ARC Resources Ltd. Reports Record Year-end 2021 Results and Reserves

CALGARY, AB, Feb. 9, 2022 /CNW/ - (TSX: ARX) ARC Resources Ltd. ("ARC" or the "Company") today reported its fourth quarter and year-end 2021 financial and operational results as well as its year-end 2021 reserves.

2021 was a transformative year for ARC, marked by the acquisition of Seven Generations Energy Ltd. ("Seven Generations"), which closed on April 6, 2021 (the "Business Combination"). Coupled with its solid financial position, ARC delivered a record-low operating expense and the highest free funds flow per share in its 25-year history, illustrating the underlying profitability and quality of ARC's business.

HIGHLIGHTS

Fourth Quarter 2021 Results

• ARC recognized net income of $678 million ($0.96 per share), compared to net income of $121 million ($0.34 per share) during the fourth quarter of 2020.
• ARC delivered average production of 345,831 boe(1)(2) per day (62 per cent natural gas and 38 per cent crude oil and liquids) to generate cash flow from operating activities of $669 million and funds from operations of $834 million(3) ($1.19 per share)(4).
• ARC's market diversification activities and enhanced scale continued to drive strong price realizations. ARC's average realized natural gas price of $6.45 per Mcf(4) was $1.51 per Mcf greater than the average AECO 7A Monthly Index price, while ARC's average realized condensate price was $96.90 per barrel(4).
• Cash flow used in investing activities was $269 million. ARC invested $375 million into capital expenditures(5), which were allocated across the Company's Alberta and northeast British Columbia ("BC") assets, and included accelerating approximately $50 million of its 2022 capital expenditure budget for Attachie West Phase I to begin securing long-lead items. Accordingly, ARC's 2022 capital expenditure guidance has been lowered to a range of $1.15 to $1.25 billion.
• ARC generated free funds flow of $459 million(5) ($0.65 per share)(6), returning $289 million ($0.41 per share), or 63 per cent to shareholders through a combination of dividends and share repurchases. The remaining free funds flow generated in the period was used to strengthen ARC's balance sheet, with ARC exiting 2021 with long-term debt of $1.7 billion and net debt of $1.8 billion(3) or 0.8 times funds from operations(3).

Year-end 2021 Results

• ARC recognized net income of $787 million ($1.25 per share) in 2021, compared to a net loss of $547 million ($1.55 per share) in 2020. Cash flow from operating activities was $2.0 billion and funds from operations were $2.4 billion ($3.85 per share).
• ARC maintained its industry-leading safety performance, surpassing eight years without an employee lost-time incident, and delivered an operating expense of $3.86 per boe(4), the lowest annual operating expense per boe in the Company's 25-year history, reflecting the low cost structure associated with owning and operating its infrastructure.
• ARC executed its 2021 capital program safely and efficiently. Cash flow used in investing activities totalled $808 million, with capital expenditures of $1,062 million delivering record annual average production of 302,003 boe per day (63 per cent natural gas and 37 per cent crude oil and liquids).
• ARC successfully integrated Seven Generations and has now captured approximately $190 million in synergies, significantly surpassing initial expectations of $110 million in annual savings due to synergies of the Business Combination.
• ARC advanced its marketing strategy by entering into its first long-term gas supply agreement to deliver approximately 150 million cubic feet ("MMcf") per day of natural gas from ARC's Sunrise facility to an LNG Canada participant. The agreement, as previously announced in November 2021, will commence with the start-up of LNG Canada.
• Free funds flow per share was the highest in ARC's 25-year history. ARC generated $1.4 billion ($2.16 per share) of free funds flow, which included nine months of contribution from the Kakwa asset acquired through the Business Combination. ARC delivered an 18 per cent return on average capital employed(7) ("ROACE").
• ARC declared dividends of $181 million or $0.286 per share(4) in 2021, and since September 2021, has repurchased 33.6 million of its common shares outstanding at a weighted average price of $11.34 per share for total consideration of $381 million.

Year-end 2021 Reserves(1)(8)

• ARC nearly doubled its reserves volumes and tripled its reserves value through high-value liquids additions from the Business Combination and strong organic additions across ARC's portfolio. Year-end 2021 proved producing ("PDP") reserves increased by 88 per cent to 503 million boe ("MMboe"), total proved ("TP") reserves increased by 96 per cent to 1,185 MMboe, and proved plus probable ("2P") reserves increased by 90 per cent to 1,761 MMboe at year-end 2021.
• ARC's before-tax net present value ("NPV") of 2P reserves, discounted at 10 per cent, substantially increased to $15.9 billion or approximately $23.00 per share(9) at December 31, 2021. The year-over-year increase was driven by additions from the Business Combination, positive organic technical revisions, and stronger average commodity prices. ARC's 2P NPV is based on the development of approximately 15 per cent of the Company's total internal inventory estimate; Attachie comprises less than four per cent of total 2P locations.

ARC's audited consolidated financial statements and notes (the "financial statements") and Management's Discussion and Analysis ("MD&A") as at and for the three months and year ended December 31, 2021, are available on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com. The disclosure under the section "Non-GAAP and Other Financial Measures" in ARC's MD&A as at and for the three months and year ended December 31, 2021 (the "2021 Annual MD&A") is incorporated by reference into this news release.

FINANCIAL AND OPERATIONAL RESULTS

OUTLOOK

• Building on the momentum generated in 2021, ARC's near-term priority is to provide investors with an attractive total return by balancing profitable reinvestment in the Company's assets with meaningful returns of capital delivered to shareholders. In 2022, ARC plans to sustain its current levels of production, increase productive capacity at Sunrise, and proceed with development at Attachie once the BC regulatory environment becomes more certain. While commodity prices are robust, ARC will remain disciplined and does not plan to accelerate capital investments in growth projects beyond what is planned at Sunrise and Attachie. Instead, ARC plans to allocate surplus funds from operations to debt reduction and returns to shareholders.
• Between 50 and 80 per cent of free funds flow generated in 2022 will be delivered to shareholders through the base dividend and share repurchases, with the balance directed to further strengthening ARC's financial position.
• A growing dividend remains ARC's primary long-term mechanism of returning capital to shareholders. The dividend is designed to grow with the underlying profitability of the business and be sustainable during extended periods of low commodity prices.
• Share repurchases will continue to be executed, as the intrinsic value of ARC's shares under lower commodity price assumptions exceeds the current market trading price.
• ARC remains fully prepared to execute its Attachie West Phase I development project once the BC regulatory environment supports such investment.
• At this time, ARC believes anticipated returns generated by mergers and acquisitions do not compete with those generated by investing in ARC's common shares or developing its assets organically.

2022 Guidance

• ARC is lowering its 2022 capital expenditure guidance by $50 million to a revised range of $1.15 to $1.25 billion. This reduction reflects the portion of the original 2022 capital expenditure budget for Attachie West Phase I that was accelerated into 2021. Production and all other previously disclosed guidance for 2022 remain unchanged. ARC continues to expect that it will offset inflationary pressures in 2022 through continued efficiency improvement initiatives.

• For a summary of ARC's full-year 2021 actuals for production, expenses, and capital expenditures, as compared to guidance, see "Annual Guidance" in the 2021 Annual MD&A.

OPERATIONAL RESULTS

Cash Flow Used in Investing Activities and Capital Expenditures

• Cash flow used in investing activities was $269 million during the fourth quarter of 2021. Of this, ARC invested $375 million into capital expenditures. In addition to drilling 47 wells and completing 29 wells, ARC accelerated approximately $50 million of the 2022 capital expenditure budget for Attachie West Phase I into the fourth quarter of 2021 to begin securing long-lead items.
• ARC's cash flow used in investing activities totalled $808 million in 2021, of which $1,062 million was invested into capital expenditures. During the year, ARC drilled 141 wells, completed 132 wells, and brought on-stream two small infrastructure optimization and expansion projects at Sunrise and Parkland. The following table details ARC's 2021 capital activity by area.

• By leveraging the Company's expertise in the Montney and the increased scale achieved through the Business Combination, ARC captured drilling and completions efficiency improvements of approximately $60 million in 2021, exceeding initial expectations of $25 million.
• At Kakwa, ARC expects that capital expenditures required to sustain production could be reduced by approximately 10 per cent over time, as the Company continues to evaluate the results from implementing wider well spacing and modifications to its well and pad design. Initial results indicate improved resource deliverability and therefore greater overall profitability of the Kakwa asset.

Production and Operating Expense

Production

• ARC's production averaged 345,831 boe per day during the fourth quarter of 2021 (62 per cent natural gas and 38 per cent crude oil and liquids), decreasing two per cent from the third quarter of 2021 due to unplanned third-party infrastructure outages in the period.
• Full-year 2021 production averaged a record 302,003 boe per day (63 per cent natural gas and 37 per cent crude oil and liquids). Strong operational performance and excellent facility run-times across all areas resulted in full-year average production reaching the high end of the Company's guidance range of 287,000 to 302,000 boe per day.

Operating Expense

• ARC's fourth quarter 2021 operating expense per boe of $3.50 decreased two per cent from the third quarter of 2021.
• ARC demonstrated excellent cost control by delivering an operating expense per boe of $3.86 for the year, the lowest annual operating expense per boe in the Company's 25-year history. Consequently, ARC's full-year 2021 operating expense per boe was one per cent below the Company's guidance range of $3.90 to $4.40.

Physical Marketing

Average Realized Prices

• ARC's expanded sales portfolio has significantly enhanced the Company's ability to generate value through its physical marketing activities. During the fourth quarter of 2021, ARC's average realized natural gas price of $6.45 per Mcf was $1.51 per Mcf, or 31 per cent greater than the average AECO 7A Monthly Index price.
• Strong liquids pricing also helped drive commodity sales from production higher in the fourth quarter of 2021. ARC's average realized condensate price of $96.90 per barrel increased 13 per cent, and ARC's average realized crude oil price of $92.11 per barrel increased 19 per cent relative to the third quarter of 2021. ARC's average realized NGLs price of $27.65 per barrel was unchanged.

Transportation Arrangements

• ARC has right-sized its natural gas transportation agreement with Alliance Pipeline. The four-year deal includes renewal rights and takes effect on November 1, 2022.
• ARC continues to execute its strategy of diversifying the markets where the Company sells natural gas. Through this strategy, ARC gains exposure to increases in regional pricing as well as mitigates price concentration risk. The following table details the sales markets where ARC's natural gas volumes are exposed in 2022.

Transportation Expense

• ARC's fourth quarter 2021 transportation expense per boe of $5.47 increased 11 per cent from the third quarter of 2021 due to a one-time charge of $14 million associated with a legacy condensate and NGLs transportation contract.
• ARC's full-year 2021 transportation expense per boe of $4.79 was in line with guidance of $4.50 to $5.00.

FINANCIAL RESULTS

Financial Position

• ARC exited 2021 with a long-term debt balance of $1.7 billion and net debt of $1.8 billion or 0.8 times funds from operations. During the fourth quarter of 2021, ARC reduced long-term debt by $144 million and net debt by $98 million. ARC has significantly bolstered its financial position since the closing of the Business Combination, having reduced net debt by approximately $0.6 billion or 25 per cent.
• As of December 31, 2021, the Company had $1.0 billion of senior notes outstanding and $0.7 billion in borrowings under its $2.0 billion credit facility.

Returns to Shareholders

ARC distributed $289 million ($0.41 per share), or 63 per cent of free funds flow to shareholders during the fourth quarter of 2021 through a combination of dividends and share repurchases.

Dividends

• ARC declared a quarterly dividend of $70 million or $0.10 per share during the fourth quarter of 2021, representing a 52 per cent increase from the Company's previous quarterly dividend of $0.066 per share.
• ARC declared dividends of $181 million or $0.286 per share in 2021. A growing dividend remains ARC's primary mechanism of returning capital to shareholders over the long term.
• Share Repurchases
• ARC repurchased 18.5 million common shares during the fourth quarter of 2021 at a weighted average price of $11.87 per share for total consideration of $220 million.
• Since its normal course issuer bid ("NCIB") commenced on September 1, 2021, ARC has repurchased 33.6 million common shares at a weighted average price of $11.34 per share for total consideration of $381 million, representing 4.6 per cent of total shares outstanding.

Net Income

• ARC recognized net income of $678 million ($0.96 per share) in the fourth quarter of 2021, compared to net income of $54 million ($0.07 per share) in the third quarter of 2021. Increased commodity sales from production, driven by higher average realized commodity prices, and reduced losses on ARC's risk management contracts were partially offset by an increase in ARC's income tax expense.
• ARC recognized net income of $787 million ($1.25 per share) during the year ended December 31, 2021, compared to a net loss of $547 million ($1.55 per share) during the year ended December 31, 2020.

Cash Flow from Operating Activities, Funds from Operations, and Free Funds Flow

Cash Flow from Operating Activities

• Fourth quarter and full-year 2021 cash flow from operating activities were $669 million and $2.0 billion, respectively.

Funds from Operations

• ARC generated funds from operations of $834 million ($1.19 per share) during the fourth quarter of 2021, increasing by $68 million ($0.13 per share) from the third quarter of 2021. Increased commodity sales from production were partially offset by higher realized losses on ARC's risk management contracts and increased royalties.
• During the fourth quarter of 2021, ARC recorded a $14 million current income tax recovery, primarily attributed to the recognition of investment tax credits and scientific research and experimental development deductions related to expenditures made in prior periods.
• The following table details the change in funds from operations for the fourth quarter of 2021 relative to the third quarter of 2021.

• ARC generated funds from operations of $2.4 billion ($3.85 per share) in 2021, an increase of $1.7 billion ($1.96 per share) from 2020.

Free Funds Flow

• ARC generated free funds flow of $459 million ($0.65 per share) during the fourth quarter of 2021. $289 million or 63 per cent of free funds flow was allocated to returns to shareholders, with the remaining free funds flow allocated to strengthening ARC's balance sheet.
• Full-year 2021 free funds flow totalled $1.4 billion ($2.16 per share), increasing $1.0 billion ($1.24 per share) from 2020.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE ("ESG") REVIEW

ARC has a long track record of leadership in ESG performance. Over the past decade, ARC was one of few North American energy producers to reduce its absolute emissions, while simultaneously growing its production profitably. ARC remains committed to responsible resource development, reducing absolute emissions, and is evaluating several opportunities across the energy value chain to bolster its position as an ESG leader.

ARC has recently received the following recognitions for its leading ESG performance:

• ARC's ongoing promotion of diversity and inclusion was recognized in 2021, with the Company's inclusion in the Bloomberg Gender Equality Index for the second consecutive year. ARC was the only Canadian exploration and production company included in the index. ARC has achieved its target of 30 per cent female representation at the Board of Directors and executive levels.
• ARC completed the annual Equitable Origin EO100TM assessment for its Kakwa asset, maintaining its certification as a responsible energy developer. ARC is currently undergoing the certification process for its northeast BC assets.

2021 RESERVES

• The acquisition of the Kakwa asset roughly doubled ARC's reserves volumes, while development additions replaced greater than 100 per cent of production in all reserves categories, reflecting ARC's successful operational execution throughout 2021. Through development additions, PDP reserves increased by 119 per cent, TP reserves increased by 132 per cent, and 2P reserves increased by 143 per cent.
• Reserves were replaced at attractive finding and development ("F&D") costs, which resulted in F&D recycle ratios, including future development costs ("FDC"), ranging from 3.4 times to 4.0 times(1).
• ARC's before-tax NPV for 2P reserves, discounted at 10 per cent, was $15.9 billion, or approximately $23.00 per share at December 31, 2021, tripling from ARC's 2P NPV at December 31, 2020.
• As the largest pure-play Montney producer, ARC has decades of top-tier drilling inventory within its portfolio. At December 31, 2021, ARC has booked approximately 900 gross 2P locations, representing approximately 15 per cent of the Company's total gross internal inventory estimates. 2P locations at Attachie account for less than four per cent of total 2P locations.
• ARC's NPV was determined using GLJ forecast pricing and foreign exchange rates at January 1, 2022, with a 10-year average WTI price of US$72 per barrel and a 10-year average AECO price of $3.35 per million British thermal units ("MMBtu").
• FDC for 2P reserves totalled $7.4 billion at December 31, 2021 as compared to $3.2 billion at December 31, 2020.
• FDC of $4.4 billion was added due to the acquisition of the Kakwa asset.
• FDC of $0.2 billion was removed for the disposition of ARC's Pembina asset.

Reserves Reconciliation

Net Present Value Summary

• For a summary of the GLJ forecast pricing and foreign exchange rates used to evaluate ARC's reserves, see "2021 Independent Qualified Reserves Evaluation" of this news release.

Finding, Development and Acquisition ("FD&A") Costs

• ARC delivered a 2P F&D cost, including FDC, of $7.28 per boe(1) from development additions in 2021, continuing to demonstrate the high-quality nature of its Montney assets and the Company's ability to consistently deliver strong well results through efficient development planning and operational execution. Including net acquisitions and dispositions, ARC's 2P FD&A cost, including FDC, was $10.39 per boe(1).
• The year-over-year increase in F&D costs reflects the Company's higher proportion of liquids reserves within its portfolio as a result of the Business Combination.

ORGANIZATIONAL UPDATE

ARC is pleased to announce the following changes to its senior leadership team:

• Lara Conrad — Chief Development Officer (ARC employee since 2011)
• Armin Jahangiri — Chief Operating Officer (ARC employee since 2014)
  
  
• Ryan Berrett — Senior Vice President, Marketing (ARC employee since 2003)
• Lisa Olsen — Senior Vice President, People and Corporate (ARC employee since 2008)

For biographies of ARC's senior leadership team members, see ARC's website at www.arcresources.com.

CONFERENCE CALL

ARC's senior leadership team will be holding a conference call to discuss the Company's 2021 year-end results on Friday, February 11, 2022, at 8:00 a.m. Mountain Time ("MT").

Callers are encouraged to dial in 15 minutes before the start time to register for the event. A replay will be available on ARC's website at www.arcresources.com for 30 days following the conference call.

CONSOLIDATED BALANCE SHEETS (unaudited)

As at

Refer to the accompanying notes to ARC's consolidated financial statements as at and for the year ended December 31, 2021, which are available on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)
For the three months and years ended December 31

Refer to the accompanying notes to ARC's consolidated financial statements as at and for the year ended December 31, 2021, which are available on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
For the three months and years ended December 31

Refer to the accompanying notes to ARC's consolidated financial statements as at and for the year ended December 31, 2021, which are available on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
For the years ended December 31

Refer to the accompanying notes to ARC's consolidated financial statements as at and for the year ended December 31, 2021, which are available on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the three months and years ended December 31

Refer to the accompanying notes to ARC's consolidated financial statements as at and for the year ended December 31, 2021, which are available on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com.

NON-GAAP AND OTHER FINANCIAL MEASURES

Throughout this news release and in other materials disclosed by the Company, ARC employs certain measures to analyze its financial performance, financial position, and cash flow. These non-GAAP and other financial measures are not standardized financial measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. The non-GAAP and other financial measures should not be considered to be more meaningful than generally accepted accounting principles ("GAAP") measures which are determined in accordance with IFRS, such as net income (loss), cash flow from operating activities, and cash flow used in investing activities, as indicators of ARC's performance.

Non-GAAP Financial Measures

Capital Expenditures

ARC uses capital expenditures to measure its capital investment level compared to the Company's annual budgeted capital expenditures. ARC's budgeted capital expenditures exclude any acquisition or disposition activities as well as the accounting impact of any accrual changes and payments under lease arrangements. The directly comparable GAAP measure to capital expenditures is cash flow used in investing activities. The following table details the composition of capital expenditures and its reconciliation to cash flow used in investing activities.

Free Funds Flow

ARC uses free funds flow as an indicator of the efficiency and liquidity of ARC's business, measuring its funds after capital expenditures available to manage debt levels, pay dividends, and return capital to shareholders. ARC computes free funds flow as funds from operations generated during the period less capital expenditures. Capital expenditures is a non-GAAP financial measure. By removing the impact of current period capital expenditures from funds from operations, Management monitors its free funds flow to inform its capital allocation decisions. The most directly comparable GAAP measure to free funds flow is cash from operating activities. The following table details the calculation of free funds flow and its reconciliation to cash flow from operating activities.

Adjusted Net Capital Acquisitions

Adjusted net capital acquisitions is a non-GAAP financial measure used in the determination of FD&A costs, which is a non-GAAP financial ratio. Adjusted net capital acquisitions is useful as it provides a measure of cash, debt, and share consideration used to acquire crude oil and natural gas assets during the period, net of cash provided by the disposal of any crude oil and natural gas assets during the period. The most directly comparable GAAP measure to adjusted net capital acquisitions is acquisition of crude oil and natural gas assets. The following table details the calculation of adjusted net capital acquisitions and its reconciliation to acquisition of crude oil and natural gas assets.

Non-GAAP Financial Ratios

Finding and Development Costs

ARC calculates F&D costs as capital expenditures divided by the change in reserves within the applicable reserves category. ARC calculates F&D costs, including FDC, as the sum of capital expenditures and the change in FDC required to bring the reserves on production, divided by the change in reserves within the applicable reserves category. Capital expenditures, a non-GAAP financial measure, is used as a component of F&D costs. Management uses F&D costs as a measure of capital efficiency for organic reserves development.

Finding, Development and Acquisition Costs

ARC calculates FD&A costs as the sum of capital expenditures and adjusted net capital acquisitions divided by the change in reserves within the applicable reserves category, inclusive of changes due to acquisitions and dispositions. ARC calculates FD&A costs, including FDC, as the sum of capital expenditures, adjusted net capital acquisitions, and the change in FDC required to bring the reserves on production, divided by the change in reserves within the applicable reserves category, inclusive of changes due to acquisitions and dispositions. Capital expenditures and adjusted net capital acquisitions, both non-GAAP financial measures, are used as components of FD&A costs. Management uses FD&A costs as a measure of capital efficiency for organic and acquired reserves development.

Recycle Ratio

ARC calculates recycle ratio by dividing the netback per boe by F&D or FD&A costs. Netback per boe is a non-GAAP financial ratio that uses netback, a non-GAAP financial measure, as a component. Capital expenditures, a non-GAAP financial measure, is used as a component of F&D costs. Capital expenditures and adjusted net capital acquisitions, both non-GAAP financial measures, are used as components of FD&A costs. Management uses recycle ratio to relate the cost of adding reserves to the expected cash flows to be generated.

Supplementary Financial Measures

Before-tax Proved plus Probable Net Present Value per Share

Before-tax 2P NPV per share is comprised of the before-tax NPV for 2P reserves, discounted at 10 per cent, as determined in accordance with NI 51-101, divided by diluted weighted average common shares.

2021 INDEPENDENT QUALIFIED RESERVES EVALUATION

GLJ conducted a Reserves Evaluation, effective December 31, 2021, which was prepared in accordance with definitions, standards, and procedures in the COGE Handbook and NI 51-101. The Reserves Evaluation was based on GLJ forecast pricing and foreign exchange rates at January 1, 2022, as outlined in the table below. These forecasts reflect current market conditions as defined by current forward commodity prices as at December 31, 2021. This aligns with the COGE Handbook, effective April 1, 2021, which states that major benchmark commodity price forecasts, up to and including the second full forecast year, should not deviate from current forward commodity prices by more than 20 per cent.

Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without the inclusion of any royalty interest) unless otherwise noted. ARC's oil and gas reserves statement for the year ended December 31, 2021, including complete disclosure of the Company's oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be disclosed in ARC's Annual Information Form for the year ended December 31, 2021, which will be available on or before March 31, 2022 on ARC's website at www.arcresources.com and under ARC's SEDAR profile at www.sedar.com.

Definitions of Oil and Gas Reserves

Reserves are estimated remaining quantities of crude oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows:

Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

Information Regarding Disclosure on Oil and Gas Reserves and Operational Information

In accordance with Canadian practice, production volumes and revenues are reported on a company gross basis, before deduction of Crown and other royalties, and without including any royalty interests, unless otherwise stated. Unless otherwise specified, all reserves volumes in this news release (and all information derived therefrom) are based on company gross reserves using forecast prices and costs.

This news release contains metrics commonly used in the oil and gas industry. These metrics do not have standardized meanings and may not be comparable to similar metrics disclosed by other issuers. See "Non-GAAP and Other Financial Measures" of this news release and the definition of reserve replacement below. Management uses these metrics for its own performance measurements and to provide shareholders with measures to compare ARC's performance over time; however, such measures are not reliable indicators of ARC's future performance and future performance may not compare to the performance in previous periods.

• Reserves replacement is calculated by dividing the annual reserves additions, in boe, by ARC's annual production, in boe. Management uses this measure to determine the relative change of its reserves base over a period of time.

FORWARD-LOOKING INFORMATION AND STATEMENTS

This news release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking information") within the meaning of applicable securities legislation about current expectations regarding the future, based on certain assumptions made by ARC. Although ARC believes that the expectations represented by such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. Forward-looking information in this news release is identified by words such as "anticipate", "believe", "ongoing", "may", "expect", "estimate", "plan", "will", "project", "continue", "target", "strategy", "upholding", or similar expressions and includes suggestions of future outcomes. In particular, but without limiting the foregoing, this news release contains forward-looking information with respect to: expected changes to ARC's 2022 capital expenditure guidance; ARC's near-term priorities; ARC's plans to sustain production, increase productive capacity at Sunrise, and proceed with the development of Attachie West Phase I once the BC regulatory environment becomes more certain; plans to remain disciplined and plans to not accelerate capital investments in growth projects beyond what is planned at Sunrise and Attachie; plans to allocate surplus funds from operations to debt reduction and returns to shareholders; ARC's objectives with respect to growing its dividend and share repurchases under its NCIB; plans to execute Attachie West Phase I development once the BC regulatory environment supports such investment; ARC's 2022 guidance including planned capital expenditures, production guidance, and expectations that it will offset inflationary pressures through continued efficiency improvement initiatives; ARC's continued evaluation of the results from implementing wider well spacing and modifications to the well and pad design at Kakwa; expectations that capital expenditures required to sustain production at Kakwa will be reduced by approximately 10 per cent over time; ARC's expectations with respect to its natural gas transportation agreement with Alliance Pipeline; expected sales markets to which ARC will be exposed in 2022; ARC's continued commitment to responsible resource development, plans to reduce its absolute emissions, and plans to bolster its position as an ESG leader; ARC's continued promotion of diversity and inclusion; ARC's anticipated future development costs; GLJ's price forecasts and foreign exchange rates; and similar statements. Further, statements relating to reserves are deemed to be forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitably produced in the future. In addition, forward-looking information may include statements attributable to third-party industry sources. There can be no assurance that the plans, intentions, or expectations upon which these forward-looking statements are based will occur.

Readers are cautioned not to place undue reliance on forward-looking information as ARC's actual results may differ materially from those expressed or implied. ARC undertakes no obligation to update or revise any forward-looking information except as required by law. Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to ARC and others that apply to the industry generally. The material assumptions on which the forward-looking information in this news release are based, and the material risks and uncertainties underlying such forward-looking information, include: ARC's ability to successfully integrate and realize the anticipated benefits of the Business Combination as well as other completed or future acquisitions and divestitures; access to sufficient capital to pursue any development plans; ARC's ability to issue securities and to repurchase its securities under the NCIB; ARC's ability to meet and maintain certain targets, including with respect to emissions-related reductions and ESG performance; expectations and projections made in light of ARC's historical experience; data contained in key modeling statistics; the potential implementation of new technologies and the cost thereof; forecast commodity prices and other pricing assumptions with respect to ARC's 2022 capital expenditure budget; continuing uncertainty of the impact of the June 29, 2021 BC Supreme Court ruling in Blueberry River First Nations (Yahey) v. Province of British Columbia on BC and/or federal laws or policies affecting resource development in northeast BC and potential outcomes of the ongoing negotiations between Blueberry River First Nations and the Government of BC; assumptions with respect to global economic conditions and the accuracy of ARC's market outlook expectations for 2022 and in the future; suspension of or changes to guidance, and the associated impact to production; the assumption that the regulatory environment will be able to support ARC's investment in the execution of Attachie West Phase I, including that regulatory authorities in BC will resume granting approvals for oil and gas activities relating to drilling, completions, testing, processing facilities, and production and transportation infrastructure in 2022 on time frames, and terms and conditions, consistent with past practice; forecast production volumes based on business and market conditions; the accuracy of outlooks and projections contained herein; the accuracy of the reserves information contained herein and the assumptions and risks involved in the evaluation of such reserves; that future business, regulatory, and industry conditions will be within the parameters expected by ARC, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability, and cost of labour and interest, exchange, and effective tax rates; projected capital investment levels, the flexibility of capital spending plans, and associated sources of funding; the ability of ARC to complete capital programs and the flexibility of ARC's capital structure; applicable royalty regimes, including expected royalty rates; future improvements in availability of product transportation capacity; opportunity for ARC to pay dividends and the approval and declaration of such dividends by the board of directors of ARC; the existence of alternative uses for ARC's cash resources which may be superior to payment of dividends or effecting repurchases of outstanding common shares; cash flows, cash balances on hand, and access to ARC's credit facility being sufficient to fund capital investments; foreign exchange rates; near-term pricing and continued volatility of the market; the ability of ARC's existing pipeline commitments and financial hedge transactions to partially mitigate a portion of ARC's risks against wider price differentials; business interruption, property and casualty losses, or unexpected technical difficulties; estimates of quantities of crude oil, natural gas, and liquids from properties and other sources not currently classified as proved; accounting estimates and judgments; future use and development of technology and associated expected future results; ARC's ability to obtain necessary regulatory approvals generally; potential regulatory and industry changes stemming from the results of court actions affecting regions in which ARC holds assets; risks and uncertainties related to oil and gas interests and operations on Indigenous lands; the successful and timely implementation of capital projects or stages thereof; the ability to generate sufficient cash flow to meet current and future obligations; estimated abandonment and reclamation costs, including associated levies and regulations applicable thereto; ARC's ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner; ARC's ability to carry out transactions on the desired terms and within the expected timelines; forecast inflation and other assumptions inherent in the guidance of ARC; the retention of key assets; the continuance of existing tax, royalty, and regulatory regimes; GLJ's estimates with respect to commodity pricing; ARC's ability to access and implement all technology necessary to efficiently and effectively operate its assets; the ongoing impact of COVID-19 on commodity prices and the global economy; and other assumptions, risks, and uncertainties described from time to time in the filings made by ARC with securities regulatory authorities.

The forward-looking information contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information included in this news release are made as of the date of this news release and, except as required by applicable securities laws, ARC undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise.

About ARC

ARC Resources Ltd. is a pure-play Montney producer and one of Canada's largest dividend-paying energy companies, featuring low-cost operations and leading ESG performance. ARC's investment-grade credit profile is supported by commodity and geographic diversity and robust risk management practices around all aspects of the business. ARC's common shares trade on the Toronto Stock Exchange under the symbol ARX.

ARC RESOURCES LTD.

Please visit ARC's website at www.arcresources.com or contact Investor Relations:
E-mail: IR@arcresources.com
Telephone: (403) 503-8600
Fax: (403) 509-6427
Toll Free: 1-888-272-4900
ARC Resources Ltd.
Suite 1200, 308 - 4 Avenue SW
Calgary, AB T2P 0H7

SOURCE ARC Resources Ltd.

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