First Quarter 2016 Operations Review
- ARC achieved record first quarter 2016 production of 124,224 boe per day, four per cent higher than the fourth quarter of 2015 and three per cent higher than the first quarter of 2015. First quarter 2016 natural gas production of 490 MMcf per day was seven per cent higher compared to the first quarter of 2015, which is largely the result of production from new wells flowing through the Sunrise gas plant, which came on-stream mid-way through the third quarter of 2015. Crude oil and liquids production of 42,613 barrels per day was down three per cent compared to the first quarter of 2015, due to the sale of approximately 1,800 boe per day during the last half of 2015 and lower capital activity in response to depressed crude oil prices. The lower crude oil production was partially offset by the first full-quarter of production from new wells flowing through the expanded Tower oil battery, which was commissioned mid-way through the fourth quarter of 2015.
- ARC expects production to decline through the year with full-year average production expected to be within the guided production range of 116,000 to 120,000 boe per day, resulting in modest year-over-year growth.
- First quarter 2016 funds from operations were $150.1 million ($0.43 per share), down 25 per cent from the fourth quarter of 2015 and down 22 per cent from the first quarter of 2015 as a result of lower realized crude oil and natural gas prices, partially offset by higher natural gas production volumes. The decline in first quarter 2016 crude oil and natural gas prices was partially offset by realized gains on crude oil and natural gas hedging contracts of $68.9 million. First quarter 2016 capital expenditures, before land and net property acquisitions and dispositions, totalled $59.1 million and were focused primarily on ARC's Montney assets in northeast British Columbia. ARC drilled eight operated wells in the first quarter of 2016 (five natural gas wells, two liquids-rich wells, and one service well). Capital spending in the quarter was directed at keeping ARC's northeast British Columbia facilities at capacity, progressing construction of the Dawson Phase III gas processing and liquids-handling facility, and continuing to delineate ARC's large land base at Attachie.
- ARC executed a strong optimization program during the first quarter of 2016, offsetting base declines and providing additional cash flow. The continued focus on optimization across ARC's asset base has proven to be highly effective and profitable, as projects provide favourable economics and meaningful production additions with relatively small capital investment. Optimization of operations has helped ARC mitigate downtime, reduce declines, and reduce operating costs across our operating districts.
- ARC's first quarter 2016 operating costs of $6.10 per boe were 16 per cent lower than the first quarter of 2015. Lower operating costs were attributed to the addition of new Montney production at lower relative costs to operate, lower power prices throughout the period, and diligent cost control efforts. ARC has reduced operating costs on a per boe basis by 40 per cent since 2009.
- ARC continues to enhance our low-cost, high-value Montney production base, which today represents nearly 80 per cent of total corporate production. The transition is resulting in greater operating and capital efficiencies, which is further supported by the operation of our own facilities. The success of ARC's ongoing transition is demonstrated by the strong performance of our Montney wells as we continue to optimize completions designs, apply new technologies and work closely with our service providers to reduce costs. We are leveraging these learnings and applying them across our portfolio. Today, ARC has a land position of approximately 1,200 net Montney sections.
(Three Months ended March 31, 2016)
|Crude Oil (bbl/d)||34,852||35,851|
|Natural gas (mmcf/d)||489.7||459.6|
|Natural Gas Liquids (bbl/d)||4,319||4,314|
|Total Production (boe/d)||124,224||120,354|
The following table summarizes the companies production by core area for three months ended March 31, 2016:
|Core Area (1)||Total (boe/d)||Oil (bbl/d)||Condensate (bbl/d)||Gas (mmcf/d)||NGL (bbl/d)|
|South Central AB (2)||4,776||3,583||20||6.0||165|
|Southeast SK & MB (3)||8,091||7,805||55||1.0||71|
(1) Provincial references: "AB" is Alberta, "BC" is British Columbia, "SK" is Saskatchewan, "MB" is Manitoba.
(2) During the second quarter of 2015, ARC disposed of certain non-core assets in this district. These assets that had been producing approximately 2,400 boe per day prior to disposal. An additional 500 boe per day of non-core assets were disposed from this district toward the end of the third quarter of 2015.
(3) During the fourth quarter of 2015, ARC disposed of certain non-core assets in this district that had been producing approximately 1,300 boe per day prior to disposal.