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 Nov 08, 2024 8:47am

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Post# 36302787

RBC 2 (Raises Target)

November 7, 2024

ARC Resources Ltd.
Q3/24 - Taste the Difference Quality Makes

Outperform

TSX: ARX; CAD 23.08

Price Target CAD 30.00 ↑ 28.00

ARX reported quarterly results which were ahead of Street expectations with Attachie now on-stream and producing at roughly half of nameplate (ramping up). The 2025 budget is largely as anticipated and features a step-change increase in FCF as Attachie capex tapers off; our estimates point to FCF of roughly $1.5 billion in 2025 with the majority allocated to dividends and buybacks. ARX remains one of our top picks and continues to be featured on the RBC Global Energy Best Ideas List.

Key points:

• Volumes - ahead of street. ARX's results featured production volumes of 326,768 boe/d (RBCe 320,007 boe/d; Street 319,300 boe/d). Capex was below expectations coming at $459 mm (RBCe $500mm; Street $500mm).

Cash flow - ahead of street. ARX generated $592 million of cash flow ($0.99 per share (f.d) vs. RBCe/Street: $0.88/$0.88) in the quarter while generating $134 million in FCF.
Dividend - increased by 12%. The company increased its base dividend by 12% to $0.19/sh (from $0.17/sh). ARX distributed $220mm including $80mm proceeds from dispositions via dividends ($101mm) and share buybacks (5mm shares for $119mm during the quarter). YTD, ARX has returned 100%+ of its FCF to shareholders (inclusive of proceeds from divestitures).
2025 budget as expected - FCF focus. ARX unveiled its 2025 capital budget to $1.65 billion (mid-point) driving FY25 volumes of 388 mboe/d (mid-point) and 39% liquids mix, which compares to their prior outlook of 388,000 boe/d (40% liquids) and $1.7bn in capex.. Broadly, the budget is focused on maintaining Montney volumes which equates to YoY growth of roughly 10%, when incorporating Attachie. ARX expects to generate $1.5bn (midpoint) in FCF while reinvesting 50%. ARX anticipates drilling 130 wells (26 in Attachie), completing 154 wells (36 in Attachie) and tying in 166 wells (44 in Attachie) in 2025.
Operations - in good shape. Operations remain in good shape with the Attachie project ramping as planned, Sunrise largely restored, and Kakwa volumes mapping to roughly 180,000 boe/d during the quarter. As expected ARC's 2024 guide remains intact, with volumes positioned to come in at the low end of the range (roughly 350,000 boe/d).
Updating Estimates - Target to $30/sh. Our 2024 estimates increase to the lower end of ARX's guidance range (350 mboe/d; +2%) driving our CFPS estimate by 5% to $3.86/sh (from $3.68/sh). Our 2025/26 CFPS estimates are updated (+3%/+2%), largely related to adjusted commodity price realizations and margin assumptions. We increase our target to $30/sh (from $28/sh) on higher estimates.