ARC Resources update Summary
Arc Resources First Quarter 2021 drilled 15 wells and completed 32 wells, Capital investments totalled $125.7 million and average daily production of 170,430 boe
- On February 10, 2021, ARC and Seven Generations announced a definitive agreement to combine in an all-share transaction to become the largest pure-play Montney producer. The Business Combination closed on April 6, 2021, making ARC Canada’s largest condensate producer, third-largest natural gas producer, and sixth-largest upstream energy company.
- Driven by strong average realized commodity prices and ARC’s continued focus on proactive market diversification activities, ARC generated funds from operations(1) of $273.9 million ($0.77 per share) and recognized net income of $178.0 million ($0.50 per share). ARC’s average realized natural gas price of $4.60 per Mcf was a 57 per cent premium to the average AECO 7A Monthly Index price.ARC’s and Seven Generations’ combined pro forma funds from operations(1)(2) was $574.5 million.
- ARC generated free funds flow(3) of $148.2 million ($0.42 per share), which was allocated to paying ARC’s dividend of $21.3 million ($0.06 per share) and reducing the Company’s net debt excluding lease obligations(1) outstanding by $125.5 million or 18 per cent. ARC’s ratio of net debt excluding lease obligations to annualized funds from operations was 0.5 times as of March 31, 2021.ARC’s and Seven Generations’ combined pro forma free funds flow(2)(3) was $300.5 million.
- Supported by profitable half-cycle investments made in late 2020, the Company delivered record average daily production of 170,430 boe(4) per day (78 per cent natural gas and 22 per cent crude oil and liquids)(5).ARC’s and Seven Generations’ combined pro forma production was 351,204 boe per day (60 per cent natural gas and 40 per cent crude oil and liquids).
- Capital investments totalled $125.7 million and were focused on drilling and completions activities in Greater Dawson, Sunrise, and Ante Creek. ARC drilled 15 wells and completed 32 wells, and progressed two small-scale infrastructure optimization projects.ARC’s and Seven Generations’ combined pro forma capital expenditures were $274.0 million.
- ARC demonstrated continued operational excellence by delivering an operating expense of $3.85 per boe through prudent cost control. ARC’s operating expense was down three per cent from the fourth quarter of 2020 and 13 per cent from the first quarter of 2020.
- Exhibiting the underlying strength and profitability of the business, as well as the Company’s risk-managed approach to value creation, ARC was assigned an investment-grade credit rating, which lowers the Company’s overall cost of debt.
ARC Resources GUIDANCE
The original 2021 capital budgets set out by both ARC and Seven Generations had the goal of sustaining production while maximizing free funds flow generation. With the Business Combination complete, ARC’s updated 2021 capital budget of $950 million to $1.0 billion is designed to sustain production and maximize free funds flow generation while centering around the Company’s longstanding principles of capital discipline, profitability, and financial strength. Upholding ARC’s and Seven Generations’ strong safety cultures, and advancing the Company’s environmental, social, and governance (“ESG”) leadership and performance, are also top priorities in 2021.
ARC plans to sustain production at Greater Dawson, Sunrise, Kakwa, and Ante Creek through the balance of 2021, delivering average daily production of between 290,000 boe per day and 305,000 boe per day, of which approximately 60 per cent is natural gas and 40 per cent is crude oil and liquids.
During the second quarter of 2021, ARC’s field operations and production will be affected by significant turnaround activity and the anticipated impact of spring break-up. As such, ARC anticipates its second quarter 2021 production will be approximately seven per cent lower than the first quarter 2021 combined pro forma production of 351,204 boe per day. Production during the second half of 2021 is expected to average approximately 340,000 boe per day.
ARC ResourcesWell & Facility Permits Download
ARC Resources PRODUCTION UPDATE
- First quarter 2021 production averaged 411,579 boepd, ahead of the upper range of full-year guidance of 390,000 – 410,000 boepd.
- Driven by stronger than anticipated well performance, March production averaged 417,841 boepd. There were no storage withdrawal volumes in the March production totals.
- First quarter average liquid production was 91,971 bpd (crude oil, condensate and NGLs), ahead of original full-year 2021 guidance of 87,000 bpd.
- Given stronger production performance in all three operated complexes, second quarter 2021 production of 400,000 – 405,000 boepd is anticipated, an increase from previous expectations of approximately 395,000 boepd. Second quarter 2021 production will continue to be impacted by planned pipeline maintenance and Company plant turnarounds which has been incorporated into current guidance estimates.
- Second quarter production estimates also include the impact of the Company’s storage injection programs in California and Dawn, which is expected to reduce quarterly production volumes by 4,500 boepd.
ARC Resources FINANCIAL UPDATE
ARC’s first quarter 2021 production averaged 170,430 boe per day, relatively unchanged from the fourth quarter of 2020. Increased natural gas production at Dawson and Sunrise offset production impacts from planned downtime to accommodate offset completions operations at Tower and Ante Creek.
Including Seven Generations’ production from the Kakwa asset, which totalled 180,774 boe per day, the combined pro forma production averaged 351,204 boe per day during the first quarter of 2021.
ARC Resources OPERATIONAL REVIEW
ARC’s leading position in the Montney resource play comprises more than 1.1 million net acres of land and features a deep inventory of high-return, de-risked development opportunities. The enhanced commodity and geographic diversity established through the Business Combination provides significant optionality within ARC’s portfolio and improves the Company’s ability to mitigate the impacts of future commodity price volatility.
ARC processes the majority of its production through owned-and-operated infrastructure. This affords the Company greater control over its low cost structure, liquids recoveries and the ability to optimize revenue streams, and supports strong safety and environmental performance. Given the recent strength in NGLs pricing, ARC is currently maximizing the liquids recoveries at its processing facilities.
ARC Resources Capital Expenditures
ARC invested $125.7 million during the first quarter of 2021 to drill 15 wells and complete 32 wells, as well as progress two highly economical facility optimization projects. The Sunrise Phase I and Phase II facilities expansion is expected to be completed during the second quarter of 2021 and will add 40 MMcf per day of low-cost natural gas processing and sales capacity. The Parkland/Tower facility sour conversion and expansion is scheduled to be completed in the third quarter of 2021, which will support the continued development of the lower Montney horizon and add approximately 6 MMcf per day of natural gas processing and sales capacity.
Including Seven Generations’ capital expenditures for the Kakwa asset, which totalled $148.3 million to drill 21 wells and complete eight wells, the combined pro forma capital expenditures for the first quarter of 2021 were $274.0 million.
ARC’s planned approach to developing the Kakwa asset is to maximize free funds flow extraction through improved deliverability and profitability. Over the next several years, ARC aims to keep production relatively flat, at approximately 180,000 boe per day, to moderate the asset’s current decline rate of approximately 40 per cent. Leveraging Seven Generations’ recent innovations on well and pad designs, ARC plans to continue on the path of optimizing the inter-well spacing for future pad development in the area to maximize profitability. ARC will seek to realize additional capital efficiency improvements through drilling and completions activities and knowledge-sharing between ARC’s and Seven Generations’ technical teams.
ARC Resources Well Permits & Wells Spud
The oil and gas industry is highly regulated by Government agencies. One of the responsibilities is to approve well permits. A well permit is the intent of an oil & gas operator to drill a new well. Well permits include oil wells, gas wells, water wells and more..
Spudding is the process of beginning to drill a well in the oil and gas industry. … After the surface hole is completed, the main drill bit—which performs the task of drilling to the total depth—is inserted and this process can also be referred to as “spudding in.” Source Arc Resources First Quarter 2021 Update
ARC Resources Drilling Locations Q1 2021
Montney Formation is a major shale gas and tight oil resource. … This estimate makes it one of the largest known gas resources in the world and equivalent to 145 years of Canada’s 2012 consumption. Gas is produced from the Montney Formation in both British Columbia and Alberta.
Source Arc Resources First Quarter 2021 Update
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About ARC Resources
ARC Resources Ltd. is the largest pure-play Montney producer and one of Canada’s largest dividend-paying energy companies, featuring low-cost operations and leading ESG characteristics. 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.Ltd. is the largest pure-play Montney producer and one of Canada’s largest dividend-paying energy companies, featuring low-cost operations and leading ESG characteristics. 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.