CALGARY,
AB, July 28, 2022 /CNW/ - (TSX: ARX) ARC
Resources Ltd. ("ARC" or the "Company") today reported its second
quarter 2022 financial and operational results.
HIGHLIGHTS
- Second quarter 2022 production averaged 336,112
boe(1)(2) per day (60 per cent natural gas and 40 per
cent crude oil and liquids).
- Cash flow from operating activities was $1,093 million and funds from operations was
$1,030 million(3)
($1.52 per share)(4).
-
- Market diversification generated higher realized pricing than
local benchmarks, enhancing strong commodity prices. ARC's average
realized natural gas price of $9.08
per Mcf(4) was $2.81 per
Mcf higher than the average AECO 7A Monthly Index price. ARC's
average realized condensate price was $137.91 per barrel(4) compared to
US$WTI of $108.52 per barrel.
- Record free funds flow of $677
million(5) or $1.00
per share(6) represented a 67 per cent increase in the
second quarter of 2022 compared to the first quarter, and a 186 per
cent increase compared to the same period in the prior year. ARC
distributed approximately 60 per cent or $406 million ($0.60
per share)(4) of its free funds flow to shareholders,
with the balance allocated to debt reduction.
-
- ARC declared dividends of $80
million or $0.12 per
share(4) and repurchased 18.4 million common shares for
$326 million under its normal course
issuer bid ("NCIB").
- ARC has repurchased 67.1 million common shares or approximately
nine per cent of the total common shares outstanding since
instituting the NCIB in September
2021, at an average price of $14.00 per share.
- ARC intends to complete the existing 10 per cent NCIB by the
end of August 2022. Upon completion
and subject to review and approval by the TSX, ARX intends to renew
the NCIB for an additional 10 per cent of the public float (as
defined by the TSX) outstanding at that time.
- As of June 30, 2022, ARC's
long-term debt balance was $1.2
billion and its net debt balance was $1.5 billion(3) or 0.4 times funds
from operations(3).
- Cash flow used in investing activities was $364 million, of which $352 million was invested into capital
expenditures(5). During the second quarter of 2022, ARC
drilled 29 wells and completed 38 wells primarily in its
Alberta operations.
- Capital spending and production guidance have been revised
upwards to primarily reflect realized and anticipated inflation,
along with additional water infrastructure in Kakwa and funds to
manage longer supply chain related lead times that will support
2023 activity.
-
- Capital expenditure guidance for 2022 has increased from
$1.15 to $1.25
billion to $1.35 to
$1.45 billion.
- Production guidance for 2022 has increased from 335,000 to
350,000 boe per day to 340,000 to 350,000 boe per day.
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 and six months
ended June 30, 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 entitled
"Non-GAAP and Other Financial Measures" in ARC's MD&A as at and
for the three and six months ended June 30, 2022 (the "Q2 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 Q2 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 Q2 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
Q2 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 Q2 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
|
Six Months
Ended(2)
|
and common shares
outstanding)
|
March 31,
2022
|
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
FINANCIAL
RESULTS
|
|
|
|
|
|
Net income
(loss)
|
(69.4)
|
762.9
|
(123.0)
|
693.5
|
55.0
|
Per share
|
(0.10)
|
1.13
|
(0.17)
|
1.01
|
0.10
|
Cash flow from
operating activities
|
758.8
|
1,092.6
|
456.0
|
1,851.4
|
722.8
|
Per
share(3)
|
1.10
|
1.61
|
0.63
|
2.71
|
1.34
|
Funds from
operations
|
743.6
|
1,029.7
|
542.5
|
1,773.3
|
816.4
|
Per share
|
1.08
|
1.52
|
0.75
|
2.59
|
1.51
|
Free funds
flow
|
410.3
|
677.3
|
249.7
|
1,087.6
|
397.9
|
Per share
|
0.60
|
1.00
|
0.35
|
1.59
|
0.74
|
Dividends
declared
|
68.2
|
79.9
|
43.5
|
148.1
|
64.8
|
Per share
|
0.10
|
0.12
|
0.06
|
0.22
|
0.12
|
Cash flow used in
investing activities
|
346.7
|
363.9
|
206.5
|
710.6
|
310.6
|
Capital
expenditures
|
333.3
|
352.4
|
292.8
|
685.7
|
418.5
|
Long-term
debt
|
1,578.7
|
1,247.6
|
2,016.9
|
1,247.6
|
2,016.9
|
Net debt
|
1,695.5
|
1,511.4
|
2,084.1
|
1,511.4
|
2,084.1
|
Common shares
outstanding, weighted average diluted
(millions)
|
688.8
|
676.8
|
723.1
|
683.6
|
540.3
|
Common shares
outstanding, end of period (millions)
|
680.9
|
663.7
|
723.9
|
663.7
|
723.9
|
OPERATIONAL
RESULTS
|
|
|
|
|
|
Production
|
|
|
|
|
|
Crude oil
(bbl/day)
|
7,892
|
8,297
|
11,659
|
8,096
|
12,648
|
Condensate
(bbl/day)
|
72,956
|
75,793
|
73,459
|
74,382
|
43,800
|
Crude oil and
condensate (bbl/day)
|
80,848
|
84,090
|
85,118
|
82,478
|
56,448
|
Natural gas
(MMcf/day)
|
1,280
|
1,219
|
1,203
|
1,249
|
1,000
|
NGLs
(bbl/day)
|
50,257
|
48,877
|
50,020
|
49,563
|
30,429
|
Total
(boe/day)
|
344,447
|
336,112
|
335,701
|
340,256
|
253,522
|
Average realized
price
|
|
|
|
|
|
Crude oil
($/bbl)(3)
|
111.48
|
134.52
|
74.01
|
123.35
|
68.89
|
Condensate
($/bbl)(3)
|
119.15
|
137.91
|
77.93
|
128.76
|
76.93
|
Natural gas
($/Mcf)(3)
|
5.98
|
9.08
|
3.34
|
7.50
|
3.84
|
NGLs
($/bbl)(3)
|
27.94
|
34.16
|
22.19
|
31.03
|
23.45
|
Average realized price
($/boe)(3)
|
54.10
|
72.31
|
34.90
|
63.14
|
34.68
|
Netback
|
|
|
|
|
|
Commodity sales from
production ($/boe)(3)
|
54.10
|
72.31
|
34.90
|
63.14
|
34.68
|
Royalties
($/boe)(3)
|
(7.81)
|
(11.10)
|
(3.02)
|
(9.45)
|
(2.58)
|
Operating expense
($/boe)(3)
|
(4.04)
|
(4.66)
|
(4.53)
|
(4.35)
|
(4.30)
|
Transportation expense
($/boe)(3)
|
(5.57)
|
(6.27)
|
(4.49)
|
(5.91)
|
(4.22)
|
Netback
($/boe)(4)
|
36.68
|
50.28
|
22.86
|
43.43
|
23.58
|
TRADING
STATISTICS(5)
|
|
|
|
|
|
High price
|
17.50
|
22.88
|
10.74
|
22.88
|
10.74
|
Low price
|
11.66
|
14.81
|
7.26
|
11.88
|
5.88
|
Close price
|
16.74
|
16.23
|
10.55
|
16.23
|
10.55
|
Average daily volume
(thousands of shares)
|
4,224
|
9,208
|
3,309
|
8,334
|
3,218
|
(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 Q2 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 Q2 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 delivered on all aspects of the business in the second
quarter of 2022 including the safe and efficient execution of the
capital program and operations:
- Strong commodity prices across diversified markets combined
with our low-cost structure and capital discipline resulted in free
funds flow of $1.00 per share.
- Free funds flow per share reached a 26-year record level,
allowing ARC to further strengthen its balance sheet and return
additional capital to shareholders at a faster rate than
anticipated.
- Planned maintenance was completed on time and within budget
providing strong momentum for growth in the second half of the
year.
While increased commodity prices and inflationary pressure have
introduced tightness across the supply chain, ARC's scale and
disciplined approach to planning is mitigating the impact and
ensures ARC has sufficient access across the supply chain to
continue to efficiently execute its capital program.
ARC has increased capital expenditures and production guidance
for 2022. All other cost guidance items are unchanged, with
operating and transportation expenses expected to decrease over the
balance of the year on a per boe basis. The capital increase
primarily reflects realized and anticipated inflation, with a
lesser amount towards water infrastructure investments at Kakwa and
additional funds to manage longer supply chain related lead times
that will support 2023 activity. At Kakwa, strong well performance
is expected to support three to five per cent production growth in
the second half of 2022, and sustained higher production levels in
2023. Should the regulatory environment in BC support investment,
ARC is well-positioned to resume activity in an efficient manner,
including the Sunrise expansion and sanctioning Attachie West Phase
I.
- Capital expenditure guidance increased to $1.35 to $1.45
billion (from $1.15 to
$1.25 billion).
- Production guidance increased to 340,000 to 350,000 boe per day
(from 335,000 to 350,000 boe per day).
2022 Guidance
|
2022
Guidance
|
2022 Guidance
(July 2022)
|
2022 YTD
Actuals
|
% Variance
from
2022 Guidance
(July 2022)
|
Production
|
|
|
|
|
Crude oil
(bbl/day)
|
7,000 -
9,000
|
8,000 -
9,000
|
8,096
|
—
|
Condensate
(bbl/day)
|
72,000 -
78,000
|
77,000 -
81,000
|
74,382
|
(3)
|
Crude oil and
condensate (bbl/day)
|
79,000 -
87,000
|
85,000 -
90,000
|
82,478
|
(3)
|
Natural gas
(MMcf/day)
|
1,240 -
1,280
|
1,240 -
1,260
|
1,249
|
—
|
NGLs
(bbl/day)
|
49,000 -
51,000
|
48,000 -
50,000
|
49,563
|
—
|
Total
(boe/day)
|
335,000 -
350,000
|
340,000 -
350,000
|
340,256
|
—
|
Expenses
($/boe)(1)
|
|
|
|
|
Operating
|
4.00 - 4.50
|
4.00 - 4.50
|
4.35
|
—
|
Transportation
|
5.35 - 5.75
|
5.35 - 5.75
|
5.91
|
3
|
G&A expense before
share-based compensation expense
|
0.80 - 0.90
|
0.80 - 0.90
|
0.92
|
2
|
G&A - share-based
compensation expense
|
0.60 - 0.70
|
0.60 - 0.70
|
0.83
|
19
|
Interest and
financing(2)
|
0.55 - 0.65
|
0.55 - 0.65
|
0.68
|
5
|
Current income tax
expense as a per cent of funds from
operations(1)
|
3 - 8
|
3 - 8
|
8
|
—
|
Capital expenditures ($
billions)(3)
|
1.15 - 1.25
|
1.35 - 1.45
|
0.7
|
n/a
|
(1)
|
See "Non-GAAP and
Other Financial Measures" in the Q2 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 Q2 2022 MD&A for historical capital
expenditures.
|
OPERATIONAL RESULTS
Cash Flow Used in Investing Activities and Capital
Expenditures
- Cash flow used in investing activities was $364 million during the second quarter of 2022,
with the Company drilling 29 wells and completing 38 wells. Cash
flow used in investing activities was $711
million during the first half of 2022, of which $686 million was invested into capital
expenditures to drill 60 wells and complete 79 wells.
The following table details ARC's capital activity by area
during the first six months of 2022.
|
Six Months Ended
June 30, 2022
|
Area
|
Wells
Drilled(1)
|
Wells
Completed(1)
|
Kakwa
|
50
|
45
|
Greater
Dawson
|
6
|
16
|
Sunrise
|
—
|
9
|
Ante Creek
|
4
|
9
|
Total
|
60
|
79
|
(1) Wells drilled and
completed for operated assets only.
|
Production and Operating Expense
Production
- ARC's production averaged 336,112 boe per day during the second
quarter of 2022 (60 per cent natural gas and 40 per cent crude oil
and liquids). Production was in line with guidance and slightly
lower compared to the first quarter of 2022 due to planned
maintenance and turnarounds, which were executed on time and within
budget.
- Production in the second half of 2022 is expected to increase
by three to five per cent compared to the second quarter, primarily
driven by growth at Kakwa.
Operating Expense
- ARC's second quarter 2022 operating expense per boe of
$4.66 increased 15 per cent from the
first quarter of 2022, primarily due to pass through input costs
from higher commodity prices and planned maintenance.
- ARC's operating expense per boe is expected to decrease over
the balance of year due to higher production volumes.
Physical Marketing
Average Realized Prices
- End market diversification and liquids marketing enhanced
strong pricing and supported high margins in the second
quarter.
- ARC's average realized natural gas price during the second
quarter was $9.08 per Mcf, 45 per
cent higher than the average AECO 7A Monthly Index price.
- ARC's realized condensate price of $137.91 per barrel increased by 16 per cent
compared to the first quarter. ARC's average realized NGLs price of
$34.16 per barrel increased by 22 per
cent relative to the first quarter of 2022.
Transportation Expense
- ARC's second quarter 2022 transportation expense per boe of
$6.27 increased by 13 per cent from
the first quarter of 2022 primarily due to higher fuel gas expense
resulting from higher natural gas prices and other pass through
fuel costs.
- ARC's transportation expense is expected to decrease over the
balance of year due to higher production volumes.
FINANCIAL RESULTS
Financial Position
- As of June 30, 2022, ARC's
long-term debt balance was $1.2
billion, and its net debt balance was $1.5 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 comprised $1.0
billion of senior notes outstanding and $0.2 billion in borrowings under the Company's
$2.0 billion credit facility.
- During the quarter, ARC reduced long-term debt and net debt by
$331 million and $184 million, respectively.
Returns to Shareholders
- ARC distributed approximately 60 per cent or $406 million ($0.60
per share) of free funds flow to shareholders during the second
quarter of 2022 through a combination of dividends and share
repurchases.
Dividends
- ARC declared dividends of $80
million or $0.12 per share
during the second quarter of 2022.
- The dividend serves as the primary 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.
Share Repurchases
- ARC repurchased 18.4 million common shares under its NCIB
during the second quarter of 2022 at a weighted average price of
$17.69 per share.
- ARC has repurchased approximately nine per cent of total shares
outstanding since its NCIB commenced on September 1, 2021, or 67.1 million common shares
at a weighted average price of $14.00
per share.
- 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 intrinsic value using much
lower commodity price assumptions than the forward strip and a wide
range of discount rates.
- ARC intends to renew its NCIB in September of 2022.
Net Income (Loss)
- ARC recognized net income of $763
million ($1.13 per share)
during the second quarter of 2022, compared to a net loss of
$69 million ($0.10 per share) during the first quarter of
2022.
- Higher commodity prices and decreases in losses on risk
management contracts explained the majority of the increase in net
income relative to the first quarter of 2022.
Cash Flow from Operating Activities, Funds from Operations,
and Free Funds Flow
Cash Flow from Operating Activities
- Cash flow from operating activities was $1,093 million ($1.61 per share) during the second quarter of
2022, increasing by $334 million
($0.51 per share) from the first
quarter of 2022.
Funds from Operations
- ARC generated funds from operations of $1,030 million ($1.52 per share) during the second quarter of
2022, representing an increase of $286
million ($0.44 per share) from
the first quarter of 2022.
-
- Royalties of $340 million
($0.50 per share)(1)
increased by $97 million from the
first quarter of 2022, reflecting the impact of higher average
realized commodity prices.
- ARC's expected taxable income has also increased with stronger
commodity prices, which resulted in ARC recording current income
tax expense of $90 million
($0.13 per share)(1)
during the second quarter of 2022.
- ARC's second quarter 2022 general and administrative
("G&A") expense of $36 million
($0.05 per share)(1)
decreased by $35 million from the
first quarter of 2022. The decrease in G&A expense primarily
reflects the decrease in the fair value of the Company's
share-based compensation plans.
- The following table details the change in funds from operations
for the second quarter of 2022 relative to the first quarter of
2022.
Funds from
Operations Reconciliation
|
$
millions
|
$/share(2)
|
Funds from operations
for the three months ended March 31, 2022
|
743.6
|
1.08
|
Production
volumes
|
|
|
Crude oil and
liquids
|
42.3
|
0.07
|
Natural gas
|
(25.8)
|
(0.04)
|
Commodity
prices
|
|
|
Crude oil and
liquids
|
174.4
|
0.26
|
Natural gas
|
343.7
|
0.49
|
Sales of commodities
purchased from third parties
|
(67.2)
|
(0.10)
|
Other income
|
1.4
|
—
|
Realized loss on risk
management contracts
|
(140.5)
|
(0.20)
|
Royalties
|
(97.3)
|
(0.14)
|
Expenses
|
|
|
Commodities purchased
from third parties
|
83.4
|
0.12
|
Operating
|
(17.1)
|
(0.02)
|
Transportation
|
(19.1)
|
(0.03)
|
G&A
|
35.2
|
0.05
|
Interest and
financing
|
(1.9)
|
—
|
Current income
tax
|
(35.0)
|
(0.05)
|
Realized gain on
foreign exchange
|
9.5
|
0.01
|
Other
|
0.1
|
—
|
Weighted average
shares, diluted
|
—
|
0.02
|
Funds from operations
for the three months ended June 30, 2022
|
1,029.7
|
1.52
|
(1)
|
See "Non-GAAP and Other
Financial Measures" in the Q2
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.
|
CONFERENCE CALL
ARC's senior leadership team will be hosting a conference call
to discuss the Company's second quarter 2022 results on
Friday, July 29, 2022, at
8:00 a.m. Mountain Time ("MT").
Date
|
Friday, July 29,
2022
|
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
|
44166497
|
Webcast URL
|
https://app.webinar.net/7PkDn3Kn5Nq
|
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
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 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
|
Six Months
Ended
|
($ millions)
|
March 31,
2022
|
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
Cash flow used in
investing activities
|
346.7
|
363.9
|
206.5
|
710.6
|
310.6
|
Cash acquired upon
close of Business Combination
|
—
|
—
|
4.9
|
—
|
4.9
|
Acquisition of crude
oil and natural gas assets
|
(0.8)
|
(0.8)
|
(0.1)
|
(1.6)
|
(0.1)
|
Disposal of crude oil
and natural gas assets
|
7.4
|
—
|
78.1
|
7.4
|
78.2
|
Long-term
investment
|
—
|
(0.1)
|
—
|
(0.1)
|
—
|
Change in non-cash
investing working capital
|
(22.7)
|
(13.8)
|
1.0
|
(36.5)
|
20.8
|
Other
(1)
|
2.7
|
3.2
|
2.4
|
5.9
|
4.1
|
Capital
expenditures
|
333.3
|
352.4
|
292.8
|
685.7
|
418.5
|
(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. 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
|
Six Months
Ended
|
($ millions)
|
March 31,
2022
|
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
Cash flow from
operating activities
|
758.8
|
1,092.6
|
456.0
|
1,851.4
|
722.8
|
Net change in other
liabilities
|
40.8
|
31.2
|
52.9
|
72.0
|
71.1
|
Change in non-cash
operating working capital
|
(56.0)
|
(94.1)
|
33.6
|
(150.1)
|
22.5
|
Funds from
operations
|
743.6
|
1,029.7
|
542.5
|
1,773.3
|
816.4
|
Capital
expenditures(1)
|
(333.3)
|
(352.4)
|
(292.8)
|
(685.7)
|
(418.5)
|
Free funds
flow
|
410.3
|
677.3
|
249.7
|
1,087.6
|
397.9
|
(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 Q2 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: 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; the expectation that transportation costs will decrease
over the balance of the year on a per unit basis; the expectation
that strong performance at Kakwa will support three to five percent
production growth in the second half of 2022 relative to the second
quarter; the possibility of resuming activity in BC, including the
Sunrise expansion and sanctioning Attachie West Phase I, should the
regulatory environment in BC support such investment; the
expectation that ARC's operating expense per boe will decrease due
to higher production volumes; ARC's expected taxable income; plans
to allocate surplus funds from operations to returns to
shareholders and debt reduction; ARC's plans with respect to
growing its dividend and share repurchases under its NCIB; ARC's
target net debt to funds from operations ratio at mid-cycle
commodity prices. 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.