital expenditures are fully
funded by funds from operations), production guidance, production
estimates and expenses; the anticipated decrease in capital
expenditure and production forecast for 2024 and the anticipated
timing thereof; the expectation that transportation costs will
decrease over the balance of the year on a per unit basis;
statements with respect to the 2023 capital budget including the
planned investment and allocation of the 2023 capital budget; the
long-term natural gas supply agreement with Cheniere and the
anticipated timing and benefits thereof; the anticipated
investments in sanctioning Attachie West Phase I, should the
regulatory environment in BC support such investment; the ability
of the Attachie asset to drive
production and reserve growth; the expectation that ARC's operating
expense per boe will decrease due to higher production volumes; the
anticipated operation expenses per boe in 2023; the anticipated
reduction in corporate operating expense as a result of the water
infrastructure investment at Kakwa and the anticipated timing
thereof; plans to allocate surplus funds from operations to returns
to shareholders; the anticipated increase in free funds flow
allocations to shareholders; the continued assessment of dividends
and payment thereof; ARC's plans with respect to growing its
dividend and increasing the dividend on a per share basis as shares
are retired through the NCIB or other means; ARC's investment to
continue electrification of the Dawson facilities and the expected
benefits therefrom; ARC's target net debt to funds from operations
ratio at mid-cycle commodity prices; ARC's 2023 guidance estimates;
and other statements. Further, statements relating to reserves are
deemed to be forward-looking information, as they involve the
implied assessment, based on certain estimates and assumptions,
that the resources and reserves described can be profitably
produced in the future. In addition, forward-looking information
may include statements attributable to third-party industry
sources. There can be no assurance that the plans, intentions, or
expectations upon which these forward-looking statements are based
will occur.
Readers are cautioned not to place undue reliance on
forward-looking information as ARC's actual results may differ
materially from those expressed or implied. ARC undertakes no
obligation to update or revise any forward-looking information
except as required by law. Developing forward-looking information
involves reliance on a number of assumptions and consideration of
certain risks and uncertainties, some of which are specific to ARC
and others that apply to the industry generally. The material
assumptions on which the forward-looking information in this news
release are based, and the material risks and uncertainties
underlying such forward-looking information, include: ARC's ability
to successfully integrate and realize the anticipated benefits of
completed or future acquisitions and divestitures; access to
sufficient capital to pursue any development plans; ARC's ability
to issue securities and to repurchase its securities under the
NCIB; ARC's ability to meet and maintain certain targets, including
with respect to emissions-related reductions and ESG performance;
expectations and projections made in light of ARC's historical
experience; data contained in key modeling statistics; the
potential implementation of new technologies and the cost thereof;
forecast commodity prices and other pricing assumptions with
respect to ARC's 2023 capital expenditure budget; continuing
uncertainty of the impact of the June 29,
2021 BC Supreme Court ruling in Blueberry River First Nations (Yahey) v. Province of
British Columbia on BC and/or
federal laws or policies affecting resource development in
northeast BC and potential outcomes of the negotiations between
Blueberry River First Nations and the Government of BC; assumptions
with respect to global economic conditions and the accuracy of
ARC's market outlook expectations for 2023, 2024 and in the
future; suspension of or changes to guidance, and the associated
impact to production; the assumption that the regulatory
environment will be able to support ARC's investment in the
execution of Attachie West Phase I, including that regulatory
authorities in BC will resume granting approvals for oil and gas
activities relating to drilling, completions, testing, processing
facilities, and production and transportation infrastructure in
2023 on time frames, and terms and conditions, consistent with past
practice; forecast production volumes based on business and market
conditions; the accuracy of outlooks and projections contained
herein; that future business, regulatory, and industry conditions
will be within the parameters expected by ARC, including with
respect to prices, margins, demand, supply, product availability,
supplier agreements, availability, and cost of labour and interest,
exchange, and effective tax rates; projected capital investment
levels, the flexibility of capital spending plans, and associated
sources of funding; the ability of ARC to complete capital programs
and the flexibility of ARC's capital structure; applicable royalty
regimes, including expected royalty rates; future improvements in
availability of product transportation capacity; opportunity for
ARC to pay dividends and the approval and declaration of such
dividends by the Board; the existence of alternative uses for ARC's
cash resources which may be superior to payment of dividends or
effecting repurchases of outstanding common shares; cash flows,
cash balances on hand, and access to ARC's credit facility being
sufficient to fund capital investments; foreign exchange rates;
near-term pricing and continued volatility of the market; the
ability of ARC's existing pipeline commitments and financial risk
management transactions to partially mitigate a portion of ARC's
risks against wider price differentials; business interruption,
property and casualty losses, or unexpected technical difficulties;
estimates of quantities of crude oil, natural gas, and liquids from
properties and other sources not currently classified as proved;
accounting estimates and judgments; future use and development of
technology and associated expected future results; ARC's ability to
obtain necessary regulatory approvals generally; potential
regulatory and industry changes stemming from the results of court
actions affecting regions in which ARC holds assets; risks and
uncertainties related to oil and gas interests and operations on
Indigenous lands; the successful and timely implementation of
capital projects or stages thereof; the ability to generate
sufficient cash flow to meet current and future obligations;
estimated abandonment and reclamation costs, including associated
levies and regulations applicable thereto; ARC's ability to obtain
and retain qualified staff and equipment in a timely and
cost-efficient manner; ARC's ability to carry out transactions on
the desired terms and within the expected timelines; forecast
inflation and other assumptions inherent in the guidance of ARC;
the retention of key assets; the continuance of existing tax,
royalty, and regulatory regimes; GLJ Ltd.'s estimates with respect
to commodity pricing; ARC's ability to access and implement all
technology necessary to efficiently and effectively operate its
assets; and other assumptions, risks, and uncertainties described
from time to time in the filings made by ARC with securities
regulatory authorities.
The forward-looking information contained herein are expressly
qualified in their entirety by this cautionary statement. The
forward-looking information included in this news release are made
as of the date of this news release and, except as required by
applicable securities laws, ARC undertakes no obligation to
publicly update such forward-looking information to reflect new
information, subsequent events or otherwise.
About ARC
ARC Resources Ltd. is a pure-play Montney producer and one of Canada's largest dividend-paying energy
companies, featuring low-cost operations and leading ESG
performance. ARC's investment-grade credit profile is supported by
commodity and geographic diversity and robust risk management
practices around all aspects of the business. ARC's common shares
trade on the Toronto Stock Exchange under the symbol ARX.
ARC RESOURCES LTD.
Please visit ARC's website at www.arcresources.com or contact
Investor Relations:
E-mail: IR@arcresources.com
Telephone: (403) 503-8600
Fax: (403) 509-6427
Toll Free: 1-888-272-4900
ARC Resources Ltd.
Suite 1200, 308 - 4 Avenue SW
Calgary, AB T2P 0H7
SOURCE ARC Resources Ltd.
