Operations

Reserves and Resources

The strength of ARC’s asset base was again demonstrated in 2012, marking the fifth consecutive year that ARC replaced over 200 per cent of annual production and delivered growth in proved plus probable reserves.

ProvedPlusProbableCompanyGrossReservesByClassification Chart
ProvedPlusProbableCompanyReservesByCommodity Chart
ReservesGrowth Chart
ReserveLifeIndex Chart
FDNetbackRecycleRatio Chart
HistoricalFDACosts Chart

In 2012, ARC added 69 mmboe of proved plus probable reserves during the year, increasing total proved plus probable reserves by six per cent to 607 mmboe. This growth was largely attributed to positive technical reserve revisions at ARC’s Sunrise, Dawson, Ante Creek and Pembina fields and a robust development program in 2012. The significant focus on crude oil and liquids development yielded a nine per cent increase in proved plus probable crude oil and natural gas liquids reserves and 214 per cent production replacement for crude oil and natural gas liquids. ARC’s Reserve Life Index for proved plus probable reserves increased to 17.5 years, based on 2013 mid-point production guidance of 95,000 boe per day.

ARC executed an efficient capital program in 2012, evident by low Finding and Development (“F&D”) costs for the year. ARC delivered F&D costs of $9.01 per boe for proved plus probable reserves and $15.73 per boe for proved reserves excluding Future Development Capital (“FDC”). ARC’s all in Finding Development and Acquisition (“FD&A”) costs were $9.34 per boe of proved plus probable reserves and $16.76 per boe of proved reserves, excluding FDC. ARC’s low F&D costs reflect ARC’s focus on high quality assets, cost management and allocation of resources and capital to the highest rate of return projects.

The recycle ratio is a key measure of profitability in the oil and gas industry as it identifies overall capital efficiency measuring the netback per boe of production relative to the cost per boe of adding a new boe of reserves. In 2012, ARC achieved a recycle ratio of 2.7 times for proved plus probable reserves, excluding FDC, based on ARC’s 2012 netback of $24.17 per boe.

ARC retained GLJ Petroleum Consultants (“GLJ”) to provide an updated Independent Resources Evaluation for its Montney lands in northeast British Columbia. The evaluation reaffirmed the significant resource base in the Montney region with 50.1 Tcf of natural gas resource and an oil resource of 1.5 billion barrels of discovered petroleum initially in place at ARC’s Tower property, which was reclassified from a liquids-rich gas reservoir to an oil reservoir in 2012. This region represents significant long-term growth with exposure to natural gas, crude oil and liquids rich gas.

Reserves Summary
Using GLJ January 1, 2013 Forecast Prices and Costs
 
  Light and Medium Crude Oil (mbbl) Heavy Crude Oil
(mbbl)

Total Crude Oil
(mbbl)


NGLs
(mbbl)

Natural Gas (Bcf)
Oil Equivalent 2012
(mboe)
Oil Equivalent 2011
(mboe)
Company Gross              
Proved Producing 88,539 1,739 90,278 9,578 607 201,018 208,920
Proved Developed Non-producing 1,973 0 1,973 1,260 53 12,044 9,952
Proved Undeveloped 14,743 0 14,743 9,375 760 150,841 140,769
Total Proved 105,255 1,739 106,994 20,214 1,420 363,904 359,641
Proved plus Probable 146,442 2,256 148,698 36,850 2,529 606,982 572,374

The reserves data set forth herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise. All reserves information has been prepared in accordance with National Instrument (“NI”) 51-101. In addition to the detailed information disclosed in this document more detailed reserves and resources information is included in ARC’s Annual Information Form (“AIF”), which is available on our SEDAR profile at www.sedar.com. Numbers presented may not add due to rounding.