arc resources ltd. 2020 investor day › assets › pdf › 2020-investor... · 2020-02-20 · for...

February 11, 2020

ARC Resources Ltd.2020 Investor Day

Advisory Statements

Forward-looking Information and Statements and Advisory StatementsThis presentation contains forward-looking information as to ARC’s internal projections, expectations, or beliefs relating to future events or future performance and includes information as to ARC’s future well inventory in its core areas, its exploration anddevelopment drilling and other exploitation plans for 2020 and beyond, and related production expectations, costs and cash flow, expenses, the Company’s plans for constructing and expanding facilities, the volume of ARC's crude oil and natural gas reservesand the volume of ARC's crude oil and natural gas resources in the Montney, the recognition of additional reserves and the capital required to do so, the life of ARC's reserves, the volume and product mix of ARC's crude oil and natural gas production, futureresults from operations, and operating metrics. These statements represent Management’s expectations or beliefs concerning, among other things, future operating results and various components thereof or the economic performance of ARC. Theprojections, estimates, and beliefs contained in such forward-looking statements are based on Management's assumptions relating to the production performance of ARC’s crude oil and natural gas assets, the cost and competition for services, thecontinuation of ARC’s historical experience with expenses and production, changes in the capital expenditure budgets, future commodity prices, continuing access to capital, and the continuation of the current regulatory and tax regime in Canada, andnecessarily involve known and unknown risks and uncertainties, such as changes in crude oil and natural gas prices, infrastructure constraints in relation to the development of the Montney, risks associated with the degree of certainty in resourceassessments, and including the business risks discussed in ARC’s annual and quarterly Management’s Discussion & Analysis and other continuous disclosure documents, and related to Management’s assumptions, which may cause actual performance andfinancial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause actual results todiffer materially from those predicted. Other than the 2020 Guidance, which is discussed quarterly, ARC does not undertake to update any forward-looking information in this document whether as to new information, future events, or otherwise except asrequired by securities laws and regulations.

ARC has adopted the standard of 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 ratioof 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 naturalgas is significantly different than the energy equivalency of the 6 Mcf:1 bbl conversion ratio, utilizing the 6 Mcf:1 bbl conversion ratio may be misleading as an indication of value.

Throughout this presentation, crude oil refers to tight, 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”). ARC’s production of heavy crude oil isconsidered to be immaterial. Natural gas refers to shale gas and conventional natural gas product types as defined by NI 51-101. ARC’s production of conventional natural gas is considered to be immaterial. ARC’s core producing properties that areconsidered to be shale gas include Attachie, Dawson, Parkland (including parts of Tower), and Sunrise, and as such, natural gas, condensate, and natural gas liquids (“NGLs”) are disclosed. ARC’s core producing properties that are considered to be tight oilinclude Ante Creek and parts of Tower, and as such, crude oil, natural gas, and NGLs are disclosed. ARC’s core producing property that is considered to be light crude oil is Pembina, and as such, crude oil, natural gas, and NGLs are disclosed.

Throughout this presentation, when condensate is disclosed, it is done so as it is the product type that is measured at the first point of sale. As per the Canadian Oil and Gas Evaluation (“COGE”) Handbook, condensate is a by-product of the NGLs producttype. NGLs by-products include ethane, butane, propane, and pentanes-plus (condensate).

Non-GAAP MeasuresThroughout this presentation, ARC uses the terms netback and return on average capital employed (“ROACE”) to analyze financial and operational performance. These non-GAAP measures do not have any standardized meaning prescribed underInternational Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures presented by other issuers.

Netback

ARC calculates netback on a total and per boe basis as commodity sales from production less royalties, operating, and transportation expense. ARC discloses netback both before and after the effect of realized gain or loss on risk management contracts.Realized gain or loss represent the portion of risk management contracts that have settled in cash during the period and disclosing this impact provides Management and investors with transparent measures that reflect how ARC’s risk management programcan impact its netback. Management believes that netback is a key industry benchmark and a measure of performance for ARC that provides investors with information that is commonly used by other oil and gas producers. The measurement on a per boebasis assists Management with evaluating operational performance on a comparable basis.

Return on Average Capital Employed

ARC calculates ROACE, expressed as a percentage, as net income (loss) plus interest and total income tax expense (recovery) divided by the average of the opening and closing capital employed for the 12 months preceding period end. Capital employed isthe total of net debt plus shareholders’ equity. ROACE since inception is the annual average net income (loss) plus interest and total income tax expense (recovery) for the years 1996 to 2019 divided by the average of the opening and closing capitalemployed over the same period. Refer to the "Capital Management" note in ARC’s financial statements for additional discussion on net debt. ARC uses ROACE as a measure of long-term operational performance, to measure how effectively Managementutilizes the capital it has been provided and to demonstrate to shareholders the sustainability of its business model and that capital has been invested profitably over the long term.

Other DefinitionsThroughout this presentation, ARC uses the term sustaining capital. This measure does not have any standardized meaning and therefore should not be used to make comparisons to similar measures presented by other issuers.

Sustaining Capital

Sustaining capital refers to estimated capital expenditures to maintain production from existing facilities at approximately current production levels.

Introduction

Update since ARC’s 2018 Investor Day

ARC Continues to Advance Its Long-term Plans and Is Focused on Profitability, Sustainability, and per Share Performance

2018 20202019Sustained existing Montney businesses

including Dawson Phase III

Brought Sunrise Phase I & II to

120 MMcf per day

Delivered average daily production of

132,724 boe per day

Sustained existing Montney businesses

Brought Sunrise Phase I & II to full

capacity of 240 MMcf per day

Brought on Dawson Phase I & II

liquids-handling upgrade

Delivered average daily production of

139,126 boe per day

Exited the year with average daily

production of 147,650 boe per day

Sustain Montney businesses

Bring on Dawson Phase IV in Q2

Bring on Ante Creek expansion in Q2

Advance Attachie West to being fully

development-ready

Continue ESG leadership and

disciplined allocation of capital

Deliver average daily production of

155,000 to 161,000 boe per day

ARC’s Vision for the Future

ARC Has Moved Towards a Larger Production Base with Lower Capital Requirements

830

679 692

500

2017 2018 2019 2020F Three-year Average Sustaining Capital

(1) Total production for 2020F denotes the midpoint of the production guidance range of 155,000 to 161,000 boe per day for 2020.

(2) Sustaining capital does not have any standardized meaning and therefore should not be used to make comparisons to similar measures presented by other issuers. Refer to “Other Definitions” in the Advisory Statements to this presentation.

123

133139

158

2017 2018 2019 2020F Production Base

Production (Mboe/day) (1)

Capital Expenditures ($ millions) (2)

Corporate Strategy

ARC’s Strategy Is Focused on Long-term Profitability

RISK-

MANAGED

VALUE

CREATION

HIGH-QUALITY

ASSETS &

OPERATIONAL

EXCELLENCE

FINANCIAL

SUSTAINABILITY &

RETURN ON

INVESTMENT

HIGH

PERFORMANCE

PEOPLE &

CULTURE

COMMERCIAL

ACTIVITIES &

RISK

MANAGEMENT

ARC Is Realizing Efficiencies across the Business

ARC’s Focused Efforts Have Resulted in an Efficient, Robust, and Sustainable Business

Production Net Well Count Sustaining Capital (1) Requirements

Three-year Average F&D Costs (2) Operating Expense Headcount

119%2009 2019

26%

51% 3%39%

57%

(1) Sustaining capital does not have any standardized meaning and therefore should not be used to make comparisons to similar measures presented by other issuers. Refer to “Other Definitions” in the Advisory Statements to this presentation.(2) Three-year average finding and development costs include future development capital.

2009 2019 2009 2019

2009 2019 2009 20192009 2019

The World Needs More Canadian Energy

Canadian Energy Sector Is Regulated by Some of the Highest Standards and Is a Clean, Ethical Energy Source

(1) Source: BMO Capital Markets; Yale Environmental Performance Index (EPI); Social Progress Imperative; Worldbank Worldwide Governance Indicators; Bloomberg; CSRHub. For presentation, an equal weight (1/3) of each index is represented.

(2) Source: BP “Statistical Review of World Energy” (2019). Reserves as at December 31, 2018.

ESG Ratings and Reserves by Major Oil Producing Country (1)(2)

0

125

250

375

500

0

25

50

75

100

Re

se

rve

s (

Bb

oe

)

Ave

rag

e E

SG

Sc

ore

Average ESG Score (LHS) Reserves (RHS)

World-class Montney Resource

ARC Has Identified over 4,500 Future Drilling Locations across Its Montney Assets

• Geographic Optionality

• Egress Optionality

• Commodity Optionality

• Multi-layer Optionality

ABBC

Oil & Liquids

Dry Gas

Condensate-rich

Gas

(1) Subject to change based on technology and economic environment.

0

1,500

3,000

4,500

6,000

7,500

Wells Drilled to YE 2019 2P Booked Locations Internal Inventory Estimate

Nu

mb

er

of

Lo

ca

tio

ns

Montney Optionality Significant Montney Inventory (1)

ARC Is Focused on Long-term Corporate Profitability

ARC Has Delivered a 10% ROACE since Inception

(1) Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Refer to “Non-GAAP Measures” in the Advisory Statements to this presentation.

Return on Average Capital Employed (1) Delivering Full-cycle Asset Level Returns (1)

Single-well

Economics

(Half-cycle)

Proportional

Facility and

Appropriate

Timing Included:

Project

Economics

(Full-cycle)

Corporate Costs

Target

Double-digit

Return on Average

Capital Employed

Aft

er-

tax

Ra

te o

f R

etu

rn

(10%)

0%

10%

20%

30%

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

ROACE Trailing Three-year ROACE

Creating Value through Infrastructure Build-out

ARC Is Positioned to Generate Strong Returns with Significant Infrastructure Build-out Complete

Liquids-rich Area Returns Dry Gas Area Returns

(10%)

0%

10%

20%

30%

Are

a R

etu

rns

(%

)

Infrastructure Build-out Infrastructure Build-out

(10%)

0%

10%

20%

30%

Are

a R

etu

rns

(%

)

Area Returns Trailing Three-year Average Area Returns

How does ARC approach capital allocation and the use of surplus funds from operations?

Key Themes Observed from the Investment Community

Investor Day Is an Opportunity to Address Key Themes Observed from the Investment Community

1

What does 2020 hold for ARC?2

How is ARC’s Attachie development progressing?3

What are the advantages of owning and operating infrastructure?4

How does ARC approach commercial diversification and price risk management?5

How is ARC leveraging new technology and innovation?6

How does ARC differentiate itself on ESG performance?7

Why should ARX be in an investor’s portfolio?8

How Does ARC Approach Capital Allocation and the Use of Surplus Funds from Operations?

Allocating Capital in Today’s Environment

ARC Is Delivering Production and Reserves per Share Growth with Lower Relative Capital Expenditures as a Percentage of Cash Flow

2020E Production per Share Growth vs. Investment (1)Capital Allocation Options

(1) Source: RBC Capital Markets “2020 Global Energy Outlook: Making Energy Great Again” (December 19, 2019). Data updated January 29, 2020.

Return Capital to Shareholders

Profitably Invest in the Business

• Pay a dividend

and/or

• Sustain production

• Grow production

• Repurchase shares

ARC

0%

50%

100%

150%

200%

(10%) 0% 10% 20% 30%

Ca

pit

al E

xp

en

dit

ure

s a

s a

Pe

rce

nta

ge

of

Ca

sh

Flo

w

Production per Share Growth (2020 vs. 2019)

Capital Allocation Priorities and Principles

ARC’s Dividend and Sustaining Capital Requirements Are Fully Funded at US$45/bbl WTI and US$2.00/MMBtu NYMEX Henry Hub

Dividend$212 million

per year

Three-year Average

Sustaining Capital (1)

~$400 millionper year

Sources of Cash Dividend Sustaining Capital Growth Capital

Funds from

Operations

Pay meaningful dividend and grow

funds from operations per share

Develop profitable projects

Manage net debt to funds from

operations ratio within 1.0 and 1.5x

Maintain a low cost structure and

corporate decline rate

Capital Allocation Priorities


Capital Allocation Principles

Inflows Outflows

Fully funded at

US$45/bbl WTI and

US$2.00/MMBtu

NYMEX Henry Hub

• Debt Reduction

• Long-term Development

Investments

• Share Buybacks

• Dividend Increases

Historical Capital Allocation and Outlook

ARC Expects to Generate Funds from Operations That Will Fully Fund Its Dividend and All Capital Requirements in 2020


Inflows Outflows

2016 to 2019 Capital Allocation 2020 Forecasted Capital Allocation

Inflows Outflows

Funds from Operations Net A&D Proceeds Dividend Sustaining Capital (1) Long-term Development Investments

(40%)

(25%)

(10%)

5%

20%

ARC

20

20

E D

ivid

en

d &

Su

rplu

s F

un

ds

fro

m O

pe

rati

on

s Y

ield

(%

)

-36

-27

-18

-9

0

9

18

27

36

(12%)

(6%)

0%

6%

12%E

&P

Co

nsu

me

r S

tap

les

Co

mm

un

ica

tion

Serv

ice

s

Ma

teria

ls

Co

nsu

me

r D

iscre

tion

ary

Re

al E

sta

te

Utilit

ies

Fin

an

cia

ls

Ind

ustr

ials

Info

rma

tio

n T

ech

no

log

y

Mid

str

ea

m

He

alth

care

20

20

E E

V/E

BIT

DA

20

20

E D

ivid

en

d &

Su

rplu

s F

un

ds

fro

m O

pe

rati

on

s Y

ield

(%

)

Surplus Funds from Operations Yield

ARC and the E&P Sector Are Focused on Returning Capital to Shareholders

TSX Sector Yield vs. Valuation (1)

(1) Source: National Bank of Canada Financial Markets “Oil & Gas Year Ahead Thematic: Feels like something has to give… what will it be?” (January 30, 2020). Estimates for sector indexes based on Bloomberg consensus as at January 28, 2020.

(2) Source: National Bank of Canada Financial Markets. Based on January 30, 2020 forward price curve. Peer group includes: BTE, CPG, ERF, PEY, POU, TOU, VET, VII, WCP.

E&P Yield (2)

2020E Dividend Yield (LHS) 2020E Surplus Funds from Operations Yield (LHS) 2020E Total Yield (LHS) 2020E EV/EBITDA (RHS)

Dividend History and Principles

The Dividend Is a Key Component of ARC’s Total Return Proposition

Dividend History Dividend Principles

0%

30%

60%

90%

120%

0

2

4

6

8

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

Div

ide

nd

s a

s a

Pe

rce

nta

ge

of

Fu

nd

s f

rom

Op

era

tio

ns

Cu

mu

lati

ve

Div

ide

nd

s (

$ b

illio

ns

)

Cumulative Dividends (LHS)

Dividends as a Percentage of Funds from Operations (RHS)

Dividend sustainability

Balance sheet strength

Paid over $6.5 billion

($34.63 per share) since inception

Capital Efficiency and Corporate Decline Rate

(1) Source: Peters & Co. Limited “E&P Overview Tables” (February 3, 2020). Peer group includes: APA, AR, COG, DVN, EOG, FANG, OVV, PEY, PXD, TOU, VII.

0%

12%

24%

36%

48%

ARC

2020E Capital Efficiencies (1) 2020E Corporate Decline Rates (1)

ARC

0

5,000

10,000

15,000

20,000

0% 25% 50% 75% 100%

20

20

E C

ap

ita

l E

ffic

ien

cy (

$/b

oe

/da

y)

2020E Percentage Natural Gas

Canadian Producers US Producers

Capitally Efficient Producers with a Low Decline Rate Deliver Superior Returns over TimeC

orp

ora

te D

ec

lin

e R

ate

(%

)

0.0

0.5

1.0

1.5

2.0

2.5

0

400

800

1,200

1,600

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0F

Ne

t D

eb

t to

Fu

nd

s f

rom

Op

era

tio

ns

Ra

tio

Ne

t D

eb

t a

nd

Fu

nd

s f

rom

Op

era

tio

ns

($

millio

ns

)Strong Balance Sheet

ARC Will Strengthen Its Balance Sheet via Debt Reduction with Any Surplus Funds from Operations

Balance Sheet History Balance Sheet Principles

Targeted net debt to annualized

funds from operations ratio within

1.0 and 1.5 times

Demonstrated history of

balance sheet management

Net Debt (LHS)

Funds from Operation (LHS)

Net Debt to Funds from Operations Ratio (RHS)

Maintaining Financial Strength

ARC’s Balance Sheet Is Top Quartile

ARC

ARC

(1) Source: RBC Research. Consensus estimates as per FactSet on January 21, 2020.

US Benchmarking: 2020E Year-end Net Debt / 2020E Cash Flow (1)

Canadian Benchmarking: 2020E Year-end Net Debt / 2020E Cash Flow (1)

0.7 0.7 0.8 1.0 1.2 1.2 1.2 1.3 1.4 1.5 1.6 1.6 1.6 1.8 1.8 1.9 1.9 1.9 2.2 2.3 2.3 2.4 2.4 2.6

3.3

4.2 4.3 4.8

5.1

Group Average

0.3 0.4 1.0 1.1 1.2 1.2 1.2 1.3 1.4 1.4 1.5 1.6 1.6

2.1 2.3 2.4 2.4 2.5 2.7 3.1 3.1 3.3 3.4 3.5

3.8 3.9 4.2

5.3

7.0 Group Average

How ARC Contemplates Share Buybacks Capital Allocation Considerations

Share Buybacks

Capital Investment Returns from Long-term Development Investments Are Currently Superior to Repurchasing Shares

Capital Investment Returns

Profit Investment Ratio

Scarcity of Capital

Payback Period

Sustain Production

Long-term

Development

Debt Levels

Flowing Barrel

MetricsReserves Valuations

Cost of Capital

What Does 2020 Hold for ARC?

2020 Key Operational Objectives

ARC’s 2020 Operations Are Focused on Further Improving Efficiencies

RISK-

MANAGED

VALUE

CREATION

HIGH-QUALITY

ASSETS &

OPERATIONAL

EXCELLENCE

FINANCIAL

SUSTAINABILITY &

RETURN ON

INVESTMENT

HIGH

PERFORMANCE

PEOPLE &

CULTURE

COMMERCIAL

ACTIVITIES &

RISK

MANAGEMENT

Improve capital efficiencies

Deliver strong safety performance

Continue to drive down operating expense

Grow profitable production

Advance Attachie pad design

Complete Dawson Phase IV and

Ante Creek expansion

Operational Objectives

2020 Guidance

In 2020, ARC Is Reducing Capital Expenditures by 28% and Delivering a 14% Increase in Production

$500 million

Invest to keep facilities at or

near gas capacity while

maximizing liquids

production and funds from

operations generation

Allowing

ARC to:

with improved operating expense

of $4.55 – $4.95/boe

Maintain Balance Sheet Strength

Focus on Organic Liquids Growth

Create Shareholder Value

and to complete

Dawson Phase IV and

Ante Creek expansion, and

commence Parkland sour conversion

while ensuring the safe and responsible

execution of the capital program

715 – 725 MMcf/dayof natural gas production

to produce

155,000 – 161,000boe/day

and drilling

65 gross

operated wells

35,500 – 40,000 bbl/dayof liquids production

Attachie$30MM

5,000 boe/dayOptimize pad profitability

with implementation of next generation of well design

2020 Budget of $500 Million (1)

Completion of Dawson Phase IV Will Grow Profitable Production and Deliver Annual Production of 155 to 161 Mboe per Day

ABBC

Ante Creek$79MM • 12 wells18,000 boe/day

Expansion at Ante Creek facility to add 15 MMcf/day of natural gas and 2,500 bbl/day

of oil in Q2 2020

Pembina$11MM

10,000 boe/dayManage production declines

and maximize funds from operations generation from

light oil production

Parkland/Tower$96MM • 6 wells29,000 boe/day

Convert existing sweet facility to a sour facility to support development of liquids-rich

lower Montney wells

Dawson$231MM • 39 wells

59,000 boe/dayPhase IV facility to comeon-stream in Q2 2020;

development focused on liquids-rich lower Montney

Sunrise$40MM • 8 wells36,000 boe/day

Generate funds from operations through owned-and-operated

facility with capacity of240 MMcf/day

Attachie

Septimus

Tower

ParklandSunset

Sunrise

Sundown

Dawson

Pouce Coupe

Ante Creek

Pembina

(1) Well counts denote wells drilled in calendar year; number of wells with completion activities in calendar year may vary.

Operational Excellence

ARC Has Reduced Its Operating Expense by Greater Than 50 per Cent While Growing Production by 120 per Cent

Operating Expense

50,000

90,000

130,000

170,000

3.00

5.50

8.00

10.50

2009 2014 2019 2020F

Ave

rag

e D

aily P

rod

uc

tio

n (

bo

e/d

ay)

Op

era

tin

g E

xp

en

se

($

/bo

e)

Operating Expense (LHS) Average Daily Production (RHS)

Lower Montney Development and Liquids Growth

Integrated Approach to Development in the Greater Dawson Area Allows ARC to Optimize Infrastructure Capacities to Maximize Profitability

(1) Total Petroleum Initially-in-Place as at December 31, 2018.

(2) NGLs volumes are Unrisked Best Estimate Economic Contingent Resource as at December 31, 2018.

(3) Internal rate of return (half-cycle after-tax rate of return) run at US$55/bbl WTI and Cdn$1.90/GJ AECO flat pricing.

Free Condensate-to-gas Ratio (bbl/MMcf)

Parkland

Dawson

2019 Lower Montney Wells

2020 Lower Montney Wells

Free Condensate-to-gas Ratio (bbl/MMcf)

Phase III & IV

Gas Plants

Phase I & II

Gas Plants

100

Greater Dawson Area Lower Montney Development

• 23 Tcf (1) of resources in lower Montney

• 105 MMbbl of contingent resource NGLs, of which 71 MMbbl is condensate (1)(2)

Large Resourcein Place

Tiered Inventory

Strong Return on Investment

• North Dawson & ParklandCGR: ~150 bbl/MMcf

• Core Dawson CGR: ~40 bbl/MMcf

• 300+ drilling locations at Dawson250+ drilling locations at Parkland/Tower

• Prioritize wells based on return on investment

• Lower Montney wells have >100% IRR and one-year payout (3)

Greater Dawson Area Strong Condensate Results

Strong Range of Condensate Outcomes from Both Upper and Lower Montney Development

Greater Dawson Area Condensate Performance

Type Curve

NGLs

[C2,C3,C4]

EUR (Mbbl)

Condensate

EUR (Mbbl)

Natural

Gas

EUR (Bcf)

Upper Montney Low End 10 30 7.3

Upper Montney High End 105 85 5.9

Lower Montney Low End 110 100 6.0

Lower Montney High End 80 240 2.4

Lower Montney Range

Upper Montney Range

0

50,000

100,000

150,000

200,000

0 12 24 36 48 60

Cu

mu

lati

ve

Co

nd

en

sa

te P

rod

uc

tio

n (

bb

l)

Months on Production

Dawson Phase IV Update

Commissioning Activities Have Commenced with the Dawson Phase IV Facility Expected to Be On-stream in Q2 2020

Commercial and Development Execution

Regulatory Approval Secured

Takeaway Secured

Economics Robust

Facility Execution

Project Cost On budget

Safety 0 LTIs

Mechanical Work 75% complete

Electrical Work 67% complete

Commissioning Work 15% complete

Expected On-stream Q2 2020

Dawson Phase IV Project Checklist

How Is ARC’s Attachie Development Progressing?

Why Does ARC Like Attachie?

Attachie Has a Large Liquids Resource in Place, Excellent Deliverability, Massive Potential, and Generates Superior Returns

(1) Total Petroleum Initially-in-Place as at December 31, 2018.

(2) Internal rate of return (half-cycle after-tax rate of return) run at US$55/bbl WTI and Cdn$1.90/GJ AECO flat pricing.

Pembina

North Montney Mainline

4-20

Battery

(3.5 Mbbl/day)

Phase I

Gas Plant

Attachie

• Large contiguous land base

• 8.9 Bbbl liquids and 32 Tcf natural gas in place (1)

Large LiquidsResource in Place

Excellent Deliverability

Superior Returns

Massive Potential

• Over-pressured reservoir

• ~50 Mbbl per well produced infirst 90 days on newest pad

• Deep inventory to develop multiple project phases

• Potential for over 2,000 future drilling locations

• Well economics of 85% IRR (2)

Attachie Development

ARC Is Progressing Its Attachie Development in the Most Efficient Manner to Maximize Value While Mitigating Risks

Land Acquisitions &

ExplorationAppraisal

InitialDevelopment

Manufacturing Production

2 – 6 Years

(2010 – 2016)

2 – 5 Years

(2017 – Ongoing)

Life Cycle of a Shale Play

Significant Competitor Activity at Attachie (1)

ARC’s Attachie Lands Are Ideally Situated in Over-pressured Liquids-rich Fairway

COP D-044-K

IP3: 397 bbl/day

COP 13-22

IP3: N/A

ABBC

Oil & Liquids

Dry Gas

Condensate

Rich Gas

Attachie

COP C-035-D

IP3: 490 bbl/day

KEL A-034-I

IP3: 427 bbl/day

KEL 2-23

IP3: 248 bbl/day

KEL 5-9

IP3: 623 bbl/day

ARX 2-27

IP3: 547 bbl/day

ARX 13-14

IP3: 415 bbl/day

YOHO 1-19

IP3: 514 bbl/day

YOHO 11-24

IP3: 469 bbl/day

PETRONAS 16-22

IP3: 13 bbl/day

(1) IP3 denotes the average production rate over the first three months of production.

0

75

150

225

300

0 350 700 1,050 1,400

Cu

mu

lati

ve

Co

nd

en

sa

te P

rod

uc

tio

n (

Mb

bl)

Days on Production

Continuous Improvement in Pad and Well Design

Initial Well Results from Newest Pad Are Encouraging with Average Condensate-to-gas Ratio of 300 Barrels per MMcf

Pad and Well Design Evolution Cumulative Condensate Production

(1) Due to facility constraints, only three of the four wells on 2-27 Pad Phase I have been producing consistently. Over 90 days of production, the three wells have produced approximately 160,000 barrels of condensate and approximately 530 MMcf of natural gas.

16-16 Well

13-26 Well

B13-26 Well

13-14 Pad Average

2-27 Pad Phase I Average (1)

2019

2-27 Pad Phase II

200 metre Spacing

45 m

400 m 400 m

400 m 400 m

45 m

300 m 300 m 300 m

300 m 300 m

2018

13-14 Pad

150 metre Spacing

2019

2-27 Pad Phase I

300 metre Spacing

45 m

600 m

600 m

2017

B13-26 Well

Unconstrained

2016

13-26 Well

Unconstrained

Attachie Is Being Advanced Towards Commercialization

ARC Is Progressing the Technical, Commercial, and Funding Aspects of Attachie West Phase I

Technical Commercial Funding

Strong liquids deliverability

Improved capital efficiencies

Competitor activity

Commodity egress

Regulatory

Support infrastructure

Balance sheet

Maximize profitability

Project readiness

What Are the Advantages of Owning and Operating Infrastructure?

Owned-and-operated Infrastructure Overview

ARC Has Added 645 MMcf per Day of Natural Gas Capacity and over 30,000 Barrels per Day of Liquids Capacity

Dawson Phase III & IV

Dawson Phase I & II

Parkland/Tower Phase I

Sunrise Phase I & II

Ante Creek Phase I

NE BC

AB

Facility Investment of ~$815 million

645 MMcf/day of Natural Gas Capacity

33.5 Mbbl/day of Liquids Capacity

Strategic Advantages of Owned Infrastructure

Owned-and-operated Infrastructure Affords ARC Greater Control and Increases Funds from Operations

Benefits of Owned-and-operated Infrastructure

Lowers cost structure and increases funds from operations

0

4

8

12

16

Op

era

tin

g E

xp

en

se

($

/bo

e)

AR

C D

aw

so

n

ARC

AR

C S

un

ris

e G

as

AR

C N

E B

C O

il &

Ga

s

2019 YTD Operating Expense (1)

(1) Source: Company reports. 2019 YTD Operating Expense represents data for the nine months ended September 30, 2019. Peer group includes: BTE, CPG, ERF, PEY, POU, TOU, VET, VII, WCP.

Ability to manage production based upon prevailing commodity prices

Retain economics of facility optimization projects

Control and reliability

-35,000

-25,000

-15,000

-5,000

5,000

15,000

25,000

35,000

($150,000,000)

($100,000,000)

($50,000,000)

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,0002

01

8

201

9

202

0F

202

1F

202

2F

202

3F

202

4F

202

5F

202

6F

202

7F

202

8F

202

9F

203

0F

Dawson Phase IV Business Model

Infrastructure Investment in Greater Dawson Area Is Supporting ARC’s Broad Shift to the Liquids-rich Lower Montney

(1) Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Refer to “Non-GAAP Measures” in the Advisory Statements to this presentation.

(2) Economics run at US$55/bbl WTI and Cdn$1.90/GJ AECO flat pricing.

Netback (1)(2)

Capital Expenditures

Facility Expenditures

Production

Netback less Capital Expenditures

Natural Gas Processing Capacity: 90 MMcf/day

Condensate-handling Capacity: 7,500 bbl/day (production expected to stabilize at ~3,000 bbl/day)

NGLs-handling Capacity: 3,000 bbl/day (production expected to stabilize at ~1,500 bbl/day)

~$300 Million

Initial Investment

Facility, Infrastructure, and

Wells to Fill Plant

Drill 8 to 10 Wells per Year

45% of Netback Required to Sustain Business (2)

-35,000

-25,000

-15,000

-5,000

5,000

15,000

25,000

35,000

($150,000,000)

($100,000,000)

($50,000,000)

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000 Dawson Phase IV Gas Processing and Liquids-handling Facility

How DoesARC Approach Commercial Diversification and Price Risk Management?

Commercial Activities and Risk Management

ARC Is Focused on Strategies to Ensure Long-term Market Access and Diversification for Its Products

Oil and

Gas Wells

Water Handling

and Treatment

Gas

Plant

Natural

Gas

Fractionation

Facility

Ethane

Propane

Butane

Condensate

Crude Oil

Raw Oil and

Gas Processing

Upstream

Transport

Do

wn

str

eam

Ma

rke

t T

ran

sp

ort

ati

on

Pro

du

ct

Sto

rag

e

Po

we

r

LN

G

Dis

trib

uti

on

an

d R

eta

il S

ale

s

Pe

tro

-ch

em

ical

Refi

nin

g

Upstream Midstream Downstream

Upstream Commercial

FunctionDownstream Commercial Function

WCSB Demand & Export Capacity Growth (1) Natural Gas Diversification (2)(3)

Natural Gas Financial and Physical Price Management

Integrated Physical Marketing and Financial Risk Management Strategies Enable ARC to Effectively Execute on Its Long-term Plans

24%

9% 3%

28%

37%37%

8%8%

12%

18%

16% 19%

10%17% 14%

8% 7% 7%

4% 6% 6%2%

Bal 2020 Cal 2021 Cal 20220%

25%

50%

75%

100%

Perc

enta

ge o

f Tot

al N

atur

al G

as P

rodu

ctio

n (%

)

(1) Source: ARC Risk Research, TC Energy, Enbridge, company reports.(2) Based on production assumptions for sanctioned projects.(3) “Hedged” includes all physical and financial fixed price swaps and collars at AECO, Station 2, and Henry Hub.

NGTL East Gate Capacity+1.3 Bcf/day by 2021

Intra-Alberta Demand+1.5 Bcf/day by 2024

LNG Canada Phase 1+2.1 Bcf/day by 2024

Enbridge T-South Capacity+0.2 Bcf/day by 2021

NGTL West Gate Capacity+0.5 Bcf/day by 2023

5.6 Bcf/day Demand & Egress Growth Expected by 2024

AECO FloatingStation 2 FloatingMidwest US Floating

HedgedMalin FloatingDawn FloatingEmpress Floating

Henry Hub Floating

0%

15%

30%

45%

60%

Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

Pe

rce

nta

ge

of

Cru

de

Oil P

rod

uc

tio

n H

ed

ge

d (

%)

76% of ARC’s liquids production is made

up of light oil and condensate

Crude oil

Condensate

NGLs

39% 37%

24%

Crude Oil & Liquids Sales Mix Crude Oil Risk Management (1)

Oil and Liquids Financial and Physical Price Management

~60% of ARC’s 2019 Commodity Sales from Production Was Derived from Crude Oil and Liquids

(1) Per cent of production hedged based on full-year 2020 production guidance.

How Is ARC Leveraging New Technology and Innovation?

Technology and Innovation at ARC

ARC Continuously Looks for Ways to Become More Efficient in Order to Create Value and Improve Profitability

Add Value, Profitability, and ESG Performance

Cycle-time Improvements

Efficiency of Execution

Direct Cost Savings

Sustainable Approach

Leverage Partnerships

ARC’s Approach to Technology and Innovation

Objective Is to Improve Efficiencies

Industry-leading Drilling and Completions Performance

ARC’s Drilling Performance Is 50 per Cent Better and Completions Performance Is 40 per Cent Better Than the Average Montney Producer

Drilling Performance (1) Completions Performance (1)

(1) Publicly available data for Montney producers only. Peer group includes: CNQ, CR, KEL, LXE, MUR, NVA, OVV, RDS, TOU, VII.

0

100

200

300

400

ARC

Ave

rag

e D

ista

nc

e D

rille

d p

er

Da

y (

me

tre

s)

Average

0

350

700

1,050

1,400

ARC

Ave

rag

e A

mo

un

t o

f S

an

d P

um

pe

d p

er

Da

y (

ton

ne

s)

Average

0

1,500

3,000

4,500

6,000

0 5 10 15 20

De

pth

(m

etr

es

)

Days from Spud

Drilling Performance

Continuous Improvements and Repeatability in Drilling Performance Have Led to Improved Capital Efficiencies

Sunrise British Columbia Montney Ante Creek

0

125

250

375

500

2014 2015 2016 2017 2018 2019

Ave

rag

e D

ista

nc

e D

rille

d p

er

Da

y (

me

tre

s)

0

1,500

3,000

4,500

6,000

0 5 10 15 20

De

pth

(m

etr

es

)

Days from Spud

Drilled

2016Drilled

2019

Drilled

2016Drilled

2019

Optimizing Dawson Lower Montney Development

Use of Technology Has Enhanced Lower Montney Profitability through Improved EURs, Better Capital Efficiency, and Lower F&D Costs

Estimated Ultimate Recovery Capital Efficiency

Well Costs Finding and Development Costs

0

375

750

1,125

1,500

2017 2018 2019

Es

tim

ate

d U

ltim

ate

R

ec

ove

ry (

Mb

oe

)

0

2,500

5,000

7,500

10,000

2017 2018 2019

Ca

pit

al E

ffic

ien

cy

($/b

oe

/da

y)

3,500

4,000

4,500

5,000

5,500

2017 2018 2019

We

ll C

os

ts($

millio

ns

)

0

2

4

6

8

2017 2018 2019

Fin

din

g &

De

ve

lop

me

nt

Co

sts

($

/bo

e)

Technology Has Improved Environmental Performance

Installation of Waste Heat Recovery Units at Dawson Phase III Is an Example of ARC’s Commitment to Reducing Its GHG Emissions Intensity

Waste Heat Recovery Unit

(1) Assumes a 10-year useful life, discounted at 10 per cent.

(2) Assumes a carbon tax cost of $35/tonne.

Dawson Phase III

Economic and Environmental Benefits

EconomicBenefits

Environmental Benefits

• $1 million initial investment

• $7 million improvement to Dawson Phase III facility’s net present value (1)

• $1 million annual carbon tax savings (2)

• Fuel gas consumption reduced by 1.3 MMcf/day

• Total annual emissions reduction of 25,000 tonnes of CO2

equivalent

How Does ARC Differentiate Itself on ESG Performance?

ESG Strategy

Environment Social Governance

Safety

Stakeholder

Engagement

First Nations

Disclosure

Ethics

Risk

Management

ARC’s ESG Strategy Is Focused on Sustainability

Responsible Development Is Engrained in ARC’s Long-term Strategy and Its Decision-making Processes

Integrated Approach to Sustainability

Environmental Responsibility

Ethical Business Leadership

Economics and Profitability

Safety Performance

SustainabilityAir

Land

Water

Board

Oversight

ARC’s ESG Excellence

ARC Ranks among the Best in the World for Sustainability Ratings

(1) Source: BMO Capital Markets; Yale Environmental Performance Index (EPI); Social Progress Imperative; Worldbank Worldwide Governance Indicators; Bloomberg; CSRHub. For presentation, an equal weight (1/3) of each index is represented.

ESG Ratings by Major Oil Producing Country (1) Oil and Gas Companies’ Relative ESG Rankings (1)

ARC

40

46

52

58

64

70

40 46 52 58 64 70

So

cia

l a

nd

Go

ve

rna

nc

e S

co

re

Environmental Score

Africa

Asia

Canada

Europe

Middle East

Latin America

Russia

United States

0

25

50

75

100Social Progress Index

Yale Environmental Performance Index

Worldbank Governance Index

Emissions Management Strategy

ARC’s GHG Emissions Intensity Performance Is Industry-leading

GHG Emissions Intensity Performance (Scope 1 and 2)

2018 GHG Emissions Intensity Benchmarking (1)

0.00

0.01

0.02

0.03

0.04

2014 2015 2016 2017 2018 2019F 2021Target

To

nn

es

of

CO

2E

qu

iva

len

t p

er

bo

e

ARC Total ARC Sunrise

25% reduction

target relative to

2017 baseline

0.00

0.03

0.06

0.09

0.12

AR

C S

un

rise

AR

C B

C

AR

C T

ota

lTo

nn

es

of

CO

2E

qu

iva

len

t p

er

bo

e

(1) Peer group includes: BNP, BTE, CNQ, CPG, CVE, ERF, MEG, NVA, OVV, PEY, SU, VET, VII, WCP.

>95% reduction

expected due to plant

electrification

Emissions Management Strategy

Proactively focus on reducing GHG intensity

Set GHG emissions intensity reduction target

Incorporate emissions management

solutions into project planning

Proactive Portfolio Management Strategy

ARC’s Business Has Become Increasingly More Efficient while Its Surface Footprint Has Been Significantly Reduced

2014 2019

Ante Creek

Pembina

NE BCGrowth Property

Hold Property

Divest Candidate

2,000

3,000

4,000

5,000

6,000

60,000

85,000

110,000

135,000

160,000

2009 2019

Ne

t W

ell C

ou

nt

Ave

rag

e D

aily P

rod

uc

tio

n (

bo

e/d

ay)

Average Daily Production (LHS) Net Well Count (RHS)

Land Management and Asset Liability Strategy

ARC Takes a Proactive Approach to Well Abandonment and Reclamation Activities

119% increase

in production

57% decrease

in well count

Multi-well Pad Development Has Reduced ARC’s Overall Surface FootprintLand Management Strategy

Rigorous asset integrity program

Reduce disturbance

Prioritize reclamation

Land Management Strategy

Water Management Strategy

ARC’s Water Management Strategy Is Centred around Responsibility, Sustainability, and Profitability

Water Storage Reservoirs

Dawson

ParklandSunrise

Ante Creek

Water Management Strategy

Responsibly manage water use in operations

Evaluate technologies and procedures to

implement best practices

Water strategy key in long-term planning

Strong Safety Performance

Employees Have Gone Six Years without a Lost-time Incident and Contractor TRIF Is down Due to Well-planned and Executed Operations

Contractor Total Recordable Incident Frequency (“TRIF”)

0.0

0.5

1.0

1.5

2.0

2014 2015 2016 2017 2018 2019

To

tal R

ec

ord

ab

le In

cid

en

t F

req

ue

nc

y

ARC’s Strong ESG Performance

ARC Is Committed to ESG Transparency

Sustainability Reporting

Societal Contributions

Ethical Business Practices

Risk Management

Executive Compensation

ESG Strategy in Action

Why Should ARX Be in an Investor’s Portfolio?

Why Should You Own ARX?

ARC Is a Compelling and Unique Long-term Investment

We Are Growing Our Production Base with Lower Capital Requirements

We Are a Leader in Operational Excellence

We Are Focused on Technology and Innovation

We Are a Leader in ESG Performance

We Are Profitably Generating Surplus Funds from Operations

We Have a Strong Balance Sheet with a Sustainable Dividend

Appendix

2020 Guidance

2020 Guidance

Production

Crude oil (bbl/day) 15,000 - 17,000

Condensate (bbl/day) 12,000 - 14,000

Crude oil and condensate (bbl/day) 27,000 - 31,000

Natural gas (MMcf/day) (1) 715 - 725

NGLs (bbl/day) 8,500 - 9,000

Total production (boe/day) (1) 155,000 - 161,000

Expenses ($/boe)

Operating 4.55 - 4.95

Transportation 3.10 - 3.30

General and administrative expense before share-based compensation expense 1.00 - 1.20

General and administrative expense - share-based compensation expense (2) 0.30 - 0.45

Interest and financing (3) 0.65 - 0.80

Current income tax expense (recovery) as a per cent of funds from operations (4) (2) - 3

Capital expenditures before land and net property acquisitions (dispositions) ($ millions) 500

(1) Does not incorporate the potential impact that third-party transportation restrictions may have on ARC's natural gas production.

(2) Comprises expenses recognized under the Restricted Share Unit and Performance Share Unit Plans, Share Option Plan, and Long-term Restricted Share Award Plan, and excludes compensation expense under the Deferred Share Unit Plan.

In periods where substantial share price fluctuation occurs, general and administrative expense is subject to greater volatility.

(3) Excludes accretion of asset retirement obligation.

(4) The current income tax estimate varies depending on the level of commodity prices.

2020 Plan Centres around Capital Discipline and Efficiency, Balance Sheet Strength, and Delivering Profitable Projects to Shareholders

0

50

100

150

200

0

2,000

4,000

6,000

8,000

0 6 12 18 24 30 36

Co

nd

en

sa

te &

NG

L P

rod

uc

tio

n R

ate

(b

bl/d

ay)


Dawson – Type Curve and Economics

(1) Type curves are internal estimates based on analog wells and reservoir modelling.

(2) Assumed cycle time (from spud to on-production) is four months.

(3) Lateral length of 2,500 metres.

Key Metrics

Medium Liquids Upper

Montney Type Curve

DCET Capital/Well ($ millions) 3.8

Internal 2P Reserves (Mboe) 1,185

IP (1 month) (boe/day) 1,280

IP (12 months) (boe/day) 910

Half-cycle Economics

US$55/bbl WTI &

Cdn$1.90/GJ AECO

IRR (%, after-tax) 90

Medium Liquids Upper Montney Type Curve (1)(2)(3) Development Economics

Natural Gas (Mcf/day)

Condensate (bbl/day)

NGLs [C2, C3, C4] (bbl/day)

Co

nd

en

sa

te &

NG

Ls

Pro

du

cti

on

Ra

te (

bb

l/d

ay)

Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

0

250

500

750

1,000

Wells Drilled toYE 2019

2P BookedLocations

Internal InventoryEstimate

We

lls

Dawson – Development Potential

Lower Montney

Booked Reserves

Upper Montney A

Booked Reserves

Reserves Maps Drilling Inventory

Up

pe

r

Mo

ntn

ey

Lo

we

r M

on

tne

y

Existing Horizontal Wells, Development

Existing Horizontal Wells, Pilot

Potential Horizontal Wells

ARC Montney Lands

ARC Montney Lands with 2P Reserves Booked as of YE 2019

0

50

100

150

200

250

0

1,500

3,000

4,500

6,000

7,500

0 6 12 18 24 30 36

Co

nd

en

sa

te &

NG

L P

rod

uc

tio

n R

ate

(b

bl/d

ay)


Dawson-Parkland – Type Curve and Economics


(2) Assumed cycle time (from spud to on-production) is four months.


Key Metrics

Medium Liquids Lower

Montney Type Curve


Internal 2P Reserves (Mboe) 1,200


IP (12 months) (boe/day) 1,100


US$55/bbl WTI &

Cdn$1.90/GJ AECO


Medium Liquids Lower Montney Type Curve (1)(2)(3) Development Economics




Co

nd

en

sa

te &

NG

Ls

Pro

du

cti

on

Ra

te (

bb

l/d

ay)


Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

0

150

300

450

600

0

750

1,500

2,250

3,000

0 6 12 18 24 30 36

Co

nd

en

sa

te &

NG

Ls

P

rod

uc

tio

n R

ate

(b

bl/d

ay)


Dawson-Parkland – Type Curve and Economics


(2) Assumed cycle time (from spud to on-production) is three months.


Key Metrics

High Liquids Lower

Montney Type Curve


Internal 2P Reserves (Mboe) 715

IP (1 month) (boe/day) 625



US$55/bbl WTI &

Cdn$1.90/GJ AECO


High Liquids Lower Montney Type Curve (1)(2)(3) Development Economics




Co

nd

en

sa

te &

NG

Ls

Pro

du

cti

on

Ra

te (

bb

l/d

ay)


Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

0

150

300

450

600

0

1,500

3,000

4,500

6,000

0 6 12 18 24 30 36

Co

nd

en

sa

te a

nd

NG

L P

rod

uc

tio

n R

ate

(b

bl/d

ay)


Parkland – Type Curve and Economics


(2) Assumed cycle time (from spud to on-production) is five months.


Key Metrics

Upper Montney

Type Curve






US$55/bbl WTI &

Cdn$1.90/GJ AECO


Upper Montney Type Curve (1)(2)(3) Development Economics




Co

nd

en

sa

te &

NG

Ls

Pro

du

cti

on

Ra

te (

bb

l/d

ay)


Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

Parkland/Tower – Development Potential

Upper Montney A+

Booked Reserves

Lower Montney

Booked Reserves 0

250

500

750

1,000


2P BookedLocations


We

lls

Upper Montney A

Booked Reserves


Up

pe

r M

on

tney

Lo

we

r M

on

tne

y




ARC Montney Lands


Tower Parkland

0

100

200

300

400

500

0

400

800

1,200

1,600

2,000

0 6 12 18 24 30 36

Liq

uid

s P

rod

uc

tio

n R

ate

(b

bl/d

ay)


Ante Creek – Type Curve and Economics


(2) Assumed cycle time (from spud to on-production) is three months.


Key Metrics Type Curve



IP (1 month) (boe/day) 685



US$55/bbl WTI &

Cdn$1.90/GJ AECO


Type Curve (1)(2)(3) Development Economics


Crude Oil (bbl/day)



Cru

de

Oil, C

on

den

sa

te &

NG

Ls

Pro

du

cti

on

Ra

te (

bb

l/d

ay)


Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

Ante Creek – Development Potential

0

200

400

600

800


2P BookedLocations


We

lls


ARC Montney Lands


0

500

1,000

1,500

2,000

0

750

1,500

2,250

3,000

0 6 12 18 24 30 36

Attachie West – Type Curve and Economics


(2) Assumed cycle time (from spud to on-production) is six months.


(4) Designated as Gas Tier 1 (less than 1,900 metres total vertical depth).

Key Metrics Type Curve






US$55/bbl WTI &

Cdn$1.90/GJ AECO


Type Curve (1)(2)(3)(4) Development Economics




Co

nd

en

sa

te &

NG

Ls

Pro

du

cti

on

Ra

te (

bb

l/d

ay)


Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

Attachie – Development Potential


0

600

1,200

1,800

2,400


2P BookedLocations


We

lls

Upper Montney A

Booked Reserves

Lower Montney

Booked Reserves

Up

pe

r M

on

tney

Lo

we

r M

on

tne

y




ARC Montney Lands


Sunrise – Type Curve and Economics


(2) Assumed cycle time (from spud to on-production) is six months.

(3) Average lateral length of 2,000 metres.

Type Curve (1)(2)(3) Development Economics

0

1,875

3,750

5,625

7,500

0 6 12 18 24 30 36


Key Metrics

Type Curve

(Average of 3 Layers)


Internal 2P Reserves (Bcfe) 11.5

IP (1 month) (MMcf/day) 7.0

IP (12 months) (MMcf/day) 6.8


US$55/bbl WTI &

Cdn$1.90/GJ AECO



Na

tura

l G

as

Pro

du

cti

on

Ra

te (

Mc

f/d

ay)

Sunrise – Development Potential


Upper Montney A

Booked Reserves

Upper Montney A+

Booked Reserves

Upper Montney B

Booked Reserves

Lower Montney

Booked Reserves

Up

pe

r M

on

tney

Lo

we

r M

on

tne

y

0

125

250

375

500


2P BookedLocations


We

lls

ARC Montney Lands




Reserves and Resources Disclosure

All reserves in this presentation are, unless indicated otherwise, as at December 31, 2019 as evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”) in accordance with thedefinitions, standards, and procedures contained in the COGE Handbook and NI 51-101. Resources volumes for the Montney are as at December 31, 2018 as evaluated byGLJ in accordance with the definitions, standards, and procedures contained in the COGE Handbook and NI 51-101 .

TPIIP, DPIIP, and UPIIP have been estimated using a one per cent porosity cut-off for shale gas and tight oil.

Reserves volumes for ARC’s Montney assets and elsewhere in this presentation are, unless indicated otherwise, Proved plus Probable, while the resource categories for theMontney in this presentation are “Best Estimates”.

All reserves and resources volumes for the Montney and elsewhere in this presentation are company gross.

Gas volumes are “sales” for reserves and resource and raw gas for DPIIP and TPIIP.

The tight oil DPIIP is a stock tank barrel.

All DPIIP and TPIIP other than cumulative production, reserves, Contingent Resources, and Prospective Resources have been categorized as unrecoverable.

The amount of natural gas and liquids ultimately recovered from ARC’s the Montney resource will be primarily a function of the future price of both commodities.

Definitions of Reserves and Resources

Reserves are estimated remaining quantities of crude oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date,based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generallyaccepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows:

Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered willexceed the estimated proved reserves.

Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantitiesrecovered will be greater or less than the sum of the estimated proved plus probable reserves.

Resources encompasses all petroleum quantities that originally existed on or within the earth’s crust in naturally occurring accumulations, including Discovered andUndiscovered (recoverable and unrecoverable) plus quantities already produced. "Total Resources" is equivalent to "Total Petroleum Initially-in-Place". Resources are classifiedin the following categories:

Total Petroleum Initially-in-Place ("TPIIP") is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity ofpetroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to bediscovered.

Discovered Petroleum Initially-in-Place ("DPIIP") is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior toproduction. The recoverable portion of DPIIP includes production, reserves, and contingent resources; the remainder is unrecoverable.

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using establishedtechnology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies.

Economic Contingent Resources ("ECR") are those Contingent Resources which are currently economically recoverable.

Project Maturity Subclass Development Not Viable is defined as a Contingent Resource that is not viable in the conditions prevailing at the effective date of theevaluation, and where no further data acquisition or evaluation is planned and therefore has not been assigned a low chance of development.

Project Maturity Subclass Development Pending is defined as a Contingent Resource that has been assigned a high chance of development and the resolution of finalconditions for development are being actively pursued.

Project Maturity Subclass Development Unclarified is defined as a Contingent Resource that requires further appraisal to clarify the potential for development and hasbeen assigned a lower chance of development until contingencies can be clearly defined.

Forecast

Definitions of Reserves and Resources

Undiscovered Petroleum Initially-in-Place ("UPIIP") is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered.

The recoverable portion of UPIIP is referred to as "prospective resources" and the remainder as "unrecoverable".

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of

future development projects.

Unrecoverable is that portion of DPIIP and UPIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these

quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered

due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

Uncertainty Ranges are described by the COGE Handbook as low, best, and high estimates for reserves and resources. The Best Estimate is considered to be the best

estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If

probabilistic methods are used, there should be at least a 50 per cent probability that the quantities actually recovered will equal or exceed the best estimate.

This presentation contains forward-looking information and statements that may be identified by words like “outlook”, “estimates”, and similar expressions. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Reference is made to thesection entitled, “Forward-looking Statements” at the beginning of this presentation and also to the February 6, 2020 news release entitled, “ARC Resources Ltd. Reports FourthQuarter and Year-end 2019 Financial and Operational Results and Year-end 2019 Reserves Results” which may be found on ARC’s website at www.arcresources.com or onSEDAR at www.sedar.com, and which are hereby incorporated by reference in this presentation and which outline a number of assumptions, risks, and uncertainties associatedwith forward-looking statements. Actual results could differ materially as a result of changes to ARC’s plans, the impact of changes in commodity prices, general economic,market, and business conditions, as well as production, development, and operating performance, and other risks associated with oil and gas operations.

For further information about ARC Resources Ltd. please visit our website www.arcresources.com.

Or contact:Investor RelationsE-mail: [email protected] 403.503.8600 F 403.509.6427Toll Free 1.888.272.4900ARC Resources Ltd.1200, 308 – 4 Avenue SWCalgary, AB T2P 0H7

arc resources ltd. 2020 investor day › assets › pdf › 2020-investor... · 2020-02-20 · for...

Documents