CALGARY,
AB, May 5, 2022 /CNW/ - (TSX: ARX) ARC
Resources Ltd. ("ARC" or the "Company") today reported its first
quarter 2022 financial and operational results and provided
revisions to its 2022 guidance.
HIGHLIGHTS
- ARC delivered first quarter 2022 production of 344,447
boe(1)(2) per day (62 per cent natural gas and 38 per
cent crude oil and liquids).
- Cash flow from operating activities was $759 million and funds from operations was
$744 million(3)
($1.08 per share)(4),
driven by strong average realized prices across the Company's
assets.
-
- ARC's average realized natural gas price of $5.98 per Mcf(4) was $1.39 per Mcf higher than the average AECO 7A
Monthly Index price. ARC's average realized condensate price was
$119.15 per
barrel(4).
- Free funds flow was $410
million(5) ($0.60
per share)(6). ARC distributed 64 per cent or
$265 million ($0.39 per share)(4) to shareholders,
with the balance allocated to debt reduction.
-
- ARC declared dividends of $68
million or $0.10 per
share(4) and repurchased 13.1 million common shares for
$196 million under its normal course
issuer bid ("NCIB").
- Since instituting the NCIB in September
2021, ARC has repurchased 44.7 million common shares or
approximately six per cent of total common shares outstanding at an
average price of $12.38 per share for
$553 million.
- Since acquiring Seven Generations Energy Ltd. ("Seven
Generations") on April 6, 2021, ARC
has generated more than $1.6 billion
($2.29 per share) of free funds flow.
Over the period, WTI averaged US$77
per barrel and the AECO 7A Monthly Index price averaged
$4.00 per Mcf.
- ARC's board of directors (the "Board") has approved an increase
of 20 per cent to ARC's quarterly dividend, from $0.10 per share to $0.12 per share, beginning with the dividend that
is expected to be paid on July 15,
2022, to shareholders of record on June 30, 2022. The revised dividend is
sustainable at approximately US$40
per barrel WTI and $2.00 per
gigajoule ("GJ") AECO.
- As of March 31, 2022, ARC's
long-term debt balance was $1.6
billion and its net debt balance was $1.7 billion(3) or 0.6 times funds
from operations(3).
- Cash flow used in investing activities was $347 million, of which $333 million was invested into capital
expenditures(5). During the first quarter of 2022, ARC
drilled 31 wells and completed 41 wells across its Alberta and British
Columbia ("BC") operations.
- As part of its market diversification strategy, ARC has entered
into a long-term natural gas supply agreement with Cheniere Energy,
Inc. ("Cheniere"). Leveraging its scale, low-emissions profile, and
operational excellence, ARC will supply 140,000 million British
thermal units ("MMBtu") per day of natural gas for a term of 15
years commencing with commercial operations of Train 7 of the
Corpus Christi Stage III expansion, which is expected to occur 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 JKM™ (Japan Korea Marker), after
deductions for fixed LNG shipping costs and a fixed liquefaction
fee.
-
- This agreement supports the next phase of ARC's diversification
and margin expansion strategy, by leveraging the Company's
strategic advantages to secure long-term supply deals in support of
the transition to a lower carbon economy underpinned by natural
gas.
- In April 2022, ARC received
certification under Equitable Origin's EO100™ Standard for
Responsible Development for its northeast BC assets, including
Greater Dawson and Sunrise. Including its existing certification at
Kakwa, ARC now holds the largest certified production base under
this standard by a Canadian energy producer, with approximately 95
per cent of its current production certified.
ARC's unaudited condensed 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, 2022, are available on ARC's website at
www.arcresources.com and under ARC's SEDAR profile at
www.sedar.com. The disclosure under the section "Non-GAAP and Other
Financial Measures" in ARC's MD&A as at and for the three
months ended March 31, 2022 (the "Q1 2022 MD&A") is
incorporated by reference into this news release.
_________________________________________________________________________________________________________
|
(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)
|
See Note 10 "Capital
Management" in the financial statements and "Non-GAAP and
Other Financial Measures" in the Q1 2022 MD&A for
information relating to this capital management measure, which
information is incorporated by reference into this news
release.
|
(4)
|
See "Non-GAAP and
Other Financial Measures" in the Q1 2022 MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
(5)
|
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 2022 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.
|
(6)
|
Non-GAAP financial
ratio that is not a standardized financial measure under IFRS and
may not be comparable to similar financial measures disclosed by
other issuers. Free funds flow, a non-GAAP financial measure, is
used as a component of the non-GAAP financial ratio. See
"Non-GAAP and Other Financial Measures" in the Q1 2022
MD&A for the non-GAAP financial ratio for the comparative
period and other information relating to this non-GAAP financial
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,
2021
|
March 31,
2022
|
March 31,
2021(2)
|
FINANCIAL
RESULTS
|
|
|
|
Net income
(loss)
|
678.0
|
(69.4)
|
178.0
|
Per
share
|
0.96
|
(0.10)
|
0.50
|
Cash flow from
operating activities
|
668.7
|
758.8
|
266.8
|
Per
share(3)
|
0.95
|
1.10
|
0.75
|
Funds from
operations
|
833.6
|
743.6
|
273.9
|
Per
share
|
1.19
|
1.08
|
0.77
|
Free funds
flow
|
458.7
|
410.3
|
148.2
|
Per
share
|
0.65
|
0.60
|
0.42
|
Dividends
declared
|
69.5
|
68.2
|
21.3
|
Per
share
|
0.10
|
0.10
|
0.06
|
Cash flow used in
investing activities
|
268.7
|
346.7
|
104.1
|
Capital
expenditures
|
374.9
|
333.3
|
125.7
|
Long-term
debt
|
1,705.3
|
1,578.7
|
1,608.8
|
Net debt
|
1,828.7
|
1,695.5
|
568.0
|
Common shares
outstanding, weighted average diluted
(millions)
|
703.0
|
688.8
|
354.4
|
Common shares
outstanding, end of period (millions)
|
693.5
|
680.9
|
353.4
|
OPERATIONAL
RESULTS
|
|
|
|
Production
|
|
|
|
Crude oil (bbl/day)
|
7,857
|
7,892
|
13,647
|
Condensate (bbl/day)
|
74,220
|
72,956
|
13,812
|
Crude oil and condensate (bbl/day)
|
82,077
|
80,848
|
27,459
|
Natural gas (MMcf/day)
|
1,293
|
1,280
|
794
|
NGLs (bbl/day)
|
48,299
|
50,257
|
10,620
|
Total (boe/day)
|
345,831
|
344,447
|
170,430
|
Average realized
price
|
|
|
|
Crude oil ($/bbl)(3)
|
92.11
|
111.48
|
64.46
|
Condensate ($/bbl)(3)
|
96.90
|
119.15
|
71.59
|
Natural gas ($/Mcf)(3)
|
6.45
|
5.98
|
4.60
|
NGLs ($/bbl)(3)
|
27.65
|
27.94
|
29.45
|
Average realized price ($/boe)(3)
|
50.87
|
54.10
|
34.25
|
Netback
|
|
|
|
Commodity sales from production
($/boe)(3)
|
50.87
|
54.10
|
34.25
|
Royalties ($/boe)(3)
|
(5.44)
|
(7.81)
|
(1.69)
|
Operating expense ($/boe)(3)
|
(3.50)
|
(4.04)
|
(3.85)
|
Transportation expense ($/boe)(3)
|
(5.47)
|
(5.57)
|
(3.70)
|
Netback ($/boe)(4)
|
36.46
|
36.68
|
25.01
|
TRADING
STATISTICS(5)
|
|
|
|
High price
|
13.34
|
17.50
|
8.67
|
Low price
|
10.20
|
11.66
|
5.88
|
Close price
|
11.50
|
16.74
|
7.72
|
Average daily volume
(thousands of shares)
|
3,173
|
4,224
|
3,125
|
(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 Q1 2022 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 financial
ratio that is not a standardized financial measure under IFRS and
may not be comparable to similar financial measures disclosed by
other issuers. Netback, a non-GAAP financial measure, is used as a
component of the non-GAAP financial ratio. See "Non-GAAP and
Other Financial Measures" in the Q1 2022 MD&A for the
non-GAAP financial ratio for the comparative period and other
information relating to this non-GAAP financial 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's 2022 capital program remains centered around the
Company's guiding principles of capital discipline, profitable
investment, and financial strength.
-
- Planned capital expenditures are unchanged at $1.15 to $1.25
billion.
- The capital program, including the revised dividend, is
expected to be fully funded by funds from operations at
approximately US$40 per barrel WTI
and $2.00 per GJ AECO.
- Production guidance is unchanged at 335,000 to 350,000 boe per
day.
- Transportation guidance has been revised upward to reflect an
increase in tolls on certain natural gas pipelines, as well as
higher fuel gas expense recognized in conjunction with higher
natural gas prices. Fuel gas expense is recognized in
transportation expense with a corresponding increase to commodity
sales from production.
- General and administrative ("G&A") expense associated with
share-based compensation guidance has been revised upward to
reflect higher-than-expected expense recognized under ARC's
share-based compensation plans during the first quarter of
2022.
- Current income tax expense guidance has been revised upward to
reflect the increase in expected taxable income associated with
higher commodity prices.
- Over the balance of year, ARC will re-direct capital to its
Kakwa asset. Excess natural gas processing capacity and strong
condensate fundamentals will drive higher free funds flow with no
changes to total capital expenditures and production guidance.
-
- Since acquiring the asset in 2021, ARC has achieved improved
capital efficiencies through lower costs and positive well
performance. ARC believes the optimal production level to
profitably develop the asset over the long term is between 180,000
and 200,000 boe per day. Kakwa production averaged 174,665 boe per
day during the first quarter of 2022.
- ARC remains fully prepared to proceed with development of
Attachie West Phase I and the Sunrise expansion as soon as the BC
regulatory environment supports such investment. The recent receipt
of new development permits from the BC Oil and Gas Commission is a
positive step towards establishing a solid foundation for future
investment in the province.
Market Diversification Strategy
- ARC continues to take a risk-managed approach to building a
long-term natural gas strategy that focuses on margin expansion and
diversification into key consuming regions. ARC has extensive
natural gas price diversification within North America through long-term commitments to
sell natural gas into the US Midwest, Henry Hub, Malin, and
Dawn.
- The previously announced long-term natural gas supply agreement
with an LNG Canada participant was ARC's first step in directing
natural gas to LNG facilities directly, achieving a premium for the
Company's natural gas based on North American pricing. The
subsequent Cheniere agreement represents the second long-term
agreement in the execution of ARC's LNG strategy, achieving
internationally benchmarked pricing. As ARC progresses its
diversification and margin expansion strategy, the Company is
focused on capturing additional opportunities along the value chain
in the US Gulf Coast and western Canada. This is consistent with ARC's strategy
of creating new markets for its product and competitively
diversifying its natural gas sales points.
Free Funds Flow Allocation
- ARC reaffirms its commitment to return between 50 and 80 per
cent of free funds flow generated in 2022 to shareholders and the
remainder to debt reduction. Currently, the optimal mechanism to
return shareholder capital is through a sustainable base dividend
that grows over time, and continued share repurchases.
-
- The dividend level is designed to grow with the underlying
profitability of the business and must be sustainable during
extended periods of low commodity prices.
- Share repurchases will continue to be executed when the
intrinsic value of ARC's shares under mid-cycle commodity price
assumptions exceeds the current market trading price.
2022 Guidance
|
2022
Guidance
|
2022
Guidance
(May
2022)
|
Production
|
|
|
Crude oil (bbl/day)
|
7,000 -
9,000
|
7,000 -
9,000
|
Condensate (bbl/day)
|
72,000 -
78,000
|
72,000 -
78,000
|
Crude oil and condensate (bbl/day)
|
79,000 -
87,000
|
79,000 -
87,000
|
Natural gas (MMcf/day)
|
1,240 -
1,280
|
1,240 -
1,280
|
NGLs (bbl/day)
|
49,000 -
51,000
|
49,000 -
51,000
|
Total (boe/day)
|
335,000 -
350,000
|
335,000 -
350,000
|
Expenses
($/boe)(1)
|
|
|
Operating
|
4.00 - 4.50
|
4.00 -
4.50
|
Transportation
|
4.50 - 5.00
|
5.35 -
5.75
|
G&A expense before share-based compensation
expense
|
0.80 - 0.90
|
0.80 -
0.90
|
G&A - share-based compensation expense
|
0.30 - 0.40
|
0.60 -
0.70
|
Interest and financing(2)
|
0.55 - 0.65
|
0.55 -
0.65
|
Current income tax
expense as a per cent of funds from
operations(1)
|
1 - 6
|
3 - 8
|
Capital expenditures ($
billions)(3)
|
1.15 - 1.25
|
1.15 -
1.25
|
(1)
|
See "Non-GAAP and
Other Financial Measures" in the Q1 2022 MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
(2)
|
Excludes accretion of
ARC's asset retirement obligation ("ARO").
|
(3)
|
See "About ARC
Resources Ltd." in the Q1 2022 MD&A for historical capital
expenditures.
|
- For a summary of ARC's 2022 year-to-date actuals for
production, expenses, and capital expenditures, as compared to
revised guidance, see "Annual Guidance" in the Q1 2022
MD&A.
OPERATIONAL RESULTS
Cash Flow Used in Investing Activities and Capital
Expenditures
- Cash flow used in investing activities was $347 million during the first quarter of 2022, of
which $333 million was invested into
capital expenditures to drill 31 wells and complete 41 wells.
- The following table details ARC's capital activity by area
during the first quarter of 2022.
|
Three Months Ended
March 31, 2022
|
Area
|
Wells
Drilled(1)
|
Wells
Completed(1)
|
Kakwa
|
21
|
16
|
Greater Dawson
|
6
|
7
|
Sunrise
|
—
|
9
|
Ante Creek
|
4
|
9
|
Total
|
31
|
41
|
(1)
|
Wells drilled and
completed for operated assets only.
|
Production and Operating Expense
Production
- ARC's production averaged 344,447 boe per day during the first
quarter of 2022 (62 per cent natural gas and 38 per cent crude oil
and liquids), unchanged from the fourth quarter of 2021.
- ARC's field operations and production will be affected by
planned turnaround activity during the second quarter of 2022.
Accordingly, average production is expected to be approximately
three per cent lower than in the first quarter of 2022, with growth
planned to resume over the second half of the year.
Operating Expense
- ARC's first quarter 2022 operating expense per boe of
$4.04 increased 15 per cent or
$0.54 per boe from the fourth quarter
of 2021, primarily due to a planned increase in maintenance and
workover activities.
- Commensurate with the turnaround activity planned, ARC's
operating expense per boe in the second quarter of 2022 is expected
to increase from the first quarter, before trending lower on a per
boe basis over the balance of 2022.
Physical Marketing
Average Realized Prices
- ARC's diversified sales portfolio enhances the Company's
ability to manage risk and generate value through its physical
marketing activities.
-
- During the first quarter of 2022, ARC's average realized
natural gas price of $5.98 per Mcf
was $1.39 per Mcf, or 30 per cent
higher than the average AECO 7A Monthly Index price.
- Crude oil and liquids pricing strengthened significantly during
the period. ARC's average realized condensate price of $119.15 per barrel increased by 23 per cent, and
ARC's average realized crude oil price of $111.48 per barrel increased by 21 per cent
relative to the fourth quarter of 2021. ARC's average realized NGLs
price of $27.94 per barrel was
relatively unchanged.
Transportation Expense
- ARC's first quarter 2022 transportation expense per boe of
$5.57 increased by two per cent from
the fourth quarter of 2021 primarily due to increased tolls on
certain natural gas pipelines, as well as increased fuel gas
expense resulting from higher natural gas prices.
FINANCIAL RESULTS
Financial Position
- As of March 31, 2022, ARC's
long-term debt balance was $1.6
billion, and its net debt balance was $1.7 billion, or 0.6 times funds from
operations.
-
- Long-term debt comprised $1.0
billion of senior notes outstanding and $0.6 billion in borrowings under the Company's
$2.0 billion credit facility.
- 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.
-
- The Company continues to strengthen its financial position with
excess free funds flow. During the first quarter of 2022, ARC
reduced long-term debt and net debt by $127
million and $133 million,
respectively.
Returns to Shareholders
- ARC distributed 64 per cent or $265
million ($0.39 per share) of
free funds flow to shareholders during the first quarter of 2022
through a combination of dividends and share repurchases.
Dividends
- ARC declared dividends of $68
million or $0.10 per share
during the first quarter of 2022.
- The Board has approved an increase of 20 per cent to ARC's
quarterly dividend, from $0.10 per
share to $0.12 per share, beginning
with the dividend that is expected to be paid on July 15, 2022, to shareholders of record on
June 30, 2022.
- ARC's dividend continues to serve as the Company's primary
mechanism of returning capital to shareholders over the long term
and is designed to grow with the underlying profitability of the
business.
Share Repurchases
- ARC repurchased 13.1 million common shares under its NCIB
during the first quarter of 2022 at a weighted average price of
$15.00 per share for $196 million.
- Since its NCIB commenced on September 1,
2021, ARC has repurchased 44.7 million common shares or
approximately six per cent of total shares outstanding. The common
shares have been repurchased at a weighted average price of
$12.38 per share for $553 million.
- ARC will continue to repurchase common shares when the
intrinsic value of the Company's common shares under lower
commodity price assumptions exceeds the current market trading
price.
Net Income (Loss)
- ARC recognized a net loss of $69
million ($0.10 per share)
during the first quarter of 2022, compared to net income of
$678 million ($0.96 per share) during the fourth quarter of
2021.
-
- During the first quarter of 2022, ARC recognized increased
losses on its risk management contracts and recorded increased
royalties and current income taxes associated with the increase in
average realized commodity prices. Additionally, ARC recorded a
higher G&A expense during the period, reflecting higher cash
payments made under the Company's share-based compensation plans in
conjunction with strong share price appreciation.
- Partially offsetting the reductions to earnings during the
first quarter of 2022 was the recognition of a deferred income tax
recovery.
Cash Flow from Operating Activities, Funds from Operations,
and Free Funds Flow
Cash Flow from Operating Activities
- Cash flow from operating activities was $759 million ($1.10
per share) during the first quarter of 2022, increasing by
$90 million ($0.15 per share) from the fourth quarter of
2021.
Funds from Operations
- ARC generated funds from operations of $744 million ($1.08
per share) during the first quarter of 2022, representing a
decrease of $90 million ($0.11 per share) from the fourth quarter of
2021.
-
- Royalties of $242 million
($0.35 per share)(1)
increased by $70 million from the
fourth quarter of 2021, reflecting the impact of higher average
realized commodity prices.
- ARC's expected taxable income has also increased with the rise
in commodity prices, which resulted in ARC recording a current
income tax expense of $55 million
($0.08 per share)(1)
during the first quarter of 2022.
- ARC's first quarter 2022 G&A expense of $72 million ($0.10
per share)(1) increased by $26
million from the fourth quarter of 2021. The increase in
G&A expense primarily reflects the increase in the fair value
of the Company's share-based compensation plans due to ARC's common
share price appreciating by 46 per cent since December 31, 2021.
- Partially offsetting the reductions to funds from operations
were increased commodity sales from production and lower realized
losses on ARC's risk management.
- The following table details the change in funds from operations
for the first quarter of 2022 relative to the fourth quarter of
2021.
Funds from Operations
Reconciliation
|
$ millions
|
$/share(2)
|
Funds from operations
for the three months ended December 31, 2021
|
833.6
|
1.19
|
Production
volumes
|
|
|
Crude oil and liquids
|
(24.5)
|
(0.04)
|
Natural gas
|
(24.1)
|
(0.03)
|
Commodity
prices
|
|
|
Crude oil and liquids
|
161.4
|
0.24
|
Natural gas
|
(54.3)
|
(0.08)
|
Sales of commodities
purchased from third parties
|
231.9
|
0.33
|
Other income
|
2.0
|
—
|
Realized loss on risk
management contracts
|
27.2
|
0.04
|
Royalties
|
(69.6)
|
(0.10)
|
Expenses
|
|
|
Commodities purchased from third parties
|
(233.8)
|
(0.33)
|
Operating
|
(13.8)
|
(0.02)
|
Transportation
|
1.6
|
—
|
G&A
|
(25.5)
|
(0.04)
|
Interest and financing(3)
|
1.5
|
—
|
Current income tax
|
(69.0)
|
(0.10)
|
Realized loss on foreign exchange
|
(2.1)
|
—
|
Other
|
1.1
|
—
|
Weighted average shares, diluted
|
—
|
0.02
|
Funds from operations
for the three months ended March 31, 2022
|
743.6
|
1.08
|
(1)
|
See "Non-GAAP and
Other Financial Measures" in the Q1 2022 MD&A for an
explanation of the composition of this supplementary financial
measure, which information is incorporated by reference into this
news release.
|
(2)
|
Per share amounts are
based on weighted average diluted common shares.
|
(3)
|
Excludes accretion of
ARC's ARO.
|
Free Funds Flow
- ARC generated free funds flow of $410
million ($0.60 per share)
during the first quarter of 2022. 64 per cent or $265 million ($0.39
per share) of free funds flow was returned to shareholders, with
the remaining free funds flow used to strengthen the Company's
financial position.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE INITIATIVES
- In April 2022, ARC received
certification under Equitable Origin's EO100™ Standard for
Responsible Development for its northeast BC assets, including
Greater Dawson and Sunrise. ARC now holds the largest certified
production base under this standard by a Canadian energy producer,
with approximately 95 per cent of its current production certified.
This is the second certification for the Company, the first of
which was achieved by Seven Generations in 2019 for the Kakwa
asset.
- During the quarter, ARC completed a small-scale,
emissions-reduction project at its Parkland 03-09 natural gas
processing facility. The project included the electrification of
the facility's final outstanding natural gas-fired compressor,
which is anticipated to reduce greenhouse gas ("GHG") emissions by
approximately 6,000 tonnes of carbon dioxide equivalent per
year.
BOARD OF DIRECTORS UPDATE
- After 13 years of service, Kathleen
O'Neill will be retiring from the Board on May 6, 2022. ARC would like to extend its
sincerest gratitude to Ms. O'Neill for the guidance and wisdom she
provided to the Board and Management during her tenure.
CONFERENCE CALL
ARC's senior leadership team will be hosting a conference call
to discuss the Company's first quarter 2022 results on Friday, May 6, 2022, at 7:00 a.m. Mountain Time ("MT").
Date
|
Friday, May 6,
2022
|
Time
|
7:00 a.m. MT
|
Dial-in
Numbers
|
|
Calgary
|
587-880-2171
|
Toronto
|
416-764-8659
|
Toll-free
|
1-888-664-6392
|
Conference
ID
|
89357067
|
Webcast URL
|
https://produceredition.webcasts.com/starthere.jsp?ei=1542881&tp_key=230c530d02
|
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 (loss),
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
compared to the Company's annually budgeted capital investments.
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 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)
|
March 31,
2022
|
March 31,
2021
|
Cash flow used in
investing activities
|
346.7
|
104.1
|
Acquisition of crude
oil and natural gas assets
|
(0.8)
|
—
|
Disposal of crude oil
and natural gas assets
|
7.4
|
0.1
|
Change in non-cash
working capital
|
(22.7)
|
19.8
|
Other property, plant
and equipment ("PP&E")(1)
|
2.7
|
1.7
|
Capital
expenditures
|
333.3
|
125.7
|
(1)
|
Other PP&E
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. 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.
|
Three Months
Ended
|
($ millions)
|
March 31,
2022
|
March 31,
2021
|
Cash flow from
operating activities
|
758.8
|
266.8
|
Net change in other
liabilities
|
40.8
|
18.2
|
Change in non-cash
operating working capital
|
(56.0)
|
(11.1)
|
Funds from
operations
|
743.6
|
273.9
|
Capital
expenditures(1)
|
(333.3)
|
(125.7)
|
Free funds
flow
|
410.3
|
148.2
|
(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 2022 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: the
declaration and payment of future dividends in the amount of
$0.12 per share; the anticipated
on-stream date of Cheniere's Corpus Christi Stage III expansion and
ARC's ability to deliver 140,000 MMBtu per day of natural gas to
the facility; ARC's 2022 guidance, including planned capital
expenditures (and the commodity prices at which such capital
expenditures are fully funded by funds from operations), production
guidance, and expenses; ARC's plans to re-direct capital to the
Kakwa asset and the optimal production levels of the same, and to
proceed with the development of Attachie West Phase I and the
Sunrise expansion once the BC regulatory environment becomes more
certain; ARC's ability to capture additional opportunities along
the value chain in the US Gulf Coast and western Canada through execution of its market
diversification strategy; plans to allocate surplus funds from
operations to returns to shareholders and debt reduction; ARC's
objectives with respect to growing its dividend and share
repurchases under its NCIB; ARC's planned turnaround activities in
the second quarter of 2022 and the effects thereof on production
and operating expenses; ARC's target net debt to funds from
operations ratio over the long term; and ARC's ability to reduce
GHG emissions at the Parkland 03-09 natural gas processing
facility. 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 2022 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 ongoing 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 2022 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 and the Sunrise expansion,
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 2022 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; the ongoing impact of the COVID-19 pandemic on commodity
prices and the global economy; 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.