Nov 5, 2014
CALGARY, Nov. 5, 2014 /CNW/ - (ARX - TSX) ARC Resources Ltd. ("ARC") announced today that its Board of
Directors has approved an $875 million capital program for 2015
directed at high value oil and liquids-rich gas development and low
cost Montney natural gas assets. ARC expects annual average production
growth of approximately 10 per cent in 2015.
Myron Stadnyk, ARC's President and Chief Executive Officer, said, "We are fortunate to be rich in profitable opportunities, which create a
healthy tension between capital discipline and the appropriate pace of
growth while being responsive to the business environment. Our 2014
capital program established the foundation for certain long-term
development projects and in 2015 we will build on that momentum by
continuing to advance long-term projects and introduce new pilot
projects with a particular focus on liquids potential in the Montney.
We expect to deliver approximately 10 per cent production growth in
2015 with continued growth into 2016 and beyond while continuing to pay
a meaningful dividend to our shareholders."
2015 Capital Budget Strategic Objectives
ARC's 2015 capital budget strategic objectives are aligned with our
long-term objective of risk managed value creation by paying a dividend
to our shareholders while also creating long-term value as follows:
Investing in our highest rate of return projects to grow high value
liquids production and low cost natural gas production
Screening project economics at US$80 per barrel of oil (WTI) and Cdn$3
per GJ of natural gas ensures excellent rates of return
Planning for the long-term by investing in strategic infrastructure to
set the stage for growth in future years
De-risking and piloting new areas before moving to full scale commercial
development
Managing production decline rates by deliberately managing the pace of
development
Applying learnings to continually advance our technical expertise and
optimize capital efficiencies
Executing a disciplined exploration program to identify future
development and growth opportunities
Preserving ARC's strong financial position to maintain flexibility
through economic cycles
2015 Capital Budget Highlights
$875 million capital program focused on high rate of return oil,
liquids-rich gas and low cost natural gas development
Investing approximately $635 million (70% per cent of capital program)
in high netback oil and liquids-rich gas development to grow high value
liquids production, expand oil handling facilities at Tower and
initiate engineering and design for a new facility at Dawson
Investing approximately $220 million (1) in our low cost, high rate of return Montney natural gas assets;
exploiting our significant natural gas resource base, growing natural
gas production and investing in strategic infrastructure at Sunrise
2015 production target of 120,000 to 125,000 boe per day, representing
approximately 10 per cent year-over-year production growth
Seven per cent growth in average crude oil and liquids production to
approximately 47,000 barrels per day
10 per cent growth in average natural gas production to approximately
450 mmcf per day in 2015
Drill 141 gross (130 net) operated wells, including three service wells,
and participate in 70 gross (nine net) non-operated wells
112 gross operated oil wells with significant activity at Ante Creek,
Tower, Pembina and Southeast Saskatchewan/Manitoba
Nine gross operated liquids-rich natural gas wells primarily at
Parkland, Dawson and Pouce Coupe
17 gross operated natural gas wells primarily at Sunrise and Dawson
Complete construction and commission a new 60 mmcf per day gas
processing facility at Sunrise, growing Sunrise production from 60 mmcf
per day to approximately 120 mmcf per day exit 2015
Commence initial design and planning for a new Dawson facility with 90
mmcf per day gas processing capacity and 7,500 barrels per day of
liquids handling capacity (approximately 50 per cent condensate),
expected to be on-stream in 2017
Drill one new lower Montney pilot well at Pouce Coupe and bring two
Dawson Lower Montney pilot wells on production to assess potential for
future commercial development of the lower Montney zone
Focus on cost management, targeting 2015 operating costs in the range of
$8.80 to $9.30 per boe, two per cent lower than 2014 estimated costs
due to growth in lower cost production and focus on cost management.
Maintain the current monthly dividend of $0.10 per share given the
current outlook for crude oil and natural gas prices
2015 Capital Program and Production
ARC's $875 million 2015 capital program is focused on maximizing value
by directing capital to the highest rate of return projects including a
mix of crude oil, liquids-rich gas and natural gas opportunities. ARC
plans to drill approximately 141 gross operated wells (130 net) on its
operated properties in 2015, with 112 wells targeting oil, nine wells
targeting liquids-rich natural gas, 17 wells targeting natural gas and
three service wells. ARC expects average 2015 production volumes to be
in the range of 120,000 to 125,000 boe per day, representing
approximately 10 per cent year-over-year production growth relative to
estimated 2014 levels. ARC expects total liquids production to grow
approximately seven per cent to 47,000 barrels per day in 2015 and
natural gas production to grow approximately 10 per cent to 450 mmcf
per day in 2015. Building on a strong 2014 exit, ARC expects
production to be stable through the first quarter of 2015, decline
modestly in the second and third quarters due to turnaround and
maintenance activities, and increase in the fourth quarter upon
commissioning of the new 60 mmcf per day Sunrise gas processing
facility and expanded oil handling facility at Tower.
ARC will invest $75 million in strategic infrastructure at Sunrise and
Tower in 2015 to set the stage for future growth in key areas in the
Montney region. With expanded facilities in the B.C. Montney region in
late 2015, ARC plans to accelerate oil development at Tower in 2015 and
execute a significant drilling program at Sunrise leading up to the
on-stream date of a new Sunrise facility. ARC plans to execute a
meaningful drilling program at Ante Creek, Pembina, and southeast
Saskatchewan/Manitoba to replace declines, keep existing facilities
full, and capitalize on high value liquids production. ARC expects
significant capital spending in the first and third quarters of 2015,
with lower spending in the second quarter during breakup and in the
fourth quarter of 2015 once new facilities at Sunrise and Tower are
completed and commissioned.
Despite the considerable up-front investment, ARC operates its business
with a long-term view and believes there are material financial,
operational and logistical efficiencies gained by owning and operating
infrastructure in key growth areas. Particularly in the high growth
Montney region which is currently capacity constrained, ARC feels that
infrastructure investment is necessary in order to execute long-term
growth plans. ARC plans to commission the new 60 mmcf per day Sunrise
gas processing facility late in 2015. With the exceptional production
results at Tower, ARC plans to expand the existing Tower oil handling
facility, doubling throughput capacity from 5,000 barrels per day to
10,000 barrels per day in late 2015. At Dawson, ARC plans to apply for
regulatory approval and initiate planning and design for a new 90 mmcf
per day gas processing and liquids handling facility to provide for
future growth. The expected timing of the Dawson start-up will depend
on a number of factors, including the timely receipt of all regulatory
approvals as well as the lead time required for delivery of major
components. The current expectation is for start-up of the new Dawson
facility in 2017, but ARC will look for opportunities to advance the
start-up date into the beginning of 2017.
ARC's asset base provides strategic optionality with assets in various
stages of the development "life cycle" comprising raw land, production
pilots, early stage developments, mature developments generating free
cash flow, and projects at the point of expansion. A significant focus
for ARC is identifying future opportunities, which starts with
de-risking the potential opportunity by piloting production through
third party facilities. ARC typically runs a pilot project to gather
and analyze critical geological and production data before committing
to a significant investment in full scale development.
ARC had five Montney pilots on production during 2014. ARC plans to
complete and test three additional Lower Montney pilot wells during
2015 as outlined below.
Pilot Project
Target Zone
Status
Attachie West (2 Hz)
Upper Montney
On production Q2 2014
Attachie East (2 Hz)
Upper Montney
On production Q4 2011
Septimus (1 Hz)
Upper Montney
On production Q2 2014
Parkland (1 Hz)
Lower Montney
On production Q3 2014
Pouce Coupe (1 Hz)
Lower Montney
On production Q4 2013
Dawson (2 Hz)
Lower Montney
Drilling Q4 2014
Pouce Coupe (1 Hz)
Lower Montney
Drilling 2015
ARC's 2015 capital program includes the drilling of one Lower Montney
pilot well at Pouce Coupe. ARC will also complete and test two Lower
Montney pilot wells at Dawson which were drilled in the fourth quarter
of 2014. ARC is pleased with the results to date from the pilots which
are currently on production and will continue to monitor the results of
the existing and new 2015 pilots to determine the potential for future
commercial development in these areas.
Additional details regarding ARC's pilot projects, including a full
operational update, can be found in the November 5, 2014 news release
titled "ARC Resources Ltd. Reports Record Third Quarter Production and
Strong Financial Results" filed on SEDAR at www.sedar.com.
ARC expects to internally finance the 2015 capital budget with a
combination of funds from operations, working capital, available credit
capacity and proceeds from potential equity or debt issuances. ARC's
hedging program will also provide a layer of protection over funds from
operations and project economics and ARC will continue to add positions
for 2015 and beyond at the appropriate time.
The 2015 capital program excludes land and minor property acquisitions
or dispositions. ARC will continue to consolidate its land position
and grow its presence in key areas through land and property
acquisitions. Through the third quarter of 2014, ARC spent $116
million on land and property acquisitions and divested approximately
$36 million of non-core assets. On a regular basis, ARC evaluates its
asset portfolio with a view to selling assets that do not meet our
retention guidelines. Through the normal course of business, minor
acquisitions and dispositions could occur that would impact the
expected volumes.
Gross Operated Wells Drilled
2015 Capital Budget
($ millions, except
wells)
Capital
Budget (1)
Oil
Liquids-
Rich
Gas
Natural
Gas
Other
Total
Primary Areas
Northeast B.C.
425
19
6
17
2
44
Parkland/Tower, Sunrise, Dawson
Northern Alberta
205
29
3
32
Ante Creek, Pouce Coupe
Pembina
105
32
32
Cardium
South Central Alberta
20
2
2
Redwater
SE Sask/Manitoba
100
30
1
31
Goodlands, Other
Corporate
20
-
-
Total (2)
$875
112
9
17
3
141
(1)
Includes Operated and Non-operated.
(2)
Excludes land expenditures and minor net property acquisitions which are
unbudgeted
Parkland/Tower
The Parkland/Tower region saw significant activity in 2013 and 2014 with
commissioning of the new 60 mmcf per day gas processing and liquids
handling facility, and a significant development drilling program.
Over the course of 2014, production at Parkland/Tower increased as new
wells were brought on-stream through the new facility. The new
facility operated intermittently at capacity during the third quarter
of 2014, depending on the stage of drilling and completions activities.
Given the exceptional results to date at Tower, ARC plans to accelerate
development at Tower with plans to drill 19 gross operated oil wells.
Given that current oil handling facilities are at capacity, ARC plans
to expand the existing liquids handling facility from 5,000 barrels per
day to 10,000 barrels per day by the end of 2015. Through the
remainder of 2014 and into 2015, ARC will focus on maximizing liquids
throughput through the existing facilities to capture high liquids
value. At Parkland, ARC plans to drill four gross operated
liquids-rich natural gas wells. ARC plans to spend $190 million at
Parkland/Tower in 2015 including spending for the Tower oil handling
facility expansion which will provide capacity for future growth of oil
and liquids production in 2015 and 2016.
ARC expects 2015 annual production at Parkland/Tower to average 26,000
boe per day (approximately 9,000 barrels per day of crude oil and
liquids and 103 mmcf per day of natural gas), approximately 20 per cent
higher than estimated 2014 production. Notably, total oil and liquids
production at Parkland/Tower is expected to increase 35 per cent
relative to 2014. ARC expects Parkland/Tower production to remain
stable through the first nine months of 2015, keeping facilities full,
with a significant production increase in the fourth quarter as
incremental oil and liquids production is brought on-stream through the
new Tower liquids handling facility. ARC expects that a significant
portion of Parkland/Tower capital will be spent early in the year with
plans for three drilling rigs to be operating at Tower in the first
quarter of 2015.
Sunrise
ARC has been piloting production at Sunrise since the third quarter of
2011 with current production of approximately 60 mmcf per day coming
from four layers of the Montney. ARC plans to spend $155 million at
Sunrise for development drilling and infrastructure to complete and
commission the new 60 mmcf per day Sunrise gas processing facility.
ARC plans to drill nine gross operated natural gas wells at Sunrise in
2015.
Preparation for construction commenced at the site of the new Sunrise 60
mmcf per day gas processing facility late in the third quarter of
2014. Initial engineering, design, procurement and field studies for
the new facility are also underway. The 2015 capital budget includes
approximately $65 million to complete the new facility; a certain
amount of pre-spending for the new facility occurred in 2014.
ARC expects 2015 Sunrise production to average 75 mmcf per day in 2015;
a greater than 100 per cent year-over-year increase in production
relative to 2014. Sunrise production will increase to 120 mmcf per day
once the new, ARC operated facility is complete and full. ARC expects
a substantial portion of the new facility capacity to be filled shortly
within the on-stream date, with the remaining capacity to be filled by
year end 2015.
Dawson
With exceptional well results, excellent capital efficiencies and low
operating costs, ARC plans to continue investing in drilling,
development and infrastructure at Dawson in 2015. During 2015, ARC
plans to drill nine gross operated horizontal natural gas wells at
Dawson to maintain production at current maximum facility capacity
levels through 2015 and into 2016. The 2015 development program also
includes completion costs for two lower Montney pilot wells which will
spud in the fourth quarter of 2014 and be completed in 2015. ARC
expects production to be relatively flat at facility capacity levels
over the course of 2015 with the exception of lower production in the
third quarter, during which time ARC has scheduled downtime for a
turnaround on the full 120 mmcf per day Dawson facility.
ARC plans to push outside of the existing Dawson core to pursue higher
liquids content. Additionally, ARC's two Dawson Lower Montney pilot
wells will be evaluated to assess the potential for higher liquids
content. Given the significant drilling inventory at Dawson and the
potential for higher liquids production, ARC is proceeding with a new
90 mmcf per day gas processing and liquids handling facility at Dawson.
The new facility will have gas processing capacity of 90 mmcf per day
and approximately 7,500 barrels per day of liquids handling capacity
(approximately 50 per cent condensate handling). ARC will commence
initial design and planning for the new facility and expects the
facility to be on-stream in 2017. The timing of the start-up of the new
Dawson facility is dependent upon receiving all required regulatory
approvals, efficient construction of the facility, and approval of a
2016 capital budget that provides appropriate funding.
Ante Creek
ARC plans to spend $170 million to drill 29 gross operated horizontal
Montney oil wells and expand gas processing facilities at Ante Creek in
2015 and continue to delineate this large, prospective land base. The
2015 drilling program is expected to maintain production at exit 2014
levels which are limited by current throughput capacity of
approximately 17,000 boe per day (approximately 50 per cent crude oil
and liquids).
ARC expects production to be maintained at facility capacity over the
course of 2015 with the exception of lower production in the third
quarter due to scheduled downtime for a facility turnaround. ARC plans
to continue drilling to keep facilities full at Ante Creek and continue
to consider options for additional takeaway capacity in future.
Pembina
ARC plans to spend approximately $100 million in the Pembina area in
2015 with plans to drill 32 gross operated Cardium oil wells. ARC
expects production to average approximately 11,000 boe per day through
2015. ARC's deliberate, paced development program at Pembina is aimed
at managing production declines in this area, while generating
significant free cash flow. ARC will continue with extensive work on
waterflood management at Pembina in 2015 to optimize reservoir
recoveries.
Southeast Saskatchewan and Manitoba
This region contributes high quality, high netback crude oil and
generates significant cash flow to fund development opportunities
throughout ARC's asset base. ARC plans to spend $100 million to drill
31 gross operated oil wells and participate in 59 gross non-operated
oil wells in southeast Saskatchewan and Manitoba. ARC's 2015 capital
program will focus on concentrated areas and will result in fewer wells
drilled but will target higher impact wells to improve capital
efficiencies. ARC expects to hold production flat at approximately
12,000 boe per day in 2015.
Non-Operated Properties
The $875 million 2015 capital program includes non-operated budgeted
capital of $44 million in 2015. ARC's partners on non-operated
properties plan to drill 70 gross (nine net) wells, dominated by oil
drilling activity at Pembina, Northern Alberta, and at various
properties in southeast Saskatchewan and Manitoba.
Capital Spending
($ millions)
2013 (Actual)
2014 (Guidance)
2015 (Budget)
Development
608
700
620
Development - Facilities
163
140
120
Maintenance
27
40
40
Optimization
14
20
25
Exploration and Seismic
8
30
25
Enhanced Oil Recovery
21
25
25
Other (1)
19
20
20
Capital before land and net property acquisitions (2)
860
975
875
Land and net property acquisitions (3)
(39)
-
-
Capital including land and net property acquisitions
821
975
875
(1)
Other capital comprises capitalized General and Administrative Expenses
("G&A") including a portion of Long-Term Incentive Plan ("LTIP" or the
"Whole Unit Plan") expense, information technology and corporate office
capital.
(2)
Does not include land and net property acquisitions or divestments as
these amounts are unbudgeted.
(3)
Through the first nine months of 2014, ARC spent $81 million on land and
property acquisitions net of property divestments.
Gross Operated Wells Drilled
2013 (Actual)
2014 (Guidance)
2015 (Budget)
Oil wells
139
133
112
Liquids-rich natural gas wells
15
20
9
Natural gas wells
13
28
17
Other
-
-
3
Total Gross Operated Wells Drilled
167
181
141
Capital by Area
($ millions)
2013 (Actual)
2014 (Guidance)
2015 (Budget)
Northeast British Columbia
362
450
425
Northern Alberta
216
215
205
Pembina
137
120
105
South Central Alberta
15
45
20
Southeast Saskatchewan & Manitoba
112
125
100
Corporate (1)
18
20
20
Capital before land and net property acquisitions (2)
$860
$975
$875
(1)
Corporate capital comprises capitalized General and Administrative
Expenses ("G&A") including a portion of Long-Term Incentive Plan
("LTIP" or the "Whole Unit Plan") expense, information technology,
corporate office capital and certain seismic and greenhouse gas
reduction expenditures.
(2)
Does not include land and net property acquisitions or divestments as
these amounts are unbudgeted.
The amount and allocation of capital expenditures for exploration and
development activities by area and the number and types of wells to be
drilled is dependent upon results achieved and is subject to review and
modifications by management on an ongoing basis throughout the year.
In addition, the Board of Directors regularly reviews the capital
program during the year in light of prevailing economic conditions,
commodity prices and changing industry regulation and conditions and
may modify the 2015 capital budget during the year.
Risk Management
As part of its overall strategy to protect cash flow and project
economics, ARC uses a variety of instruments to hedge crude oil,
natural gas, foreign exchange rates, electrical power costs and
interest rates. ARC has hedges in place to protect prices on crude oil
volumes through the first half of 2015 and natural gas volumes through
2019. ARC currently has 6,000 barrels per day of first half 2015 crude
oil and condensate production hedged at an average floor/ceiling price
of approximately US$90/US$101 per barrel. Approximately 45 per cent of
forecast natural gas production is currently hedged for 2015 at an
average floor/ceiling price of US3.94/US$4.54 per mmbtu. Additional
natural gas production is hedged in 2016 through 2019 at floor prices
of US$4.00 per mmbtu with upside participation up to US$4.80 to US$5.00
per mmbtu. ARC also has AECO basis swap contracts in place, fixing the
AECO price received to approximately 90 per cent of the Henry Hub NYMEX
price on a portion of its natural gas volumes through 2019.
ARC will continue to pursue opportunities to protect funds from
operations and will continue to take positions in natural gas and/or
crude oil at levels that will provide greater certainty on rates of
return in 2015 and beyond.
See Table 16 in the MD&A for the three and nine months ended September
30, 2014 and 2013 for full details of ARC's hedge positions as of
November 5, 2014 as filed on SEDAR at www.sedar.com.
Royalties, Operating Costs and Transportation
ARC's total corporate royalty rate includes all Crown, Freehold and
Gross overriding royalties on production in all operating
jurisdictions. ARC expects that the 2014 total corporate royalty rate
will be in the range of 14 to 16 per cent based on commodity prices in
the range of US$75 to US$90 per barrel of crude oil (WTI) and Cdn$3.00
to Cdn$4.00 per GJ of natural gas (AECO).
ARC expects per boe operating costs to decrease in 2015 due to higher
production levels with new production coming on-stream at lower
relative costs. Full year 2015 operating costs are estimated to be
approximately $8.80 to $9.30 per boe, two per cent lower than estimated
2014 costs. ARC's investment in owned and operated infrastructure
throughout the asset base has yielded cost savings over time by
eliminating third party processing fees and running more efficient
facilities.
ARC expects full year 2015 transportation costs to be approximately
$2.00 to $2.20 per boe, unchanged from estimated 2014 transportation
fees. ARC controls transportation arrangements for a portion of
production in order to most effectively move its production to market,
this generally results in additional transport costs, but in most cases
is offset by higher revenue received for its products. Trucking costs
in the Parkland/Tower will be reduced as a higher volume of condensate
and NGL production will be transported by lower cost pipelines in 2015.
General and Administrative ("G&A") Expense
ARC estimates total 2015 G&A expenses to increase five per cent relative
to 2014 to approximately $97 million, however per boe G&A expenses are
expected to decrease by approximately seven per cent to $2.00 to $2.30
per boe compared to estimated costs of $2.20 to $2.40 per boe in 2014.
Lower estimated per boe costs in 2015 are due to higher average
production levels in 2015.
ARC's 2015 budgeted G&A includes an estimated expense of approximately
$30 million under the Long-Term Incentive Plans ("LTIP") compared to an
estimated expense of $32 million in 2014. The LTIP expense is
dependent on ARC's share price and three year total return relative to
its peers, and therefore is subject to a high degree of volatility.
The following table outlines estimated G&A expenses for 2015.
G&A Expenses
($ millions, except per boe amounts)
2013 (Actual)
2014 (Guidance)
2015 (Budget)
G&A expense before Long-Term Incentive Plan
$59.0
$60.0
$67.0
Long-Term Incentive Plan expense
$38.0
$32.0
$30.0
Total G&A expense
$97.0
$92.0
$97.0
G&A expense before Long-Term Incentive Plan per boe
$1.67
$1.45 - $1.55
$1.45 - $1.55
Long-Term Incentive Plan expense per boe (1)
$1.10
$0.75 - $0.85
$0.55 - $0.75
G&A expense per boe
$2.77
$2.20 - $2.40
$2.00 - $2.30
(1)
Long-Term Incentive Plan expense includes both cash payments and
non-cash amounts.
Corporate Income Tax
ARC expects to pay current income taxes of approximately three to eight
per cent of funds from operations, before tax, in 2015, based on the
expectation that oil prices could be in the range of US$75 to US$90 per
barrel of crude oil (WTI) and natural gas could be in the range of
Cdn$3.00 to Cdn$4.00 per GJ (AECO). Given the sensitivity of income
taxes to fluctuations in commodity prices, income taxes could exceed
the guidance range if oil and/or natural gas prices increase beyond
this range. Estimated 2014 income taxes are approximately six to eight
per cent of funds from operations, before tax; lower income taxes in
2015 are the result of lower expected commodity prices in 2015 relative
to 2014.
Reclamation Activities
ARC has an active abandonment and reclamation program for inactive
wells, pipelines and leases. During 2014, ARC estimates spending of
approximately $25 million on reclamation activities. ARC expects
reclamation spending to be approximately $25 million in 2015 for
activities at various properties throughout our asset base as we
maintain our leadership position in environmental responsibility.
Funding of the 2015 Capital Budget
The $875 million capital budget was determined after examining financial
forecasts based on the expectation that oil prices could be in the
range of US$75 to US$90 per barrel of crude oil (WTI) and natural gas
could be in the range of Cdn$3.00 to Cdn$4.00 per GJ of natural gas
(AECO), and assuming the continuation of the $0.10 monthly dividend
throughout 2015. All of the approved 2015 capital expenditures are
expected to provide attractive rates of return at Cdn$3.00/GJ natural
gas and Cdn$85/barrel oil prices.
ARC is well positioned with a strong balance sheet including low debt
levels, working capital and significant available credit capacity to
fund the 2015 capital program. ARC will pursue the most cost effective
means of financing its 2015 capital program through a combination of
funds from operations, DRIP proceeds, shares issued under the Stock
Dividend Program in place of cash dividends, existing credit
facilities, proceeds from potential equity or debt financings, and
proceeds from potential non-core property dispositions. The exact split
of financing will be dependent on commodity prices, operational
performance and potential acquisitions and dispositions. Our business
model is dynamic and we continually assess capital spending in light of
current and forecast market conditions. Management will review the
2015 capital program on a regular basis in the context of prevailing
economic conditions and make adjustments as necessary to the program,
subject to review by the Board of Directors.
Dividends
ARC is focused on value creation, with the dividend being a key
component of our business strategy. We believe that we are well
positioned to sustain current dividend levels despite the volatile
commodity price environment. Going forward, as we grow our production
and funds from operations, we expect that our dividend payout ratio
will naturally decline to a level that provides even greater financial
flexibility. The monthly $0.10 dividend is primarily dependent upon
commodity prices and prevailing economic conditions and will be
reviewed regularly by the Board of Directors.
2015 Guidance
The corporate guidance for 2015 is based on commodity price expectations
of US$75 to US$90 per barrel of crude oil (WTI) and Cdn$3.00 to $4.00
per GJ of natural gas (AECO). Certain guidance estimates may fluctuate
with changes in commodity prices. The 2015 Guidance provides
shareholders with information on Management's expectations for results
of operations, excluding any acquisitions or dispositions, for 2015.
Readers are cautioned that the 2015 Guidance may not be appropriate for
other purposes.
Corporate Guidance
2013 (Actual)
2014 (Guidance)
2015 (Budget)
Production:
Oil (bbls/d)
32,784
35,000 - 37,000
37,000 - 39,000
Condensate (bbls/d)
2,251
3,500 - 3,800
3,800 - 4,300
Natural gas (mmcf/d)
349.4
405 - 415
445 - 460
Natural Gas Liquids (bbls/d)
2,811
4,200 - 4,500
4,700 - 5,100
Annual average production (boe/d)
96,087
110,000 - 114,000
120,000 - 125,000
Costs and Expenses ($/boe):
Operating
9.66
9.00 - 9.40
8.80 - 9.30
Transportation
1.72
2.00 - 2.20
2.00 - 2.20
G&A including Long-Term Incentive Plan (1)
2.77
2.20 - 2.40
2.00 - 2.30
Interest
1.21
1.10 - 1.20
1.10 - 1.30
Current income tax (% of funds from operations) (2)
2%
6 - 8%
3 - 8%
Capital expenditures before land and net property acquisitions ($
millions) (3)
860
975
875
Land and net property acquisitions (3)
(39)
-
-
Weighted average shares (diluted) (millions) (4)
312
317
321
(1)
The 2015 G&A expense is comprised of G&A before before LTIP of $1.45 -
$1.55 per boe and LTIP of $0.55 - $0.75 per boe.
(2)
The 2014 and 2015 corporate tax estimates will vary depending on level
of commodity prices. Current income tax is quoted as a percentage of
funds from operations before tax.
(3)
Capital expenditures are prior to land and net property acquisitions and
divestments as these amounts are unbudgeted. Through the third quarter
of 2014, ARC spent $81 million on land and property acquisitions net of
property divestments.
(4)
Based on weighted average shares plus the dilutive impact of share
options outstanding during the period.
2016 Capital Program and Production Outlook
Preliminary estimates for the 2016 capital program estimate capital
expenditures at levels similar to 2014 with investments in oil,
liquids-rich gas and natural gas development and investment in
strategic long-term infrastructure projects. Based on current
commodity prices and on execution of the 2014 capital budget and
expected 2015 and 2016 capital budgets in full, ARC is currently
targeting 2016 annual average production to be in excess of 128,000 boe
per day, dependent upon the winter 2015/2016 drilling season and a
supportive capital budget in 2016. The 2016 capital budget is subject
to approval by the Board of Directors in late 2015.
Forward-looking Information and Statements
This news release is primarily comprised of forward-looking statements
as to ARC's internal projections, expectations or beliefs relating to
future events or future performance, including ARC's Corporate Guidance
for 2014, 2015 and as to average target production levels for 2016 and
the 2015 Capital Program and Production Outlook and the amount and type
of 2015 budgeted capital expenditures for the 2015 Capital Program,
production volumes, royalties and operating costs, general and
administrative expenses, risk management, reclamation activities,
funding and taxation. In some cases, forward-looking statements can be
identified by terminology such as "may", "will", "should", "expects",
"projects", "plans", "anticipates" and similar expressions but are
contained in virtually every paragraph of this news release. These
statements represent management's expectations or beliefs concerning,
among other things, future capital expenditures and future operating
results and various components thereof or the economic performance of
ARC. The projections, estimates and beliefs contained in such
forward-looking statements are based on management's assumptions
relating to the production performance of ARC's oil and gas assets, the
cost and competition for services throughout the oil and gas industry
in 2015, the results of exploration and development activities during
2015, the market price for oil and gas, expectations regarding the
availability of capital, estimates as to the size of reserves and
resources, and the continuation of the current regulatory and tax
regime in Canada, and necessarily involve known and unknown risks and
uncertainties inherent in exploration and development activities,
geological, technical, drilling and processing problems and other risks
and uncertainties, including the business risks discussed in
management's discussion and analysis and ARC's annual information form,
which may cause actual performance and financial results in future
periods to differ materially from any projections of future performance
or results expressed or implied by such forward-looking statements. The
internal projections, expectations or beliefs are based on the 2015
Capital Budget which is subject to change in light of ongoing results,
prevailing economic circumstances, commodity prices and industry
conditions and regulations. Accordingly, readers are cautioned that
events or circumstances could cause results to differ materially from
those predicted. ARC does not undertake to update any forward looking
information in this document whether as to new information, future
events or otherwise except as required by securities rules and
regulations.
The forward-looking information and statements contained in this news
release speak only as of the date of this news release, and none of ARC
or its subsidiaries assumes any obligation to publicly update or revise
them to reflect new events or circumstances, except as may be required
pursuant to applicable laws.
Note: Barrels of oil equivalent (BOEs) may be misleading, particularly
if used in isolation. In accordance with NI 51-101, a BOE conversion
ratio for natural gas of 6 Mcf:1bbl has been used, which is based on an
energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
ARC Resources Ltd. ("ARC") is one of Canada's largest conventional oil
and gas companies with an enterprise value of approximately $9.5
billion. ARC expects 2015 oil and gas production to average 120,000 to
125,000 barrels of oil equivalent per day from its properties in
western Canada. ARC's Common Shares trade on the TSX under the symbol
ARX.
ARC RESOURCES LTD.
Myron M. Stadnyk
President and Chief Executive Officer
SOURCE ARC Resources Ltd.