Operations Overview

With operations from southwestern Manitoba to northeastern British Columbia, ARC’s diverse asset portfolio provides optionality through commodity price cycles. In 2012, ARC focused its capital investments on liquids-rich natural gas and oil opportunities, which in the prevailing market conditions provided the highest rates of return.

During the year, ARC grew total production 12 per cent to average 93,500 boe per day. Of particular significance, crude oil and liquids production increased 15 per cent in 2012. Production growth was driven by ARC’s oil and liquids focused drilling program with 144 gross operated wells, comprised of 141 gross operated oil and liquids wells and three natural gas wells. ARC replaced 200 per cent of annual production at an all-in finding and development cost of $9.01 per boe for proved plus probable reserves (2); resulting in a three year average finding and development cost for proved plus probable reserves (2) of $6.63 per boe. With ongoing volatility of commodity prices, our ability to sustain low capital and operating costs will continue to be an essential driver in the overall strength of our business.

In 2012, ARC achieved excellent capital efficiencies, meeting production guidance and delivering production growth despite cutting the original capital budget from $760 million to actual spending of $608 million. Contributing to the excellent results was lower than expected base decline of approximately 22 per cent, demonstrating the quality of ARC’s assets.

  • ARC’s Dawson field exceeded expectations again in 2012, demonstrating why independent researchers have ranked it as one of the best natural gas fields in Canada.

Strong production results and a focus on reducing costs also contributed to the strong capital efficiencies. ARC’s Dawson field exceeded expectations again in 2012, demonstrating why independent researchers have ranked it as one of the best natural gas fields in Canada. As a result of excellent well productivity, Dawson production held flat during the year. The high quality of the resource at Dawson means the field remains economic even at today’s low gas prices. Half cycle economics for new wells at Dawson are strong with a 44 per cent internal rate of return at a flat $3 per gigajoule AECO price.

ARC continues to aggressively manage costs and seek ways to improve capital efficiencies. Since 2010 we have constructed our own natural gas processing facilities at Dawson and Ante Creek, and in 2013 we will construct a gas processing and liquids handling facility at Parkland/Tower. Investing in our own facilities ensures greater control over operational efficiency and operating costs. With a focus on improved capital efficiencies, ARC shifted to a multi-well pad drilling approach to development in 2012, which is expected to reduce total average well costs by 10 to 15 per cent per well, reduce ARC’s land footprint and greatly improve overall efficiencies of the drill, complete and tie-in process. The approach, however, will alter the production profile, as all wells on a single pad will be brought on production at the same time. This results in step changes in production where pad drilling is occurring, rather than smooth continuous growth through the year.

In addition to the capital program, ARC spent $36.5 million on “tuck-in” acquisitions during the year. Through “tuck-in” acquisitions ARC has strategically grown its land position in key areas where we have resource and technical expertise. ARC continually high grades its assets, and in 2012 divested $4.1 million of non-core properties. Operating core production in large contiguous land positions allows us to gain in-depth technical knowledge and benefit from economies of scale with exploitation programs.

ProductionByCoreArea Chart
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  2. Excluding future development capital.