We achieved 16 per cent growth in production, increased proved plus probable reserves by 18 per cent and maintained low debt levels. ARC celebrated its fifteenth year as a successful operating oil and gas company and completed its first year as a corporation. When we set out in 1996, our vision was to create a premier “blue chip” conventional oil and gas royalty trust as measured by the quality of assets, management expertise and long-term investor returns. We have realized this vision and as we move forward as a corporation, we will continue to manage our business on principles of risk managed value creation as we have for the past fifteen years. Despite continued uncertainty and volatility in the world economy, ARC’s strategy of capital discipline and paced development has enabled us to be opportunistic and set the stage for sustainable growth. As our mandate is not to grow but to create shareholder value, a fundamental component of our business plan has always been the dividend. The dividend allows us to opportunistically grow our business if we are creating value, yet continue to deliver returns to our shareholders when we are faced with a business environment that is not conducive to growth. We have paid a healthy monthly dividend at $0.10 per share for the past 32 consecutive months, while growing our company as an outcome of our profitable investment opportunities. ARC remains committed to providing risk managed value creation to our shareholders.
The theme of this year’s annual report is Creating Value. This is not a catch phrase, but a strategic cornerstone at ARC. Our primary objective is always to create long-term value for our shareholders. As such, we govern our business in terms of the current economic environment and understand growth as an option when appropriate, rather than a mandate. We have set the course for internally generated growth and in 2012 we will continue to focus on this agenda, primarily in oil and natural gas liquids investments. Our portfolio is comprised of world-class oil, liquid and gas investment opportunities that offer optionality for our entrepreneurial team to continue to be nimble in investing in the highest rate of return projects. As we continue to find ways to create value, we are confident that our team will meet the challenges and ARC will thrive.
During 2011, ARC executed its largest capital program to-date and achieved record production of 83,416 boe per day, a 16 per cent increase over 2010. The robust $726 million capital program focused on oil and liquids-rich natural gas opportunities across our asset base and included the drilling of 164 gross operated wells. Flooding in Saskatchewan and forest fires in northern Alberta posed challenges to our operations and capital program through the spring, slowing our pace of development. ARC increased activity in the second half of the year to reach our targets and achieve record fourth quarter production of approximately 92,000 boe per day. In April, ARC commissioned the 60 mmcf per day phase two Dawson gas plant, increasing total operated processing capacity to 120 mmcf per day. The completion of the plant marks an important milestone in the development of ARC’s Montney resource and illustrates our commitment to long-term staged growth in the region. This commitment is further exemplified by successful drilling programs at ARC’s Tower and Attachie properties in northeast British Columbia, which proved up discoveries of significant liquids-rich gas. Early well test results are promising and through 2012 we will continue to assess these reservoirs and expand our understanding of their long-term potential.
World markets in 2011 experienced historic swings as geopolitical upheaval dominated the news. Supply disruptions, decreased OPEC spare capacity and increased political tension buoyed crude oil prices throughout the year. As a result, average WTI oil price increased meaningfully to US$95.14 per barrel compared to US$79.55 per barrel in 2010. Supply of natural gas continued to outpace demand, resulting in a prolonged reduced natural gas price averaging $3.67 per mcf in 2011, a considerable decline from $4.12 per mcf in 2010. Despite the volatility, ARC delivered solid financial results and maintained our trademark strong balance sheet. Record production and the high oil price contributed to a 26 per cent increase in funds from operations to $2.95 per share up from $2.52 per share in 2010. The diversity of ARC’s asset base enabled us to focus on oil and liquids-rich natural gas opportunities to capitalize on the near-term strength of crude oil prices. This strategy proved successful in mitigating the low natural gas price environment and ultimately resulted in strong netbacks. An active risk management program allows ARC to preserve our financial position through market downturns and provides a level of certainty to execute our business plan. ARC achieved growth objectives while holding net debt essentially flat at a ratio of 1.1 times debt to cash flow, representing one of the lowest levels in the sector.
ARC’s ambitious 2011 drilling program delivered significant reserve additions, increasing ARC’s total proved plus probable reserves by 18 per cent to 572 million barrels of oil equivalent (“mmboe”). We replaced 385 per cent of 2011 production through the drill bit, increasing the corporate Reserve Life Index to an impressive 17 years. Finding and Development costs (excluding Future Development Capital) were at $5.50 per boe while Finding Development and Acquisition costs were at the lowest level in 10 years at $5.24 per boe for proved plus probable reserves. When benchmarked against our peers, these costs are expected to be among the lowest in the industry. ARC delivered an exceptional recycle ratio, a key indicator of profitability in the oil and gas sector, of 5.3 times and 5.0 times for the current year and three year average, respectively.
The northeast British Columbia Montney region was the primary driver of this strong performance with a 48 percent year-over-year increase in proved plus probable reserves. In an effort to better understand ARC’s long-term future reserve and resource potential in the region, we commissioned an independent resource evaluation for our northeast British Columbia Montney holdings. Independent evaluators assigned an a best estimate of economic contingent resources of 4.1 Tcf of natural gas and 101 mmbbls of natural gas liquids in excess of proved plus probable reserves to these assets. In addition, Discovered Petroleum Initially in Place increased to 25.5 Tcf and estimated Total Petroleum Initially in Place to 50.4 Tcf based on a zero per cent porosity cut-off (21.2 Tcf and 39.6 Tcf, respectively, based on a three per cent porosity cut-off). To put these numbers into perspective, we estimate that the currently assigned proved plus probable reserves plus the current estimate of economic contingent resource could, after the expenditure of required capital, sustain a peak production rate up to 800 mmcf per day of natural gas and 17,000 bbls per day of liquids for 10 years. Given that fourth quarter production averaged 235 mmcf per day, there is enormous potential for substantial production growth. Also noteworthy, is the fact the cumulative production, current proved plus probable reserves plus the economic contingent resource represent 13 per cent of the Total Petroleum Initially in Place. It is our expectation that ultimate recoveries could exceed this level resulting in even greater production potential from the region. These findings confirm ARC’s belief that the Montney is a world-class asset with significant long-term growth potential to add considerable shareholder value in the future. 
The scale of the reserve additions in the Montney demonstrates an evolution which has taken place at ARC. We have transitioned from a company focused on the acquisition of mature assets to one driven by the development of resource plays. The size of the resource in the Montney continues to evolve into a greater and greater opportunity. As we assess how to best develop this vast resource we are cognizant of the changes taking place in the natural gas business and will execute a long-term development plan in our tradition of capital discipline and paced development. A key attribute of ARC’s Montney assets is the optionality created from having both dry and liquids-rich natural gas opportunities. This optionality, coupled with the fact that it is one of the largest and lowest cost natural gas plays in North America, make it an attractive investment opportunity even in a low natural gas price environment. We are confident that we have the ability and expertise to fully exploit these assets. With the goal of risk managed value creation we will remain open to evaluating new opportunities which could develop in the natural gas market.
Managing our business with a focus on risk managed value creation and capital discipline has produced exceptional results to-date and we will move forward in this tradition. In 2012, ARC plans to execute a $760 million capital budget, the largest in our history. Capital investments are pursued in context of the broader economic environment and we prudently allocate capital to projects which generate the highest rate of return. In addition, ARC’s efficient operations and low cost structure create optimal returns across our operations. In 2012, we are directing $660 million towards oil and natural gas liquids projects. The flagship project for 2012 is the drilling of 40 oil wells in Ante Creek, an Alberta Montney oil pool, and the construction of a gas plant in the area to handle the solution gas from these wells. Concurrently, we will continue to counter-cyclically invest in staged long-term development of our northeast British Columbia Montney resource. The diversity in our asset base enables us to re-deploy significant and stable cash flow generated from our high quality oil assets to support development projects such as those in the Montney.
We take a dynamic approach to capital allocation and continually assess capital spending and dividend levels in the context of current and forecast market conditions. We are committed to the dividend and believe that we are well positioned to sustain current levels despite the low natural gas price environment. Should a prolonged period of low commodity prices occur, our first priority will be to defer certain growth capital in order to preserve our strong financial position in the long-term.
ARC’s continued success is thanks to the fabulous team of 534 employees who bring the experience and expertise required to execute on opportunities. In 2011, we reached new levels in production, technological advancements and financial achievements. Without our employees’ hard work and dedication none of this would be possible. Entrepreneurial spirit and high employee engagement define ARC’s culture and we strive to maintain these core values as the company grows. It is a special time at ARC in that we are large enough to take on significant capital projects and, as an intermediate size company, our employees have a direct line of sight to see the results and positive impact of their contributions.
As we take on new challenges and opportunistically grow our business, our aim is always to conduct our operations in a manner that is safe for our employees and the environment. Building a culture of health, safety and environmental stewardship is a foundation of our strategy of operational excellence. It is crucial that the people who come to work for us each morning return home to their families each night. We continually strive to improve our health and safety policies and programs with the collective goal of zero lost-time incidents.
In the past year we enhanced our management team with the promotion of two Senior Vice-Presidents and the addition of two Vice-Presidents through internal staff promotions. We welcomed Cam Kramer, who was previously the Senior Vice-President of North American Operations for a senior producer, to our team as the Senior Vice-President of Operations. To our Board of Directors we added Tim Hearn, who brings a wealth of knowledge and industry experience. These changes have served to strengthen our team’s expertise and position the company for continued success.
Over the past 15 years we have created significant value for our shareholders, amassed a portfolio of world-class assets and built a team consisting of some of the industry’s top talent. In 2012, we will embark on an exciting new chapter in ARC’s history with tremendous opportunities in front of us. We have the privilege of developing the vast resource in the Montney and as we move forward, stronger than ever, we will continue our tradition of creating value and delivering superior long-term returns to our shareholders.
We enthusiastically embrace
the challenges that lay ahead with the
confidence that our future is bright.
Myron M. Stadnyk
President & Chief Operating Officer
John P. Dielwart
Chief Executive Officer
|Year Ended December 31|
|Cdn$ millions, except per share and per boe amounts||2011||2010 |
|Funds from operations ||844.3||667.0|
|Per share ||2.95||2.52|
|Per share ||1.00||0.80|
|Operating income ||293.5||232.6|
|Per share ||1.02||0.88|
|Per share ||1.20||1.20|
|Net debt outstanding ||909.7||871.0|
|Shares outstanding, diluted||286.6||264.2|
|Shares outstanding, end of period||288.9||284.4|
|Crude oil (bbl/d)||27,158||27,341|
|Natural gas (mmcf/d)||310.6||254.2|
|Natural gas liquids (bbl/d)||2,444||2,628|
|Total (boe/d) ||83,416||73,954|
|Crude oil ($/bbl)||89.51||73.85|
|Natural gas ($/mcf)||3.83||4.21|
|Natural gas liquids ($/bbl)||47.53||39.57|
|Oil equivalent ($/boe)||47.15||44.88|
|Operating netback ($/boe)|
|Commodity and other sales||47.24||44.96|
|Netback before hedging||29.16||27.02|
|Realized Hedging gain (loss)||2.18||2.20|
|Netback after hedging||31.34||29.22|
|Trading Statistics |
|(Cdn$, except volumes - based on intra-day trading)|
|Average daily volume (thousands)||1,251||1,197|
|Crude oil and NGLs (mbbl)||123,150||123,538|
|Natural gas (bcf)||1,419||1,265|
|Total oil equivalent (mboe)||359,641||334,432|
|Proved plus probable reserves|
|Crude oil and NGLs (mbbl)||170,153||165,963|
|Natural gas (bcf)||2,413||1,915|
|Total oil equivalent (mboe)||572,374||485,121|
|Finding, Development and Acquisition Costs ($/boe) |
|Including future development capital|
|Excluding future development capital|
Mr. Van Wielingen has served as Vice-Chairman and director of ARC Resources since its formation in 1996 and became Chairman in 2002. He is Co-Chairman and a founder of ARC Financial Corporation, a private equity investment management company focused on the energy sector in Canada. Previously, Mr. Van Wielingen was a Senior Vice-President and Director of a major national investment dealer responsible for all corporate finance activities in Alberta. Mr. Van Wielingen holds an Honours Business degree from the University of Western Ontario Business School and has studied post-graduate Economics at Harvard University.
Mr. DeBoni is a Corporate Director and has extensive experience in the oil and gas industry. Mr. DeBoni retired from Husky Energy Inc., in 2005 where he held the position of Vice-President, Canada Frontier & International Business. Prior thereto, he was the Chief Executive Officer of Bow Valley Energy. In addition to his time at Husky and Bow Valley he has held numerous top executive posts in the oil and gas industry with major corporations. Mr. DeBoni holds a Bachelor of Science in Chemical Engineering from the University of British Columbia and a Masters in Business Administration with a major in Finance from the University of Calgary. He is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta and the Society of Petroleum Engineers. He currently serves on the board of directors for Sterling Resources Ltd. Mr. DeBoni has been a director of ARC Resources since 1996.
Mr. Dielwart is Chief Executive Officer of ARC Resources and has overall management responsibility for the Company. Prior to joining ARC in 1994, Mr. Dielwart spent 12 years with a major Calgary based oil and natural gas engineering consulting firm, as Senior Vice-President and a director, where he gained extensive technical knowledge of oil and natural gas properties in western Canada. Prior thereto, he began his career with a major oil and natural gas company in Calgary. Mr. Dielwart received a Bachelor of Science with Distinction (Civil Engineering) degree from the University of Calgary. Mr. Dielwart is a Past-Chairman of the Board of Governors for the Canadian Association of Petroleum Producers (CAPP).
Mr. Dyment has over 30 years of extensive experience in the oil and gas industry and is currently an independent businessman. He has held positions as President and Chief Executive Officer for Maxx Petroleum and President and Chief Executive Officer of Ranger Oil Limited. Mr. Dyment received a Chartered Accountant designation from the province of Ontario in 1972. Currently, he serves on the board of directors for Tesco Corporation, Transglobe Energy Corporation, Major Drilling Group International and WesternZargos Resources Ltd. Mr. Dyment has been a director of ARC since 2003.
Mr. Hearn is a retired Chairman, President and Chief Executive Officer of Imperial Oil Limited. He has over 40 years of experience in the oil and gas industry. During his time with Imperial Oil he held increasingly senior positions including President of Exxon Mobil Chemicals, Asia Pacific, and Vice-President of Human Resources for Exxon Mobil Corporation. Mr. Hearn holds a Bachelor of Science degree from the University of Manitoba. He currently serves on the board of directors for the Royal Bank of Canada and Viterra Inc. Mr. Hearn has been a director of ARC since 2011.
Mr. Houck is President and Chief Executive Officer of the Churchill Corporation, a diversified construction company. Previously, he was President and Chief Executive Officer of Western Oil Sands. The greater part of his career was spent with ChevronTexaco Inc., where he held a number of senior management and officer positions, including President, Worldwide Power and Gasification Inc, and Vice-President and General Manager, Alternate Energy Department. Earlier in his career, Mr. Houck held various positions of increasing responsibility in Texaco’s conventional oil and gas operations. Mr. Houck has a Bachelor of Engineering Science degree from Trinity University in San Antonio and a Masters in Business Administration degree from the University of Houston. Currently, he serves on the board of directors for the Churchill Corporation and WesternZagros Resources Ltd. Mr. Houck has been a director of ARC since 2008.
Mr. Kanovsky is an independent businessman. He has 40 years of experience within the finance, utilities and power, and oil and gas industries. In 1997, Mr. Kanovsky co-founded Bonavista Energy, a natural gas exploration company. Prior thereto, he co-founded Northstar Energy Corporation, an oil and gas exploration company and Powerlink Corporation (electrical cogeneration). Mr. Kanovsky holds a Bachelor of Science degree in Chemical Engineering from Queens University and a Masters in Business Administration degree from the Ivey School of Business. He currently serves on the board of directors for Bonavista Petroleum Inc., Devon Energy Corporation, TransAlta Inc., and Pure Technologies Inc. Mr. Kanovsky has been a director of ARC Resources since 1996.
Mr. Kvisle is the former President and Chief Executive Officer of TransCanada Corporation. He retired from TransCanada in 2010. Mr. Kvisle has over 35 years of experience and has worked in both the oil and gas, and utilities and power industries. Prior to joining TransCanada in 1999, Mr. Kvisle was the President of Fletcher Challenge Energy Canada Inc. Previously, he held engineering, finance and management positions with Dome Petroleum Limited. Mr. Kvisle holds a Bachelor of Science degree in Engineering from the University of Alberta and a Masters in Business Administration degree from the University of Calgary. He currently serves on the board of directors for the Bank of Montreal, Talisman Energy Inc., and Northern Blizzard resources Inc. Mr. Kvisle has been a director of ARC since 2009.
Ms. O’Neill is a Corporate Director and has extensive experience in accounting and financial services. She was previously an Executive Vice-President of Bank of Montreal Financial Group with accountability for a number of major business units. Prior to joining the Bank of Montreal Financial Group in 1994, she was a partner with PricewaterhouseCoopers. Ms. O’Neill is an FCA (Fellow of Institute of Chartered Accountants) and has an ICD.D designation from the Institute of Corporate Directors. She currently serves on the board of directors of Invesco Canada Funds, Finning International Inc., and the TMX Group Inc. Ms. O’Neill has been a director of ARC since 2009.
Mr. Pinder is the President of Goal Group, a private equity management firm located in Saskatoon, Saskatchewan. Previously he managed a family business as President of Pinder Drugs. He is an experienced corporate director and brings a varied business background to ARC. Mr. Pinder has a Bachelor of Arts degree from the University of Saskatchewan, a Bachelor of Law degree from the University of Manitoba and a Masters in Business Administration degree from Harvard University Graduate School of Business. He currently serves on the board of directors for Viterra and a number of private energy companies. Mr. Pinder has been a director of ARC since 2006.
ARC’s governance practices are routinely reviewed, appraised and modified to ensure that they are appropriate for a corporation of ARC’s size and stature. ARC’s approach to corporate governance meets the guidelines established by the Canadian Securities Administrators (CSA) as laid out in National Instrument 58-101.
ARC’s board comprises ten members, all of whom are “independent” directors, with the exception of the Chief Executive Officer. ARC uses the definition of independence as defined in NI 58-101, which states that a director is independent if the member has no direct or indirect material relationship with the company. A material relationship means a relationship which could, in the opinion of the board of directors, reasonably interfere with the exercise of a member’s independent judgment.
The Board has determined that none of the directors who serve on its committees has a material relationship with ARC that could reasonably be expected to interfere with the exercise of a director’s independent judgment. Both the Chairman of the Board and the Vice-Chairman are independent directors. They are responsible for managing the affairs of the Board and its committees, including ensuring the Board is organized properly, functions effectively and independently of management and meets its obligations and responsibilities.
The Board of Directors of ARC sees its primary role as the stewardship of the company and overseeing the management of the business and affairs of ARC, with the goal of achieving ARC’s fundamental objective of providing long-term superior returns to shareholders. The Board oversees the conduct of the business and management through a number of activities, including its review and approval of strategic, operating, capital and financial plans; succession planning for senior officers and the appointment and performance review of the Chief Executive Officer. The full mandate of the Board and its committees is available on our website at www.arcresources.com.
The Board has established an Audit Committee, a Reserves Committee, a Human Resources and Compensation Committee, a Policy and Board Governance Committee, a Health, Safety and Environmental Committee and a Risk Committee to assist it in the discharge of its duties and responsibilities. All of the committees are comprised of independent directors and report to the Board of Directors.
Members: Fred Dyment (Chair), Walter DeBoni, James Houck and Kathleen O’Neill.
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to: the integrity and completeness of the annual and quarterly financial statements and accompanying management discussion and analysis provided to shareholders and regulatory bodies; compliance with accounting and finance based legal and regulatory requirements; review of the independence and performance of the external auditor and internal accounting systems and procedures. The committee reviews the audit plans of the external auditors and meets with them at the time of each committee meeting, independently of management.
Members: James Houck (Chair), Fred Dyment, and Michael Kanovsky.
The Reserves Committee assists the Board in meeting their responsibilities to review the qualifications, experience, reserve evaluation approach and costs of the independent engineering firm that performs ARC’s reserve evaluation and to review the annual independent engineering report. The committee reviews and recommends for approval by the Board on an annual basis the statements of reserve data and other information specified in National Instrument 51-101.
There were four meetings of the committee in 2011.
Members: Herb Pinder (Chair), Kathleen O’Neill and Mac Van Wielingen.
The Human Resources and Compensation Committee assists the Board in: fulfilling its oversight responsibilities with respect to overall human resource policies and practices; the compensation program for ARC; and in consultation with the Board, the committee undertakes an annual performance review of the Chief Executive Officer and reviews the Chief Executive Officer’s appraisal of the other executive officers’ performance. The committee also reviews and recommends for approval to the Board the principle compensation plans of ARC, such as the long-term incentive program.
There were eight meetings of the committee in 2011.
Members: Hal Kvisle (Chair), James Houck and Herb Pinder
The Health, Safety and Environmental Committee assists the Board in its responsibility for oversight and due diligence by reviewing, reporting and making recommendations to the Board on the development and implementation of the policies, standards and policies of ARC with respect to the areas of health, safety and environment.
There were four meetings of the committee in 2011.
Members: Walter DeBoni (Chair), Herb Pinder, Michael Kanovsky and Mac Van Wielingen.
The Policy and Board Governance Committee assists the Board in: fulfilling its oversight responsibilities with respect to reviewing the effectiveness of the Board and its Committees; developing and reviewing ARC’s approach to board governance matters; and reviewing, developing and recommending to the Board for approval procedures designed to ensure that the Board can function independently of management. The committee reviews the need to recruit and recommend new members to fill Board vacancies based on a variety of criteria, and recommends to the Board the nominees for election at each annual meeting. The effectiveness of individual board members and the board is reviewed through a yearly self-assessment and inquiry questionnaire.
There were six meetings of the committee in 2011.
Members: Michael Kanovsky (Chair), Walter DeBoni, Fred Dyment and Mac Van Wielingen.
The risk committee assists the Board in fulfilling its oversight responsibilities with respect to identifying and reviewing the principal business, financial and other risks of the corporation. Included in the mandate is the review of guidelines, policies and reports from Management with respect to risk assessment, risk management and risk mitigation.
There were five meetings of the committee in 2011.
A commitment to health, safety and the environment is at the core of ARC’s values. We strive to be leaders and to meet high standards in business and operating activities. Certain aspects of the oil and gas industry are inherently hazardous and as a responsible operator we approach health, safety and environmental issues with the utmost regard for all of our stakeholders. At ARC, our objective is to meet or exceed regulations, be prepared for emergencies, monitor and assess our performance and integrate environmental management measures into our activities. We publish a Corporate Responsibility report every second year, which details our activities in health, safety and environmental management. Our 2010 report is available on our website at www.arcresources.com. The 2012 report is expected to be available on-line early in the third quarter.
ARC fosters a cooperative and positive culture of health and safety through effective policies and programs with appropriate education and training for employees and contractors engaged in ARC’s operations. Every individual who works for us understands our expectations and must comply with them. We use near miss and hazard identification to help determine potentially unsafe situations and implement mitigation measures to prevent accidents.
Regular facility inspections and contractor safety audits are performed on our operating facilities and lease sites to ensure the integrity of our systems and operations. ARC requires contractors and vendors to undergo an approval process prior to working for us to ensure that they meet our standards. It is crucial that our service providers are aligned with our value-based safety practices. ARC works together with contractors and vendors to improve our health and safety program and aims to work with the same service providers on multiple projects. Development of long-term working relationships results in an alignment of values and enables us to achieve a safer working environment.
ARC performs regular emergency response training exercises to prepare our personnel should an unlikely emergency situation arise. We hold annual workshops for our contractors and on-site consultants to review safe work practices and procedures, changes to regulatory requirements and modifications to ARC’s health and safety programs. Planning and preparation are key elements to ensuring operational excellence.
We understand our operations may have an effect on the environment and as such we are proactive and strategic in our approach to environmental management. ARC’s environmental policies are developed to address the many variables that come with operating a diverse set of assets. We strive to meet or exceed all regulatory environmental policies, and believe in empowering employees with the support and resources required to develop effective and innovative projects and programs to mitigate our environmental footprint.
As ARC continues to grow, so does our commitment to meaningful and effective environmental management. By implementing data management systems, environmental risk assessment, facility maintenance and production efficiency improvements we are able to manage our impact. We continuously seek new opportunities for further improvements as demonstrated by the construction of low emission facilities at Dawson and Ante Creek, and internal programs such as the Eco-Efficiency Program that focuses on reducing Green House Gas (GHG) emissions and emerging energy efficiency technologies.
In 2011, ARC was again named to the Carbon Disclosure Project (“CDP”) Leadership Index for its leadership in climate change disclosure. The CDP invites Canada’s 200 largest publicly traded companies to disclose information related to their carbon management strategies. It is the fourth consecutive year ARC was named to the Index, and notably is one of only four companies in our sector to be included. ARC is also active in the Canadian Association of Petroleum Producers (“CAPP”) Stewardship program. We use the information reported in both these programs to evaluate past performance and plan future initiatives.
ARC manages its liabilities through proactive abandonment and reclamation of facilities, wells and leases. ARC has a reclamation fund to which yearly contributions are made to fund future abandonment and reclamation activities. At present, the fund balance is $27 million. In addition, we allocate funding in our annual capital budget for annual abandonment and reclamation expenditures.
ARC’s environment, health and safety program and community involvement initiatives are explained in more detail on our website and in ARC’s Corporate Responsibility Report at www.arcresources.com/community.