Fourth Quarter and Year End 2015 Operations Review
- ARC achieved fourth quarter 2015 production of 119,243 boe per day, which was within the fourth quarter guidance range of 118,000 to 122,000 boe per day. Fourth quarter 2015 natural gas production of 469 MMcf per day was nine per cent higher compared to the fourth quarter of 2014, and is the result of the first full quarter of production from new wells flowing through the Sunrise gas plant, which was brought on-stream mid-way through the third quarter of 2015. Crude oil and liquids production of 41,053 barrels per day was down 11 per cent compared to the fourth quarter of 2014 due to significantly lower capital activity in response to declining crude oil prices, and was partially offset by new production brought on to coincide with the completion of the oil battery expansion at Tower in the fourth quarter of 2015.
- Full-year 2015 production of 114,167 boe per day was two per cent higher than full- year 2014 production of 112,387 boe per day, with natural gas production increasing 10 per cent to 445 MMcf per day and crude oil and liquids production decreasing 11 per cent to 40,011 barrels per day. ARC's 2015 annual average production was within the guidance range of 113,000 to 115,000 boe per day, a significant achievement given the divestment of approximately 4,900 boe per day of non-core production volumes throughout the year, which resulted in an annual volume impact of approximately 3,000 boe per day of production.
- Fourth quarter funds from operations were $200.7 million ($0.58 per share), up 15 per cent from the third quarter of 2015 as a result of higher production volumes, partially offset by lower realized quarter-over-quarter crude oil and natural gas prices. Fourth quarter funds from operations were down 20 per cent relative to the fourth quarter of 2014 and full-year 2015 funds from operations of $773.4 million ($2.27 per share) were down 31 per cent relative to full-year 2014. Fourth quarter and full-year 2015 capital expenditures, before land and net property acquisitions and dispositions, totalled $149.5 million and $541.6 million, respectively, and were focused primarily on ARC's Montney assets in northeast British Columbia. ARC drilled five gross operated natural gas wells in the fourth quarter of 2015 and 60 gross operated wells for the full-year 2015 (33 oil wells, 21 natural gas wells, five liquids-rich wells, and one service well). Leveraging cost savings and capital efficiencies realized throughout 2015, ARC accelerated certain key projects in the fourth quarter, further strengthening ARC's position as it entered into the first quarter of 2016.
- ARC continues to actively manage its cost structure by identifying opportunities to reduce capital, general and administrative ("G&A"), and operating costs where appropriate. Asset sales and reduced capital activity throughout the year resulted in the streamlining of ARC's operations and a reduction in staff count. In response to the lower commodity price environment, bonuses were significantly reduced in 2015, and base salaries were frozen for the second year in a row. ARC's decade-low fourth quarter and full-year 2015 operating costs of $6.21 per boe and $7.15 per boe, were 27 per cent and 19 per cent lower than comparable periods in 2014, respectively. Lower operating costs were attributed to the addition of new Montney production at lower relative costs to operate and certain realized cost savings. ARC has reduced operating costs on a per boe basis by 30 per cent since 2009.
- In response to the continued deterioration of commodity prices in late 2015 and early 2016, ARC is reducing its 2016 capital program to $390 million, down from the $550 million previously announced. The reduced budget will remain focused on balance sheet preservation and long-term value creation through continued development of ARC's low-cost, high-value northeast British Columbia Montney assets. The budget will allow ARC to hold northeast British Columbia facilities at capacity, progress the key infrastructure project at Dawson Phase III, and continue to delineate ARC's highly prospective Attachie asset. Capital allocation to ARC’s assets in Ante Creek, Pembina and Southeast Saskatchewan has been deferred while ARC concentrates investment in larger-scale projects that deliver superior rates of return in the current commodity price environment; ARC also awaits final details on the Modernized Royalty Framework from the Alberta Government for its Alberta assets.
- Full-year 2016 annual average production is expected to be in the range of 116,000 to 120,000 boe per day.
(Twelve Months ended December 31, 2015)
|Crude Oil (bbl/d)||32,762||36,525|
|Natural gas (mmcf/d)||444.9||406.1|
|Natural Gas Liquids (bbl/d)||3,819||4,518|
|Total Production (boe/d)||114,167||112,387|
The following table summarizes the companies production by core area for twelve months ended December 31,2015:
|Core Area (1)||Total (boe/d)||Oil (bbl/d)||Condensate (bbl/d)||Gas (mmcf/d)||NGL (bbl/d)|
|South Central AB (2)||6,166||3,996||33||11.6||196|
|Southeast SK & MB (3)||9,952||9,636||51||1.1||88|
(1) Provincial and directional references: AB is Alberta, BC is British Columbia, SK is Saskatchewan, MB is Manitoba, NE is northeast, NW is northwest, SE is southeast and SW is southwest.
(2) During the second quarters of 2015 and 2014, ARC disposed of certain non-core assets in this district. Each disposition included assets that had been producing approximately 2,400 boe per day prior to disposal. An additional 500 boe per day were disposed from this district toward the end of the third quarter of 2015.
(3) In December 2015, ARC disposed of certain non-core assets in this district that had been producing approximately 1,300 boe per day prior to disposal.