ARC RESOURCES LTD. REPORTS THIRD QUARTER 2024 RESULTS AND ANNOUNCES 2025 BUDGET, FIRST PRODUCTION AT ATTACHIE, AND 12 PER CENT DIVIDEND INCREASE
CALGARY, AB, Nov. 6, 2024 /CNW/ - (TSX:ARX)
HIGHLIGHTS
Attachie Phase I was successfully commissioned in late October, facilitating substantial production growth in the fourth quarter of 2024 and throughout 2025. Drilling operations for all start-up wells have concluded and completions operations for the final start-up pad will commence in mid-November.
Current production at Attachie is approximately 20,000(1) boe per day, and increasing as planned towards productive capacity of 40,000 boe per day.
Attachie is expected to contribute to record fourth quarter average production of between 380,000 and 385,000 boe per day (62 per cent natural gas and 38 per cent crude oil and liquids(2)).
ARC's Board of Directors (the "Board") has approved a 12 per cent increase to the quarterly dividend, from $0.17 per share to $0.19 per share ($0.68 per share to $0.76 per share, per annum). This reflects ARC's commitment to grow the dividend with the profitability of the business, and on a per share basis as the share count is reduced.
Third Quarter Results
ARC delivered third quarter 2024 average production of 326,768 boe per day (61 per cent natural gas and 39 per cent crude oil and liquids), in line with the third quarter production guidance range of 315,000 to 330,000 boe per day.
Natural gas production at Sunrise was curtailed during the third quarter by approximately 250 MMcf per day due to low natural gas prices. Production was partially restored in mid-October once natural gas prices recovered.
ARC generated funds from operations of $592 million(3) ($0.99 per share(4)) and free funds flow of $134 million(5) ($0.22 per share(6)), while capital expenditures totalled $459 million(7). ARC recognized cash flow from operating activities of $518 million ($0.87 per share) and net income of $329 million ($0.55 per share).
ARC realized a natural gas price of $1.78 per Mcf(4), $0.97 per Mcf or 120 per cent greater than the AECO 7A Monthly Index price. Strong price realizations were driven by market diversification into key demand regions in the US, along with reduced exposure to western Canadian natural gas markets.
ARC distributed $220 million ($0.37 per share) to shareholders during the third quarter, representing 103 per cent of free funds flow (net of proceeds from divestitures).
As of September 30, 2024, ARC's long-term debt balance was $1.4 billion and its net debt balance was $1.6 billion(3) or 0.6 times funds from operations(3).
2025 Capital Budget
The Board has approved a 2025 capital budget of between $1.6 billion and $1.7 billion, at the low end of previous disclosure of between $1.6 billion and $1.8 billion. The 2025 capital budget is expected to generate record annual average production of between 380,000 and 395,000 boe per day (61 per cent natural gas and 39 per cent crude oil and liquids).
The capital budget implies approximately 10 per cent production growth with a concurrent 10 per cent decrease in capital expenditures compared to 2024. The enhancement in capital efficiencies is attributed to a full year of production contribution from Attachie, the finalization of investments into Attachie Phase I infrastructure, and improved capital efficiencies at Kakwa and Sunrise.
For the third straight year, ARC intends to return essentially all of its free funds flow to shareholders in 2025 through a growing base dividend and share repurchases. At strip prices(8), ARC estimates free funds flow of between $1.4 and $1.6 billion in 2025 and expects to generate an 18 per cent Return on Average Capital Employed(9).
ARC's unaudited condensed interim consolidated financial statements and notes (the "financial statements") and Management's Discussion and Analysis ("MD&A") as at and for the three months and nine months ended September 30, 2024, are available on ARC's website at www.arcresources.com and under ARC's SEDAR+ profile at www.sedarplus.ca. The disclosure under the section entitled "Non-GAAP and Other Financial Measures" in ARC's MD&A as at and for the three and nine months ended September 30, 2024 (the "Q3 2024 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 8 "Capital Management" in the financial statements and "Non-GAAP and Other Financial Measures" in the Q3 2024 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 Q3 2024 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 as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and may not be comparable to similar financial measures disclosed by other issuers. See "Non-GAAP and Other Financial Measures" in the Q3 2024 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 ratio that is not a standardized financial measure under IFRS Accounting Standards and may not be comparable to similar financial 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 Q3 2024 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.
(7)
Refer to the section entitled "About ARC Resources Ltd." contained within the Q3 2024 MD&A for historical capital expenditures, which information is incorporated by reference into this news release.
(8)
Based on forward curve as at October 24, 2024 (US$WTI $68.60 per barrel; C$2.40/Mcf AECO; US$3.20/MMBtu Henry Hub).
(9)
Non-GAAP ratio that is not a standardized financial measure under IFRS Accounting Standards and may not be comparable to similar financial ratios disclosed by other issuers. Includes non-GAAP financial measure components of adjusted EBIT and average capital employed. See "Non-GAAP and Other Financial Measures" in the Q3 2024 MD&A for an explanation of composition, which information is incorporated by reference into this news release.
FINANCIAL AND OPERATIONAL RESULTS
(Cdn$ millions, except per share amounts(1), boe amounts,
Three Months Ended
Nine Months Ended
and common shares outstanding)
June 30. 2024
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
FINANCIAL RESULTS
Net income
239.5
328.9
236.4
753.8
1,090.2
Per share
0.40
0.55
0.39
1.26
1.78
Cash flow from operating activities
543.0
518.4
604.2
1,697.7
1,695.4
Per share(2)
0.91
0.87
0.99
2.84
2.76
Funds from operations
502.8
592.4
662.2
1,702.1
1,940.4
Per share
0.84
0.99
1.09
2.85
3.16
Free funds flow
(29.5)
133.8
260.8
206.6
635.1
Per share
(0.05)
0.22
0.43
0.35
1.04
Dividends declared
101.6
100.8
103.0
304.0
298.6
Per share
0.17
0.17
0.17
0.51
0.49
Cash flow used in investing activities
643.4
339.7
394.6
1,482.9
1,256.4
Capital expenditures
532.3
458.6
401.4
1,495.5
1,305.3
Long-term debt
1,379.5
1,440.1
1,108.9
1,440.1
1,108.9
Net debt
1,477.9
1,560.6
1,243.5
1,560.6
1,243.5
Common shares outstanding, weighted average diluted
(millions)
598.2
596.4
609.0
597.8
613.2
Common shares outstanding, end of period (millions)
596.7
591.7
605.0
591.7
605.0
OPERATIONAL RESULTS
Production
Crude oil and condensate (bbl/day)
74,713
88,517
87,098
81,991
83,232
Natural gas (MMcf/day)
1,286
1,203
1,353
1,270
1,302
NGLs (bbl/day)
40,994
37,797
47,557
42,716
47,182
Total (boe/day)
330,046
326,768
360,177
336,346
347,475
Average realized price
Crude oil ($/bbl)(2)
100.28
92.22
104.91
91.46
95.65
Condensate ($/bbl)(2)
103.73
95.38
103.21
97.64
100.21
Natural gas ($/Mcf)(2)
1.86
1.78
3.16
2.29
3.93
NGLs ($/bbl)(2)
21.69
23.77
19.63
23.83
23.09
Average realized price ($/boe)(2)
33.35
35.07
39.47
35.35
41.75
Netback per boe
Commodity sales from production ($/boe)(3)
33.35
35.07
39.47
35.35
41.75
Royalties ($/boe)(3)
(4.19)
(4.09)
(4.68)
(4.14)
(5.63)
Operating expense ($/boe)(3)
(5.51)
(4.90)
(4.94)
(4.88)
(4.76)
Transportation expense ($/boe)(3)
(5.22)
(5.25)
(4.94)
(5.27)
(5.29)
Netback per boe ($/boe)(3)
18.43
20.83
24.91
21.06
26.07
TRADING STATISTICS(4)
High price
26.18
26.45
22.05
26.45
22.05
Low price
23.45
21.44
17.63
19.44
14.33
Close price
24.41
22.86
21.68
22.86
21.68
Average daily volume (thousands of shares)
3,648
3,696
3,705
