Canaccord Update: target price $29: BuyField notes: Attachie site tour takeaways 2,817 2,126.7 14,613.6 0.68 2.8 597 1,477.9 16,140.4 22.46 2025E 387,431.2 59.4 36,947 (0.1) Aug-24 Sep-24 Oct-24 Earlier this week, we attended ARX's investor update and Attachie site tour hosted by senior management, well attended by both sell and buy sides. With Attachie Phase I ~90% complete and on-schedule to come online before year-end, the primary focus of the update and tour was understandably around the project. Notably, we anticipate ARX's FCF to approximately double in 2025 from 2024 levels. We believe this will open the door to (1) an increased base dividend (targeting a ~15% payout ratio), (2) continued share buybacks, and (3) proceeding with Attachie Phase II. Overall, the conscious efforts to develop Phase I with phased growth in mind was readily apparent. This follows the company's business model and demonstrates the growth potential of a largely untapped ~300-section landbase at Attachie. We reiterate our BUY rating and $29.00 target on ARX, which maps to a 2025E EV/DACF multiple of 4.9. ARX currently trades at 3.9x 2025E EV/DACF, compared to the peer group average of 3.4x. Key takeaways: Attachie Phase I completion to deliver FCF wedge in 2025. With the ~$750M Phase I project nearly complete and still on-track to come online before year-end, the company will begin to see benefits of the significant investment in the project next year. With the majority of infrastructure and D&C capital having been spent, ARX will see a noted increase in FCF next year alongside some gained efficiencies as it moves to Phase II. On our estimates, we forecast ARX's 2025 FCF to nearly double 2024 levels. Drilling at Attachie is now 90% complete for the six initial pads with the final seventh pad to be drilled by the end of October. 70% of wells are now frac'd with the last pad is to be completed mid-Q4/24. Phase II on deck. Staying true to its development model, ARX's Attachie Phase II development is next in line. We anticipate the company moving forward with Phase II in 2025 with the goal of adding another ~40,000 boe/d production wedge in 2028. Having constructed Phase I with Phase II development in mind, we believe ARX will have few issues bringing Phase II online in a similar fashion (being on-budget and on-schedule). Notably, the company has completed construction of a pipeline bridge across the Halfway River (Figure 1). While this component is a necessity for tying-in liquids production from Phase I to a Pembina sales line (Figure 2), it will interconnect the planned Phase II project so that natural gas will be tied-in to sales gas lines west of the Halfway River. Drilling efficiencies. ARX has undertaken a number of initiatives to improve drilling efficiencies on Attachie, including reducing the hole size from 200 mm to 171 mm which reduced drill time by two days. Additionally, the company is optimizing drill bits and directional tools through real time learning obtained from the two high-spec AC triples. ARX has also learned from its other assets and successfully implemented a produced water-based drilling fluid system. These efficiencies have resulted in 50% improvement in metres drilled with a 15% cost reduction compared to project assumptions. Completion practices also lowering costs. ARX implemented redesigned frac isolation equipment to increase pumping rates to 18 m3/min from 12 m3/min in 2019. The company has increased storage and offloading capacity to increase available frac sand to 4,500 tonnes per day and has also moved sand ~200 km closer to site resulting in 4.5 hours of less travel per round trip. Additionally, ARX invested in 150,000 m3 of produced water storage and recycling infrastructure (Figure 5) to lower freshwater dependence with >80% of water used in frac operations being produced water