They must think i am
special, or maybe a bit of a pain, you decide....
ARC has released its second quarter 2021 financial and operational results. Attached is a copy of our news release, financial statements and MD&A, and risk management contracts positions as of June 30, 2021.
A video update is available on our website:
https://www.arcresources.com/investors/investor-reporting/quarterly-results
Highlights from the quarter
- Production & Free Funds Flow
- Production of 335.7 MBOE/d ahead of Q2 guidance and in line with consensus
- Free funds flow of $250 MM ($0.35/sh) in the quarter
- FFO of $543 MM ($0.75/sh)
- Capital spending $293 MM
- YTD Free funds flow $550 MM (pro-forma, assuming full contribution in Q1 from VII)
- Annualized equates to 16% of current market cap and 12% of EV
- Net loss of $123 MM or $0.17/sh
- Included $453 MM of unrealized losses from risk management
- Balance Sheet & Asset Sales
- Reduced net debt by $271 MM in the quarter; 11% since closing VII (excluding lease obligations)
- Disposed Pembina asset for net $78 mm (Jan 1. 2021 effective date)
- Reduced corporate ARO by 35% ($232 MM) and operating costs by ~$0.25/BOE
- Difference between the $78 MM and the >$100 MM price in industry publications is effective vs close date
- Net debt at quarter end was $2.1 bn ($3.0 bn including lease obligations)
- 1.0x annualized FFO (Q2 annualized, excluding lease obligations)
- Kakwa generated >$0.5 bn of free funds flow at the operating level year to date
- Annualized equates to funding the acquisition in 4.2 years
- Dividend increased 10%
- Sustainable at very low commodity prices
- Synergies are approximately half captured; on track to achieve $160 MM target by year-end
- Purchasing power benefits is offsetting cost inflation
- Realizing synergies from optimizing transportation and frac capacity
- Headcount reductions (mainly executives)
- Operational momentum into H2
- Turnarounds and maintenance completed in the quarter slightly ahead of schedule
- Sunrise facility expansion commissioned adding 40 mmcf/d of capacity
- Guidance unchanged other than incorporating Pembina
- Capital spending guidance unchanged ($950 MM - $1,000 MM)
- H2 production guidance unchanged at ~340 MBOE/d
- Operational momentum from core assets offsets Pembina disposition
- Guidance revised to incorporate Pembina disposition
- Full year oil production guidance lowered to reflect Pembina disposition
- Operating costs lowered $0.20/BOE to reflect Pembina disposition
- Guidance for condensate, NGLs, and natural gas unchanged
- Production guidance for H2/21 is unchanged at 340 MBOE/d
Outlook & Capital Allocation
Strong commodity prices have allowed ARC to rapidly de-risk our business by remaining disciplined with our capital, reducing debt, and moderating the decline rate. As a result, we are on pace to generate well through $1 bn of free cash flow this year (based on the forward curve) and anticipate being at the bottom end of our debt target by Q3.
Looking ahead, we will remain focused on delivering superior returns but flexible in our approach. This is best achieved by continuing to spend maintenance capital on our core assets and likely investing free cash flow in Attachie and potentially opportunistic share repurchases. This is central to growing free cash flow per share at a competitive return on capital under numerous commodity price scenarios.
IMHO