The Board has approved a preliminary capital budget of $1.8 billion. The budget was designed with profitable growth and capital discipline in mind, and includes an updated framework that allows capital returns to increase as net debt approaches ARC’s long-term target. The capital program adheres to ARC’s long-standing principles of prudent capital allocation, balance sheet strength, and long-term profitability.
Strategic Priorities
- Execute the capital program in a safe, efficient, and responsible manner.
- Increase Kakwa profitability through modest production growth and investments in infrastructure that lowers operating costs.
- Resume drilling activity in British Columbia (“BC”) to restore production to previous levels and maximize unit economics.
- Evaluate and execute additional downstream diversification initiatives.
- Remain sanction-ready at Attachie West Phase I.
- Execute initiatives to reduce emissions and retain ESG leadership status.
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Wells Drilled 2022
The 2023 budget is expected to generate average production of approximately 350,000 boe per day (60 per cent natural gas and 40 per cent crude oil and liquids) representing two per cent production growth. The program is expected to generate approximately $1.7 billion of free funds flow, at the current forward curve. The 2023 capital budget incorporates an approximately 20 per cent increase due to cost inflation realized over the course of 2022.
Capital Budget Highlights
- Total capital expenditures of $1.8 billion(1), with approximately 70 per cent allocated to Alberta and 30 per cent to BC.
- Capital expenditures are expected to decrease in 2024 to between $1.5 billion and $1.6 billion with production forecast to average approximately 350,000 boe per day (60 per cent natural gas and 40 per cent crude oil and liquids).
- The capital program is predicated upon the continued receipt of drilling permits on freehold land in NEBC.
- Invest $1.1 billion to increase free funds flow at Kakwa.
- Kakwa production is expected to increase and average between 190,000 and 200,000 boe per day in 2023.
- Invest $170 million over the next two years ($130 million in 2023) into water infrastructure to reduce annual operating expenses, primarily trucking, by approximately $60 million, or $0.50 per boe based on corporate production.
- Invest $100 million to expand natural gas production at Sunrise by 80 MMcf per day.
- Production volumes from the expansion are expected to be fully on-stream in 2024, bringing the area’s processing capacity to 360 MMcf per day.
- Sunrise is one of ARC’s most profitable assets and will be direct-connected to the Coastal Gas Link that will supply natural gas to liquefied natural gas (“LNG”) off of the west coast of Canada.
- ARC remains prepared to sanction Attachie West Phase I once the BC regulatory environment on Crown lands in NEBC becomes more certain. The total project costs for Phase I are estimated at approximately $700 million, which includes all facility capital and the initial wells required to fill the facility. Phase I is estimated to pay out in less than two years based on the current forward curve.
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