ARC Resources Ltd T.ARX

Ink Research

[retiredcf]

Morning Report: Contrarian alert: ARC Resources insiders buy the natural gas pullback 

April 12, 2023

With natural gas prices on the ropes, we return to the Energy sector to revisit ARC Resources (ARX), last featured here on May 17th. The stock is down 6.2% since that report, slightly lagging the S&P/TSX Capped Energy Index, down 5.7% over the same period. However, based on its sunny INK Edge outlook, the stock is in a group that has the potential to outperform in the months ahead. ARC is clearly betting that natural gas will help fuel profitability well into the future. In our March 27th report, we reported that ARC Resources had signed a memorandum of understanding with Pembina Pipeline (Sunny; PPL) and the Haisla Nation for a 20-year liquefaction services agreement that would make ARC the first customer of the proposed Cedar LNG Project.

ARC believes its northeast BC and Alberta Montney assets make it Canada's largest condensate producer, and Canada's third largest natural gas producer. ARC reported Q4 2022 production of 359,730 barrels of oil equivalent per day (including 60.7% natural gas and 23.0% condensate), up from 345,831 boe/d (incl. 62.3% natural gas and 21.5% condensate) in Q4 2021. Free funds flow came in at $0.96 per share, up from $0.65 in the comparable period. In 2023, ARC anticipates allocating between 50% and 100% of free funds flow to shareholders through a combination of share repurchases and its dividend. In November, ARC upped its quarterly dividend to $0.15 per share ($0.12 previously), now implying a prospective annual yield of 3.7%.

Meanwhile, insiders have spent more than $1 million buying shares in the public market over the past 90 days while ARC has bought back more than $1 billion worth of shares since we featured it here in May 2022.