ARC Resources Ltd T.ARX

Alternate Symbol(s): AETUF

Energy Oil & Gas E&P

ARC Resources Ltd. is a Canadian energy company. It is focused on the exploration, development, and production of unconventional natural gas, condensate, natural gas liquids (NGLs), and crude oil in western Canada. Its operations are focused in the Montney region in Alberta and northeast British Columbia. Its operations in Alberta are located near Grande Prairie and the region includes Kakwa and Ante Creek. Kakwa is a condensate-rich and high-deliverability natural gas play with top-tier development opportunities. Its operations in northeast British Columbia are located near Dawson Creek and the region includes Greater Dawson, Sunrise, Attachie, and Septimus and Sundown. The Greater Dawson operating area includes Dawson Phases I, II, III and IV and Parkland. The Attachie is a condensate-rich, natural gas play primed for large-scale development. Sunrise is a dry natural gas play with a low-cost structure, well deliverability and direct connectivity to liquefied natural gas Canada.

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ARC Resources Ltd

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Post by retiredcfon Feb 12, 2024 9:06am

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Post# 35875192

RBC

Their upside scenario target is $32.00. GLTA

February 9, 2024

Outperform

TSX: ARX; CAD 20.49

Price Target CAD 26.00

ARC Resources Ltd. Q4/23: On the Power Play

Our view: ARX posted strong quarterly results which exceeded Street expectations, alongside intact guidance and a robust reserve report. The Attachie project is progressing on schedule and budget, with the company generating $155 million in FCF during the quarter which was directed toward buybacks and dividends. ARX remains one of our top picks and continues to be featured on the RBC Global Energy Best Ideas List.

Key points:

• Q4 Results - ahead of street. ARX's results featured production volumes of 365,248 boe/d (RBCe 360,640 boe/d; Street 357,100 boe/d). Capex was roughly in line with expectations, coming at $545mm (RBCe $548mm; Street $560mm). The company generated $699 million of cash flow ($1.16 per share (f.d) vs. RBCe/Street: $1.17/$1.10) in the quarter in tandem with $155 million in FCF.

2024 guidance - intact. ARX reiterated its 2024 capital budget of $1.8 billion (mid-point) driving FY24 volumes of 355 mboe/d (mid-point). The company also reiterated its 2025 production guidance of 388 mboe/d (mid-point) on capital of $1.7bn. Cumulative capex in 24/25 equates to roughly 63% of projected AFFO on our RBC deck with the remaining earmarked for shareholder returns.
Return of capital – free cash initiatives. ARX distributed $284mm via dividends ($102mm) and share buybacks (8.4mm shares for $182mm) during the quarter. ARX returned 96% of its FCF (net of divestitures) to shareholders in 2023.
Operations - in great shape. The Attachie project progressing as planned and commissioning volumes are expected in late 2024 with full ramp up to full capacity (40,000 boe/d) in early 2025. Sunrise has been direct connected to Coastal Gaslink supplying Shell for Phase 1 of LNG Canada in 2025. For more details on the Montney, please refer to our recent report Canadian Natural Gas: Going Global - Imagining the Montney in 2030.
PDP reserves up 13%/share. 2P reserves increased by 9% (+13%/share) and PDP up 8% (+13%/share) as positive technical revisions weighed in and buyback programs improved YoY per-share metrics. A contingent resource study was also completed, pointing to an incremental 15 Tcf + 920 mmbbl of resource above and beyond 2P reserves. PDP reserves were added at an attractive cost (incl FDC) of roughly $10/boe in 2023; reserve details are detailed in Exhibit 3, with additional color detailed within our RBC Elements-driven report.