ARC Resources Ltd T.ARX

RBC

[retiredcf]

May 4, 2022

ARC Resources Ltd.
Adding global exposure with Cheniere LNG deal

Sentiment: positive

Outperform

TSX: ARX; CAD 18.16

Price Target CAD 23.00

All values in CAD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise noted).

We positively view ARC adding long-term exposure to global JKM pricing via LNG deal with Cheniere, although not impacting our near-term estimates. The deal solidifies ARC's positioning as a global LNG supplier and has a potential to significantly boost cash flow once it commences (roughly 2027).

Long-term LNG export arrangement with Cheniere. ARC Resources has entered into a long-term agreement to sell 140,000 mmbtu/d of natural gas to Corpus Christi Stage III for a term of 15 years. Contract is set to commence with commercial operations of Train 7 of the Corpus Christi Stage III Project (expected 2027). ARC will receive an LNG-linked price based on the Japan Korea Marker (JKM) less fixed shipping cost and liquefaction fee. Based on a JKM price of $22.67/mmbtu (current 2023 strip) this would map to a total annual revenue figure of C$1.5 bn (before liquefaction, shipping costs, fees).

Q1/22 results. ARC will report Q1/22 results on May 5th, 2022 (AMC). Our AFFO estimate of $1.10/share is slightly below the Street consensus of $1.16/share. Our production estimate of 343 mboe/d is roughly in line with the Street's 342 mboe/d. ARC management will host a conference call to discuss Q1 results on May 6th at 9:00 am ET. Conference call | 1-888-664-6392| ID 89357067.