Our view: ARC Resources hosted a well-attended investor day in Toronto, where discussions mainly revolved around its recent sanctioning of Attachie and the associated multi-year company outlook. Reflective of a top-tier asset base, the company in our view should be able to maintain existing operations by reinvesting roughly half of its cash flow, leaving plenty of cash for RoC initiatives and growth. ARX remains one of our top ideas and continues to be featured on the RBC Global Energy Best Ideas List.
Key points:
• Attachie – Investor Day Focus. A majority of the session covered Attachie Phases 1 and 2 (~40 mboe/d phases; see map Exhibit 1), with the prospect over time having potential to become as large as Kakwa (~180 mboe/d) in five phases. Phase 2 of Attachie is expected to feature capital costs (~$740mm) similar to Phase 1 and could be onstream in 2028 (potentially sooner based on Phase 1 buildout). Attachie boasts >300 net Montney sections with well performance that replicates Kakwa, though shallower in depth (TVD approx. 2,000 metres; Kakwa 2,600– 3,500 metres) and higher-pressure (12–16 kPa/metre; Kakwa 10–14 kPa/ metre). Additionally, Attachie’s well spacing of 300m (Kakwa: 175m) allows the company to increase tonnage intensity to better access the reservoir, reflective of lower permeability.
• Outside of Attachie – Largely Drill to Fill. ARX highlighted its Kakwa project (15 years of inventory), which will largely remain in maintenance mode at 180 mboe/d. At Greater Dawson, ARX highlighted the asset’s 20 years of inventory (current pace) that is 67% undeveloped and now producing 300 mmcf/d of natural gas with payouts of approximately one year. The company noted that its asset at Sunrise (20 years of inventory; 63% undeveloped) is fully electrified and connected to the Coastal Gaslink pipeline for stacked layer development. The Septimus and Sundown assets are ready to be sanctioned (2025+) and are viewed as an additional growth area for the company capable of producing 1 bcf/d for the next 15 years. ARX plans to produce >400 mboe/d by 2028 organically, with assets capable of sustaining 500 mboe/d of production beyond that timeframe.
• Five-Year Plan – FCF Generation. Supported by its base Montney assets combined with the development of Attachie Phases 1 and 2, the company’s newly released five-year plan guides 2028 production toward ~425 mboe/d with the onset of Attachie Phase 2, driving an associated +14% PPS/CFPS CAGR over the five-year period. ARX also anticipates generating 80% of its market cap ($8bn) from FCF through 2028; roughly 100% of FCF is positioned to be returned to shareholders via buybacks and dividends. Regular common dividend increases are also forecast, perhaps to the tune of roughly +10% per year.