Value Proposition Clear Line of Sight to Long-term Value Creation
Value Creation Culture Culture Focused on Organizational Learning Drives Ongoing Success Technology Efficiency Opportunity Applying New Focus on Operational Building for the Technology: Efficiency: Long-Term: Longer Laterals…
Corporate Profile Corporate Summary Production (Q3 2014) 115,530 boe/d Reserves (2P Gross YE 2013) (1) 634 mmboe Reserve Life Index (2P) (1) 15.5 years (2) Annualized Dividend / Dividend Yield 1.20 per share / 4.4% (3) Annualized…
Unique Strategy Risk Managed Value Creation is Central to ARCs Strategy Targeting net debt to funds 200% Reserve Replacement from operations between through the drill bit for the 1.0 1.5x past 6 consecutive years One of the…
High Quality Long Life Assets 200% or Greater Reserve Replacement Over the Past 6 Years Annual Reserve Replacement 700% Development 600% Acquisitions 500% 400% 300% 200% 100% 0%
Operational Excellence Capital Efficiencies Managing Declines and Driving Down Costs All In Capital Efficiencies /boe/d(1) 3 Year Avg. Capital Efficiencies /boe/d(2) 40,000 40,000 ARC Competitors 30,000 30,000 per boe/d…
Operational Excellence Cost Management Low Cost Producers Deliver Superior Returns Over Time Focused assets, characterized by high working interest, operatorship and ARC owned/operated facilities, provides control over costs and…
Financial Flexibility Balance Sheet Strength Targeting Net Debt to Funds from Operations Between 1.0 1.5x Net Debt to FFO 1,400 2.0 Net Debt to Funds from Operations 1,200 1.5 1,000 millions 800 1.0 600 400 0.5…
Risk Managed Value Creation 15% Compound Annual Production Growth (CAGR) Since Inception boe/d Forecast
Sustainable Dividend Committed to the Dividend While Delivering Profitable Growth 18% annualized total return since inception, 5.2 billion of dividends (30.88/share) 5,500 Cumulative Dividends and Historic Payout Ratio 120% 5,000…
Growth in Per Share Production and Cash Flow Delivering Value with Profitable Growth and Income 38% increase in production per share and 69% increase in Funds from Operations per share over five year period Production per Share(1)…
ARCs Proven Development Model Inventory of Opportunities at all Stages
Operations Overview Western Canadian Producer Strategic Optionality BRITISH COLUMBIA ALBERTA SASKATCHEWAN MANITOBA NE British Columbia Northern Alberta Redwater Pembina Southern Alberta SE Sask and Manitoba
Focused Production and Reserves Montney Comprises 70% of Production and 2P Reserves Production (boe/d) Q3 2014 2P Reserves (Mmboe) YE 2013(1) 40,000 200 180 Montney Montney 160 30,000 80,000 boe/d (70%) 457 mmboe (72%) 140…
Complimentary Asset Base Montney Growth Assets Underpinned by Free Cash Flow Generating Base Assets Invested 2.3 billion of capital in Montney growth assets during 2009 2014F Base assets generated 1.6 billion of free cash flow…
Early Stages of Property Development* Large Identified Opportunity for Future Growth Gross Drilling Locations 1,600 Montney 4,000 Gross Drilling Locations 1,400 1,200 1,000 800 600 400 200 0 Dawson Parkland/…
Montney Assets
Why the Montney Total Recoverable Resource Ranks High Amongst North American Resource Plays Massive thickness Large areal extent (500km) Superior lithology and fracability High permeability Over pressured Montney Higher…
Significant Montney Land Position 3rd Largest Montney Landholder With Over 620,000 Net Acres 1,400 Top Montney Acreage Holder(1) 000 acres 1,200 1,000 Montney Acres (000's) 70% of ARCs Montney land is 800 undeveloped,…
Multiple Layers to Develop Attachie Septimus Sunrise Tower Parkland Dawson Pouce Coupe Montney A Upper Montney Montney B Montney C Lower Montney Montney D Montney E Existing Horizontal Wells,…
ARC in the Montney 40% Annual Montney Growth over 5 Year Period (2009 2014) 40% CAGR 2009 2014 2015 100,000 Sunrise 30% CAGR 2000 - 2014 Development 2014 90,000 Parkland Gas 2013 Plant: Phase 1 80,000 Construction begins…
NE BC Montney Reserves & Resources NE BC Montney TPIIP 55 Tcf of Gas and 2.2 Billion Barrels of Oil Corporate 2P Reserves of 634 mmboe OIL RESERVES 11.3 mmbbls 2.2 Tcf NGL 27.6 mmbbls OIL ECONOMIC CONTINGENT RESOURCE 10.7…
Montney Development Economics Strong Rates of Return Across the Montney Portfolio Half Cycle Economics Cdn85/bbl Oil and Cdn3/GJ Gas Parkland Tower Dawson Sunrise Ante Creek 50% IRR 50% IRR 65% IRR 50% IRR 50% IRR 4.2x Recycle…
Montney Infrastructure Optionality Well Positioned For Market Access Area is currently well served with three major pipelines providing access to North American Markets: TransCanada Canada & US ARC Lands Alliance Chicago…
Dawson Gas World Class Resource, Unlimited Potential *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO…
Dawson Asset Details Excellent Free Cash Flow Net production (boe/d) Q3 2014 28,000 ARC Proposed Gas Plant (90 mmcfd & 7,500 Liquids (bbls/d) 920 bbls/d liquids) Gas (mmcf/d) 162 ARC 1-34 Production split % (liquids/gas) 97% gas…
Dawson Development Potential Additional Development Layer Below Core Acreage Dawson Dawson core development has been Upper Upper Montney A Montney Booked Reserves* focused on Upper Montney A; 55% of lands currently have no…
Dawson Gas Type Curve Growth Frac Technology Advancements = Improvements in Well Performance Type curve growth over time due to Completions 2009-2011 2012 2013- 2015 2014 improvements in well design, focused on completions and…
Dawson Development Economics 65% Rate of Return at Flat 3/GJ AECO and C85/bbl Key Metrics 7,000 DCET Capex per well (MM) 5.5 Reserve estimate (Bcf) 7.4 6,000 IP (1 mo) (MMcf/d) 6.2 IP (12 mo) (MMcf/d) 5.4 5,000 Half Cycle…
Dawson A Cash Flow Machine Low Reinvestment Ratio to Maintain Significant Free Cash Flow Grown production from 50 Mmcfe/d in 2009 to 165 Mmcfe/d by mid 2012 At Cdn3 gas 30% Reinvestment Ratio to sustain cash flow and generate 100…
Dawson Infrastructure New Facility Planned For 2017 On-stream New Dawson Phase III Gas Plant 90 mmscfd with 7,500 bbls/day of liquids handling New site ideally situated in the Lower Montney/Liquids Rich play Designed to handle…
Parkland/Tower Reaping Acquisition Benefits *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free…
Parkland/Tower Asset Details Material Value Creation in 2014 Parkland Tower Net production (boe/d) 18,200 6,880 Q3 2014 Liquids (bbls/d) 3,700 4,940 Gas (mmcf/d) 87 11.6 Land (net sections) 23 57 Working Interest 84% 92% Reserves…
Parkland/Tower Development Potential Incremental Reserves Potential with Multilayer Development Upper Montney Upper Montney A supports two layers Booked Reserves* of development at Upper Montney Parkland and Tower At year end…
Operational Excellence Tower Optimal Frac Design and Significant Efficiency Gains in Tight Oil Play 60% Decrease in Cost/Frac, 2X Increase in Applying Learnings in Well Length and Frac Intensity Frac Spacing 160,000 70 2,500 90 80…
Tower Completions Advancement Advanced Completion Design = Improved Performance 1,200 Completions 2014 2015 2014 Type Curve Frac spacing (m) 40 25 1,000 Fracs per well 44 60 2015 Type Curve Production Rate (boe/d) Avg.…
Tower Development Economics 50% Rate of Return at Flat 3/GJ AECO and C85/bbl 1400 Key Metrics 1200 DCET Capex per well (MM) 6.5 Reserve Estimate (Mboe) 600 1000 IP (1 mo) (boe/d) 1000 IP (12 mo) (boe/d) 400 800 Half Cycle…
Tower 2014 Wells New Completions Delivering Breakthrough Performance Total Production (boe/d) Oil Production (bbl/d) Old completion 12-16 Pad design 5-14 Pad (2014) New completion 8-15 Pad (2014) design 2015 Type curve 2015…
Tower Cumulative Production New Wells are Exceeding Type Curve Total Production (boe) Oil Production (bbl) 2015 Type curve 2015 Type curve 2014 Type curve 2014 Type curve Old completion 12-16 Pad design 5-14 Pad (2014)…
Operational Excellence Parkland Learnings from Dawson = Advanced Frac Design and Improved Results at Parkland Optimizing Fracs, Lowering Costs Optimizing Well Length and Frac Spacing 300,000 35 2,050 110 250,000 30 2,000…
Parkland Development Economics Targeting Liquids With Step Out From Core Completions 2012 2013 2014 2015 Frac spacing (m) 180 100 80 70 1,200 2012 Type Curve (Dry Gas) Fracs per well 10 15 22 30 Avg. tonnage per 100 60 60 100…
Parkland Development Economics 50% Rate of Return at Flat 3/GJ AECO and C85/bbl 1200 Key Metrics DCET Capex per well (MM) 5.7 1000 Reserve Estimate (Bcfe) 5.8 IP (1 mo) (boe/d) 1080 800 IP (12 mo) (boe/d) 645 Half Cycle…
Sunrise Long-term Growth Opportunity *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free Cash Flow…
Sunrise/Sunset Asset Details Sunrise/Sunset Moving Forward with Full Scale Development Sunrise has progressed from pilot to full scale development Net production (boe/d) Q3 2014 7,050 Liquids (bbls/d) 0 Gas (mmcf/d) 42.3 Land…
Sunrise Development Potential Proven Productivity from Four Layered Development Known reserves exist in Upper Montney A. 2014 Upper Montney A Booked Reserves* drilling program has proved Upper Montney Upper Montney Upper…
Operational Excellence Sunrise Incorporating Learnings into Early Development = Excellent Initial Results Doubling Fracs/well over 3 years Efficient Lateral Lengths 2,500 140 250,000 35 120 30 2,000 Lateral Length…
Sunrise Outperforming Expectations 2014 Drilling Results Prove Four Layer Development Model 10,000 2014 Type Curve (11.7 Bcf Raw) 9,000 08-24Hz (MTYA) 8,000 C09-13Hz (Lower (UpperMTYA) MTYA+) 7,000 B02-25Hz (MTYB) - see note…
Sunrise Continuous Improvements Enhanced Well Design = Type Curve Improvement Completions 2009-2011 2013-2014 2015 7,000 2015 Type Curve (11.5 Bcf) Frac spacing (m) 120 80 80 6,000 Fracs per well 16 25 25 2013/14 Type Curve (11…
Sunrise Development Economics 50% Rate of Return Flat at 3/GJ AECO and C85/bbl 7,000 Key Metrics DCET Capex per well (MM) 6.0 Reserve Estimate (Bcf) 11.5 6,000 IP (1 mo) (MMcf/d) 6.2 IP (12 mo) (MMcf/d) 5.4 5,000 Half Cycle…
Montney Pilot Projects Significant Future Potential
Montney Pilots Proving Future Value Before Full Scale Development West Attachie: Pilot Production on-stream since Parkland: Q2 2014 Red Creek Lower Montney well on-stream Q3 Attachie 2014 East Attachie: Pouce Coupe: Monitoring…
Ante Creek A Montney Success Story *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free Cash Flow…
Ante Creek Asset Details Significant Cash Flow with Substantial Growth Opportunity Net production (boe/d) Q3 2014 17,800 Liquids (bbls/d) 9,300 Gas (mmcf/d) 51 Production split % (liquids/gas) 52/48 Land (Montney net sections)…
Ante Creek Significant Drilling Inventory Large Land Base and Down-spacing = Significant Drilling Inventory Booked reserves exist on 30% of ARC held mineral rights Significant opportunity to prove up this large land base with…
Operational Excellence Ante Creek Reducing Business Cycle Times with Optimized Frac Design Drilling Longer Laterals in Fewer Days Lower Cost/Frac, Optimizing Frac Intensity 2,500 20 180,000 180 19 160,000 160 Lateral Length…
Ante Creek Delivering Results Type Curve Consistency Moving Out of the Core Completions 2012 2013 2014 2015 Ante Creek Normalized Type Curves for Montney Horizontal Wells Frac spacing (m) 120 100 100 80 500 Fracs per well 14 17 16…
Ante Creek Development Economics 50% Rate of Return at Flat 3/GJ AECO and C85/bbl 400 Key Metrics 350 DCET Capex per well (MM) 4.2 Reserve Estimate (Mboe) 290 300 IP (1 mo) (boe/d) 375 IP (12 mo) (boe/d) 210 250 Half Cycle…
Pembina Revitalizing a Mature Oil Field *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free Cash…
SE Saskatchewan/Manitoba Solid Long Life Assets *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO…
2015 Budget and Outlook
2015 Capital Budget 875 Million 2015 Capital Program Forecast to Deliver Record Production of 120,000-125,000 boe/d Focus on oil and liquids-rich gas and low cost, high rate of return Montney gas development BRITISH COLUMBIA…
Looking Beyond 2016 Diverse Portfolio Provides Strategic Optionality ARC has a well balanced inventory of value creating opportunities which may be pursued beyond 2016 Project Options 2016 - 2020+ Dawson Phase 3 Pouce…
Sustainability Balancing Inflows and Outflows for Long-Term Sustainability Objective to fully fund ARC's Dividend and Sustaining Capital from Funds from Operations (FFO) over the long-term Profitable Growth Capital will be funded…
Multiple Sources of Debt Significant Available Credit Capacity of 1.1 Billion 2.1 Billion Total Credit Capacity Bank Credit Facility (1.1 Billion Available) 2.5 1 Billion credit facility plus 40 Master Shelf million working…
Summary
Value Proposition Clear Line of Sight to Long-term Value Creation
APPENDIX
Crude Oil Marketing 96% Condensate, Light and Medium Crude Oil Maintain control into liquid market hubs to ensure flexibility and optimize price Secured firm transportation pipeline agreements to support future development…
Natural Gas Commodity Marketing Diversified Sales Point and Purchasers of ARCs Natural Gas Sales are typically 70%/30% monthly/daily dependent upon operations and market environment Secured adequate take-away to support development…
NGL Commodity Marketing NGL Pipeline & Fractionation Capacity Secured ARCs NGL Exposure NGL revenue (5,000 bbl/d) makes up approximately 4% of ARCs revenue Ensuring NGL production moves to market protects ARCs oil & gas production…
Hedge Positions November 5, 2014 Active Hedging Program Supports Business Plan Summary of Hedge Positions as at November 5, 2014 (1) Remainder of 2014 2015 2016 - 2017 2018 2019 Crude Oil (2) WTI: (US/bbl) US/bbl bbl/d US/bbl bbl/d…
Significant Land & Drilling Inventory Considerable Future Opportunity Avg Well Net Net Drilling Spacing Primary Zones Developed Undeveloped Total Net 2P Reserves Location (Metres) Area Sections(2) Sections(2) Sections(2) (Mmboe)…
Reserves and Resources Disclosure All reserves and resources volumes for the BC Montney and elsewhere in this presentation are, unless indicated otherwise, as at December 31, 2013 as evaluated by GLJ Petroleum Consultants Ltd. in…
Definitions of Oil and Gas Reserves and Resources Economic Contingent Resources (ECR are those contingent resources which are currently economically recoverable. Undiscovered Petroleum Initially-In-Place (UPIIP) is that quantity of…
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