Risk Management

ARC takes a proactive and forward thinking approach to the mitigation of risks associated with operating our business. Management regularly identifies, evaluates and mitigates risks relating to all aspects of our business, and the Risk Committee of the board of directors provides guidance and policies on such matters.

Active Hedging Program

ARC has an active hedging program as part of its ongoing risk management activities. ARC’s hedging program is carried out by our in house financial risk management team, and is governed by guidelines from the Risk Committee of the board. ARC hedges a portion of its annual production with the objective of limiting exposure to commodity price volatility and providing greater certainty over cash flow. In addition to crude oil and natural gas hedges, ARC hedges foreign exchange rates, electrical power costs and interest rates using a variety of instruments. Strategies and structures are employed that are appropriate for our business in the current market environment. We typically enter into a number of small positions to “leg in” and reduce the timing risk on executing these strategies. We actively manage our hedge positions to retain upside participation when possible.

For the full 2012 calendar year, ARC realized hedging gains of $66.4 million. The realized gains are mainly attributed to positive cash settlements on natural gas hedges and natural gas basis swap contracts, as well as positive gains on foreign exchange and power contracts. The gains were partially offset by losses on oil contracts. Since 2009, ARC has realized gains of approximately $225 million from hedging activities.

For a detailed summary of ARC's latest hedging positions please visit the Hedging page on our website