A Prime Trust Asset
Northern Alberta and B.C. is ARC's largest core area and represents approximately one-third of ARC's production. Northern Alberta and B.C. is a prime Trust asset due to the relatively low-risk drilling targets, low operating costs, high netbacks and a diverse base of operated and non-operated assets. The area became a major growth center in 2000 with the acquisition of producing assets at Ante Creek. Through the Star acquisition in 2003, ARC gained the new area of Dawson that is a relatively immature, tight Montney natural gas development which was brought on stream by Star in 2001. Northern Alberta and British Columbia was an active area in 2005 for ARC. Average daily production for the area increased slightly to 18,897 boe/d in 2006 compared to 18,286 boe/d in 2005. ARC's 2007 capital budget for Northern Alberta and British Columbia is $154 million, the largest budget of all of ARC's core areas.

ARC has developed significant expertise in developing tight low permeability oil and gas formations through its operational activities in Ante Creek and Dawson. To successfully produce from these formations, large hydraulic fracture stimulations are required along with sophisticated completion techniques. The higher capital costs required for these types of resource plays generally require a higher commodity price than more conventional projects but deliver a stable long-term return. After an initial period of steep decline, these wells will produce at stable rates and will have a long-life reserve life index (RLI).

Recent Acquisition
Jan 8/2008: ARC Energy Trust announces two new gas discoveries and a large land acquisition in the Dawson area. To download a pdf version please click here. 

Since the Ante Creek property acquisition in 2000, Northern Alberta and British Columbia has been a key focus area for ARC. With $59 million spent at Dawson alone, the Northern Alberta and British Columbia area accounted for 46 per cent of ARC's capital development expenditures in 2006. ARC drilled four horizontal wells at Dawson to follow-up on a successful 2005 horizontal well that tested new completion technology. The horizontal wells are expected to deliver four times the natural gas for three times the cost of a vertical well, thereby improving the drilling economics. To date, the initial horizontal well continues to exceed expectations. Three of the four 2006 horizontal wells have been tied-in but unfortunately production is restricted due to facility constraints; however, we believe that the current program will meet or exceed our expectations. ARC also drilled and tied-in six vertical wells in Dawson, which when combined with the success of the horizontal program, enabled ARC to increase production by 20 per cent at Dawson to 24 mmcf per day in the fourth quarter. With an additional four horizontal wells and four vertical wells planned for 2007, ARC is expecting to increase production to 40 mmcf per day in the fourth quarter of 2007. This increase does have risk associated with it as processing the additional volumes is dependent upon the construction and completion of a new gas plant by a third party.

Another property which saw substantial activity in 2006 was Ante Creek where $35 million was spent to drill 14 wells and construct a 16 km gas gathering system. The gathering system will tie-in production from the north half of the property to an ARC operated gas plant that was acquired as part of a small acquisition in early 2006. The completion of the gathering system in early 2007 will be critical to ARC's efforts to increase production in this core area as the existing facility is full and there are still eight wells from the 2006 drilling program that are awaiting tie-in. ARC has plans to drill up to ten additional wells at Ante Creek in 2007 and complete the facility optimization.

• Information updated to year end 2006

Superintendent: Dave Harris
9909 - 102 Street, Grande Prairie, Alberta T8V 2V4
Tel: (780) 402-3300-----Fax: (780) 402-3341