CALGARY,
AB, May 4, 2023 /CNW/ - (TSX: ARX) ARC
Resources Ltd. ("ARC" or the "Company") today reported its first
quarter 2023 financial and operational results, announced the
sanctioning of Attachie Phase I, provided revisions to its 2023
guidance, and increased the dividend.
HIGHLIGHTS
Attachie Phase I Sanction and Revised Guidance
- The Board has approved the sanction of Attachie Phase I. The
capital costs to construct and fill the facility are approximately
$740 million. Attachie Phase I is
expected to deliver approximately 40,000 boe per day, and includes
a 90 MMcf per day natural gas processing facility and 25,000
barrels per day of liquids-handling infrastructure. ARC anticipates
achieving full productive capacity in the first half of 2025.
- ARC has updated its 2023 guidance to incorporate the sanction
of Attachie Phase I. The revised total capital budget is largely
unchanged at $1.8 billion to
$1.9 billion(1)
($1.8 billion previously), and
includes $250 million to $300 million at Attachie Phase I. Offsetting the
Attachie Phase I capital expenditures is lower capital investment
on ARC's base assets due to stronger production performance, and
the removal of certain infrastructure projects.
- ARC increased production guidance in 2023 to average between
350,000 and 355,000 boe per day (previously 345,000 to 350,000 boe
per day). The increase reflects stronger than forecast production
from its base assets.
First Quarter Highlights and Dividend Increase
- ARC delivered first quarter 2023 average production of 338,377
boe(2) per day (62 per cent natural gas and 38 per cent
crude oil and liquids(3)). Stronger than forecast base
production more than offset third-party downtime resulting in an
upward revision to 2023 production guidance.
- ARC generated funds from operations of $717 million(4) ($1.16 per share)(5) and free funds
flow of $230 million(6)
($0.37 per share)(7). ARC
recognized cash flow from operating activities of $540 million and net income of $575 million ($0.93
per share) .
-
- Market diversification resulted in an average realized natural
gas price of $5.89 per
Mcf(5), 36 per cent greater than the average AECO 7A
Monthly Index price.
- ARC's Board of Directors (the "Board") has approved a 13 per
cent increase to the quarterly dividend, from $0.15 per share to $0.17 per share. This is a continuation of ARC's
strategy to sustainably grow the dividend with the underlying
profitability of the business, and on a per share basis as the
share count is reduced.
- ARC distributed 106 per cent or $243
million ($0.39 per share) of
free funds flow for the period to shareholders through base
dividends and share repurchases. Net debt was maintained at 1.3
billion(4) or 0.3 times funds from
operations(4) as ARC disposed of non-core assets for
cash proceeds of $74 million and
dedicated the proceeds to repurchasing shares.
-
- ARC repurchased 10 million shares during the first quarter.
Since renewing its Normal Course Issuer Bid ("NCIB") on
September 1, 2022, ARC has
repurchased 44 million common shares, representing 16 per cent of
total outstanding shares.
- Capital expenditures in the first quarter registered at
$485 million(6), while
cash flow from investing activities of $397
million included the proceeds from the disposition of
non-core assets. ARC drilled 46 wells and completed 34 wells across
its Alberta and British Columbia ("BC") assets.
- ARC entered into a non-binding Memorandum of Understanding for
a 20-year agreement to supply and liquefy approximately 200 MMcf
per day of natural gas with the Cedar LNG Project in BC. This
represents the equivalent of 1.5 million tonnes per annum of LNG or
approximately one half of the facility's total production capacity.
ARC is advancing a binding agreement and continues to pursue LNG
offtake arrangements to increase its anticipated total exposure to
internationally linked natural gas pricing.
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 ended March 31,
2023, 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 ended
March 31, 2023 (the "Q1 2023 MD&A") are incorporated by
reference in this news release.
|
|
(1)
|
Refer to the section
entitled "About ARC Resources Ltd." contained within the Q1
2023 MD&A for historical capital expenditures, which
information is incorporated by reference into this news
release.
|
(2)
|
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.
|
(3)
|
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.
|
(4)
|
See Note 10 "Capital
Management" in the financial statements and "Non-GAAP and
Other Financial Measures" in the Q1 2023 MD&A for
information relating to this capital management measure, which
information is incorporated by reference into this news
release.
|
(5)
|
See "Non-GAAP and
Other Financial Measures" in the Q1 2023 MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
(6)
|
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
Q1 2023 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.
|
(7)
|
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 Q1 2023 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.
|
FINANCIAL AND OPERATIONAL RESULTS
(Cdn$ millions, except
per share amounts(1), boe amounts,
|
Three Months
Ended
|
and common shares
outstanding)
|
December 31,
2022
|
March 31,
2023
|
March 31,
2022
|
FINANCIAL
RESULTS
|
|
|
|
Net income
(loss)
|
741.0
|
574.9
|
(69.4)
|
Per share
|
1.18
|
0.93
|
(0.10)
|
Cash flow from
operating activities
|
878.3
|
540.3
|
758.8
|
Per
share(2)
|
1.39
|
0.87
|
1.10
|
Funds from
operations
|
986.2
|
717.4
|
743.6
|
Per share
|
1.56
|
1.16
|
1.08
|
Free funds
flow
|
602.9
|
230.0
|
410.3
|
Per share
|
0.96
|
0.37
|
0.60
|
Dividends
declared
|
93.4
|
91.9
|
68.2
|
Per share
|
0.15
|
0.15
|
0.10
|
Cash flow used in
investing activities
|
350.7
|
397.4
|
346.7
|
Capital
expenditures
|
383.3
|
487.4
|
333.3
|
Long-term
debt
|
990.0
|
1,056.0
|
1,578.7
|
Net debt
|
1,301.5
|
1,264.7
|
1,695.5
|
Common shares
outstanding, weighted average diluted
(millions)
|
630.3
|
619.2
|
688.8
|
Common shares
outstanding, end of period (millions)
|
620.9
|
611.2
|
680.9
|
OPERATIONAL
RESULTS
|
|
|
|
Production
|
|
|
|
Crude oil
(bbl/day)
|
7,280
|
7,884
|
7,892
|
Condensate
(bbl/day)
|
82,855
|
71,085
|
72,956
|
Crude oil and
condensate (bbl/day)
|
90,135
|
78,969
|
80,848
|
Natural gas
(MMcf/day)
|
1,310
|
1,264
|
1,280
|
NGLs
(bbl/day)
|
51,311
|
48,800
|
50,257
|
Total
(boe/day)
|
359,730
|
338,377
|
344,447
|
Average realized
price
|
|
|
|
Crude oil
($/bbl)(2)
|
103.58
|
92.78
|
111.48
|
Condensate
($/bbl)(2)
|
107.24
|
104.10
|
119.15
|
Natural gas
($/Mcf)
|
8.31
|
5.89
|
5.98
|
NGLs
($/bbl)(2)
|
28.86
|
28.59
|
27.94
|
Average realized price
($/boe)(2)
|
61.17
|
50.16
|
54.10
|
Netback
|
|
|
|
Commodity sales from
production ($/boe)(2)
|
61.17
|
50.16
|
54.10
|
Royalties
($/boe)(2)
|
(10.18)
|
(7.96)
|
(7.81)
|
Operating expense
($/boe)(2)
|
(4.37)
|
(4.50)
|
(4.04)
|
Transportation expense
($/boe)(2)
|
(5.70)
|
(5.61)
|
(5.57)
|
Netback
($/boe)(3)
|
40.92
|
32.09
|
36.68
|
TRADING
STATISTICS(4)
|
|
|
|
High price
|
20.49
|
18.07
|
17.50
|
Low price
|
17.05
|
14.33
|
11.66
|
Close price
|
18.25
|
15.33
|
16.74
|
Average daily volume
(thousands of shares)
|
4,259
|
5,949
|
4,224
|
(1)
|
Per share amounts, with
the exception of dividends, are based on weighted average diluted
common shares.
|
(2)
|
See "Non-GAAP and
Other Financial Measures" in the Q1 2023 MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
(3)
|
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 Q1 2023 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.
|
(4)
|
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's strategic priorities are to deliver sustainable free funds
flow per share growth adhering to longstanding principles of
capital discipline, profitability, and financial strength. To
achieve this, ARC has put forth a strategy that balances organic
investment in its highest return assets with a meaningful capital
return that includes a growing base dividend and share repurchases
when deemed a profitable investment. A milestone in achieving these
goals includes advancing the development of Attachie in northeast BC ("NEBC").
Attachie Phase I Sanction
ARC is pleased to announce that Attachie Phase I has been
sanctioned by the Board. Attachie
is a multi-phase development that spans approximately 300 net
sections in NEBC, providing a multi-decade development runway for
condensate and low-emission natural gas. Attachie Phase I is a
40,000 boe per day project with a capital cost of approximately
$740 million to build and fill the
facility. ARC has secured access to critical services and has taken
steps to mitigate inflation across critical parts of the supply
chain. Long-term takeaway capacity for all products has been
secured to retain operational flexibility, maintain a low cost
structure, and maximize profitability.
The development plan put forth aligns with the principles of the
agreements reached between the BC government and Treaty 8 First
Nations, which address the cumulative impacts of development of the
neighbouring Treaty 8 territories. These recent agreements,
combined with ARC's collaboration with the Treaty 8 First Nations,
has provided confidence to proceed with the Attachie development. Through continued
partnership and engagement, ARC is committed to advancing the
project in a manner that protects the environmental and cultural
values and contributes to the economic prosperity of Treaty 8 First
Nations, while creating value for its shareholders and the
Province.
Attributes of Attachie Phase I:
Capital expenditures to develop Attachie Phase I are estimated
at $740 million. This includes the
capital investment to construct the facility and drill
approximately 39 wells to fill the facility. Included in the
capital expenditures is approximately $65
million of investments for subsequent phases at Attachie.
Attachie Phase I is estimated to deliver annual average
production of approximately 40,000 boe per day (60 per cent crude
oil and natural gas liquids and 40 per cent natural gas).
Production is expected to commence in late 2024, with full
productive capacity anticipated in the first half of 2025.
- Total facility capacity includes a 90 MMcf per day natural gas
processing facility and 25,000 barrels per day of liquids-handling
capacity.
- In its first full-year of operations, ARC anticipates that
Attachie Phase I will contribute approximately $450 million to funds from
operations(1), based on the April
20, 2023 forward curve(2).
- Estimated capital to sustain production is approximately
$150 million per year over the
initial five years after achieving productive capacity.
Consistent with its NEBC operations, ARC plans to electrify the
natural gas processing facility upon commissioning. This will
reduce ARC's emissions intensity and contribute meaningfully
towards achieving its emissions intensity reduction targets. As
part of the Attachie development
program, ARC is investing in water recycling infrastructure that
will significantly reduce fresh water use.
(1) Refer to the
section entitled "About ARC Resources Ltd." contained within
the Q1 2023 MD&A for historical funds from operations, which
information is incorporated by reference into this news
release.
|
(2) Forward curve
as at April 20, 2023 (US$WTI $65.00 per barrel and US$4.25/Mcf
NYMEX).
|
2023 Guidance
ARC has updated its 2023 guidance to reflect stronger production
and incorporate the sanction of Attachie Phase I.
ARC intends to invest between $1.8
billion and $1.9 billion in
capital expenditures (previously $1.8
billion). The company plans to invest $250 million to $300
million at Attachie Phase I in 2023. The majority of the
Attachie Phase I investment in 2023 will be allocated towards
long-lead items and infrastructure construction. Revised guidance
includes approximately $70 million of
capital inflation that has been realized year-to-date.
Offsetting the investment for Attachie Phase I is lower capital
investment required to sustain base production due to stronger than
forecast well performance, and the removal of approximately
$120 million of capital previously
allocated for water infrastructure at Kakwa. In its place, ARC has
secured a long-term agreement with a third-party for water
infrastructure and disposal at competitive terms. The agreement is
expected to decrease associated operating costs by between
$30 million and $60 million per year beginning in 2024.
Other guidance revisions include a three per cent decrease to
operating costs per boe, and slight revisions to the production mix
to reflect a higher natural gas weight as a result of the
third-party downtime in the first quarter, and updated timing of
new well pads at Kakwa. All other expenses are unchanged.
ARC's 2023 preliminary annual guidance, 2023 revised annual
guidance, and a review of 2023 year-to-date results are outlined
below:
|
|
|
|
|
|
2023 Preliminary
Guidance
|
2023 Revised
Guidance
|
2023
YTD
Actual
|
% Variance
from
2023 Revised
Guidance
|
Crude oil
(bbl/day)
|
8,500 -
9,000
|
8,500 -
9,000
|
7,884
|
(7)
|
Condensate
(bbl/day)
|
79,000 -
81,000
|
76,000 -
78,000
|
71,085
|
(8)
|
Crude oil and
condensate (bbl/day)
|
87,500 -
90,000
|
84,500 -
87,000
|
78,969
|
(8)
|
Natural gas
(MMcf/day)
|
1,260 -
1,270
|
1,295 -
1,305
|
1,264
|
(2)
|
NGLs
(bbl/day)
|
47,000 -
49,000
|
49,000 -
51,000
|
48,800
|
—
|
Total
(boe/day)
|
345,000 -
350,000
|
350,000 -
355,000
|
338,377
|
(3)
|
Expenses
($/boe)(1)
|
|
|
|
|
Operating
|
4.60 - 5.00
|
4.45 -
4.85
|
4.50
|
—
|
Transportation
|
5.50 - 6.00
|
5.50 -
6.00
|
5.61
|
—
|
General and
administrative ("G&A") expense before share-based compensation
expense
|
0.85 - 0.95
|
0.85 -
0.95
|
1.18
|
24
|
G&A - share-based
compensation expense
|
0.25 - 0.35
|
0.25 -
0.35
|
(0.03)
|
(112)
|
Interest and
financing(2)
|
0.65 - 0.75
|
0.65 -
0.75
|
0.59
|
(9)
|
Current income tax
expense as a per cent of funds from
operations(1)
|
10 - 15
|
10 -
15
|
11
|
—
|
Capital expenditures ($
billions)(3)
|
1.8
|
1.8 -
1.9
|
0.5
|
n/a
|
(1)
|
See "Non-GAAP and
Other Financial Measures" in the Q1 2023 MD&A for an
explanation of the composition of these supplementary financial
measures, which information is incorporated by reference into this
news release.
|
(2)
|
Excludes accretion of
ARC's asset retirement obligation.
|
(3)
|
Refer to the section
entitled "About ARC Resources Ltd." contained within the Q1
2023 MD&A for historical capital expenditures, which
information is incorporated by reference into this news
release.
|
Investor Day
ARC will host an Investor Update on Thursday, June 22, 2023 in Toronto. The live event will feature
presentations from the executive leadership team and will provide
greater insight into ARC's long-term strategy, including
asset-level detail and details of the Attachie Phase I
development.
FINANCIAL AND OPERATIONAL RESULTS
Production
- First quarter production averaged 338,377 boe per day (62 per
cent natural gas and 38 per cent crude oil and liquids).
- Strong base production more than offset the previously
announced unplanned third-party downtime. The total impact from the
unplanned third-party outages was approximately 7,000 boe per day
in the quarter with production fully restored in late
February.
- Kakwa delivered first quarter 2023 average production of
181,867 boe per day. Since acquiring the asset in 2021, Kakwa has
contributed $3.7 billion to ARC's
free funds flow.
Funds from Operations, Cash Flow from Operating Activities, and
Free Funds Flow
Funds from Operations and Cash Flow from Operating
Activities
- First quarter 2023 funds from operations was $717 million ($1.16
per share), representing a decrease of $269
million from the fourth quarter of 2022. This decrease was
primarily driven by lower production and lower commodity prices.
Partially offsetting these items were as follows:
-
- G&A expense of $35 million
($0.06 per share) decreased by 38 per
cent or $21 million from the fourth
quarter of 2022 and was in-line with guidance. The decrease in
G&A expense quarter over quarter primarily reflects the
decrease in the fair value of share-based compensation
liabilities.
- Realized losses on risk management contracts of $151 million decreased $128 million from the fourth quarter of 2022. ARC
has approximately 25 per cent of its natural gas hedged in 2023,
primarily through collars and weighted to the summer months.
- First quarter 2023 cash flow from operating activities was
$540 million.
Free Funds Flow & Shareholder Returns
- ARC generated free funds flow of $230
million ($0.37 per share)
during the first quarter of 2023.
- ARC distributed 106 per cent or $243
million ($0.39 per share) of
free funds flow to shareholders through a combination of dividends
and share repurchases under its NCIB.
- With net debt approaching the bottom end of ARC's debt targets,
ARC intends to return essentially all free funds flow to
shareholders in 2023.
Dividends
- During the first quarter 2023, ARC declared dividends of
$92 million ($0.15 per share).
- The Board approved a 13 per cent increase to the quarterly
dividend, from $0.15 per share to
$0.17 per share. The dividend
increase is effective with the second quarter dividend payable on
July 17, 2023 to shareholders of
record on June 30, 2023.
Share Repurchases
- During the first quarter of 2023, ARC repurchased 10 million
common shares under its NCIB at a weighted average price of
$15.51 per share.
- ARC has repurchased 44 million common shares since renewing its
NCIB on September 1, 2022,
representing 67 per cent of its current NCIB allotment.
- Since commencing its initial NCIB in September 2021, ARC has repurchased approximately
16 per cent of total outstanding shares, or 116 million common
shares, at a weighted average price of $15.54 per share.
The following table details the change in funds from operations
for the first quarter of 2023 relative to the fourth quarter of
2022.
Funds from
Operations Reconciliation
|
$
millions
|
$/share(1)
|
Funds from operations
for the three months ended December 31, 2022
|
986.2
|
1.56
|
Production
volumes
|
|
|
Crude oil and
liquids
|
(136.7)
|
(0.22)
|
Natural gas
|
(56.0)
|
(0.09)
|
Commodity
prices
|
|
|
Crude oil and
liquids
|
(29.0)
|
(0.04)
|
Natural gas
|
(275.2)
|
(0.45)
|
Sales of commodities
purchased from third parties
|
(89.5)
|
(0.14)
|
Interest and other
income
|
(0.2)
|
—
|
Realized loss on risk
management contracts
|
127.5
|
0.20
|
Royalties
|
94.7
|
0.15
|
Expenses
|
|
|
Commodities purchased
from third parties
|
67.8
|
0.11
|
Operating
|
7.6
|
0.01
|
Transportation
|
17.7
|
0.03
|
G&A
|
21.0
|
0.03
|
Interest and
financing
|
4.5
|
0.01
|
Current income
tax
|
(8.5)
|
(0.01)
|
Realized loss on
foreign exchange
|
(17.0)
|
(0.03)
|
Other
|
2.5
|
—
|
Weighted average
shares, diluted
|
—
|
0.04
|
Funds from operations
for the three months ended March 31, 2023
|
717.4
|
1.16
|
(1) Per share
amounts are based on weighted average diluted common
shares.
|
Operating and Transportation Expense
Operating Expense
- ARC's first quarter 2023 operating expense was $4.50 per boe, slightly below the Company's
guidance range of $4.60 to
$5.00 per boe.
- ARC revised its 2023 guidance to include a decrease in
operating expenses to $4.45 to
$4.85 (previously $4.60 - $5.00).
- ARC executed a third-party agreement for water disposal and
related infrastructure at Kakwa. The agreement is expected to
reduce operating costs by between $30
million and $60 million per
year beginning in 2024.
Transportation Expense
- ARC's first quarter 2023 transportation expense per boe of
$5.61 decreased by two per cent from
the fourth quarter of 2022 and was in-line with ARC's guidance
range of $5.50 to $6.00 per boe. The decrease is primarily related
to lower fuel gas expense.
Cash Flow Used in Investing Activities and Capital
Expenditures
- In the first quarter 2023, ARC's cash flow used in investing
activities was $397 million. Of this,
ARC invested $485 million in capital
expenditures to drill 46 wells and complete 34 wells.
- ARC disposed of certain non-core assets for cash proceeds of
$74 million. These proceeds were
subsequently used to repurchase ARC shares.
The following table details ARC's capital activity by area
during the first quarter of 2023.
|
Three Months Ended
March 31, 2023
|
Area
|
Wells
Drilled(1)(2)
|
Wells
Completed(1)
|
Kakwa
|
28
|
21
|
Greater
Dawson
|
8
|
—
|
Sunrise
|
6
|
5
|
Ante Creek
|
4
|
8
|
Total
|
46
|
34
|
(1) Wells drilled
and completed for operated assets only.
|
(2) Excludes
disposal wells.
|
Physical Marketing and LNG
- During the first quarter, ARC's infrastructure and committed
takeaway capacity played a critical role in mitigating price
volatility at AECO while capturing additional margin during periods
of price volatility at various points in North America.
- ARC's first quarter average realized natural gas price was
$5.89 per Mcf, 36 per cent higher
than the average AECO 7A Monthly Index price for the period.
-
- ARC's 170,000 MMBtu per day of physical exposure to Malin
represented approximately 13 per cent of its total production.
During the first quarter, the PG&E Malin daily price averaged
US$9.39 per Mcf.
- ARC entered into a non-binding Memorandum of Understanding for
a 20-year agreement to supply and liquefy approximately 200 MMcf
per day of natural gas with the Cedar LNG Project in BC. This
represents the equivalent of 1.5 million tonnes per annum of LNG or
approximately one half of the facility's total production. ARC is
advancing a binding agreement and continues to pursue LNG offtake
arrangements to increase its anticipated total exposure to
internationally linked natural gas pricing.
Net Debt
- As of March 31, 2023, ARC's
long-term debt balance was $1.1
billion, and its net debt balance was $1.3 billion, or 0.3 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 of $1.0
billion of senior notes outstanding and $0.1 billion in borrowings under the Company's
$1.8 billion credit facility.
- 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 $575
million ($0.93 per share)
during the first quarter of 2023, a decrease of $166 million ($0.25
per share) from the fourth quarter 2022.
CONFERENCE CALL
ARC's senior leadership team will be hosting a conference call
to discuss the Company's first quarter 2023 results on Friday, May 5, 2023, at 8:00 a.m. Mountain Time ("MT").
Date
|
Friday, May 5,
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
|
96684414
|
Webcast URL
|
https://app.webinar.net/BRjv830OJ7k
|
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.
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.
|
Three Months
Ended
|
($ millions)
|
December 31,
2022
|
March 31,
2023
|
March 31,
2022
|
Cash flow used in
investing activities
|
350.7
|
397.4
|
346.7
|
Acquisition of crude
oil and natural gas assets
|
(0.1)
|
(0.5)
|
(0.8)
|
Disposal of crude oil
and natural gas assets
|
—
|
73.6
|
7.4
|
Long-term
investments
|
(3.3)
|
(1.2)
|
—
|
Change in non-cash
investing working capital
|
30.1
|
16.0
|
(22.7)
|
Other
(1)
|
5.9
|
2.1
|
2.7
|
Capital
expenditures
|
383.3
|
487.4
|
333.3
|
(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
|
($ millions)
|
December 31,
2022
|
March 31,
2023
|
March 31,
2022
|
Cash flow from
operating activities
|
878.3
|
540.3
|
758.8
|
Net change in other
liabilities
|
13.9
|
13.7
|
40.8
|
Change in non-cash
operating working capital
|
94.0
|
163.4
|
(56.0)
|
Funds from
operations
|
986.2
|
717.4
|
743.6
|
Capital
expenditures(1)
|
(383.3)
|
(487.4)
|
(333.3)
|
Free funds
flow
|
602.9
|
230.0
|
410.3
|
(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 Q1 2023 MD&A.
|
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 expectation that transportation costs
will decrease over the balance of the year; 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 timing of development of Attachie
Phase I and the anticipated benefits therefrom; the ability of the
Attachie asset to drive production
and reserve growth; the anticipated recovery of capital and annual
production form the Attachie
asset; ARC's plans to electrify the natural gas facility through BC
Hydro and the anticipated benefits therefrom; 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 target net debt to funds
from operations ratio at mid-cycle commodity prices; ARC's 2023
guidance estimates and 2023 outlook; 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 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.