Liquids-rich natural gas wells and stronger commodity prices more than paid for an expensive corporate takeover and turned Montney shale specialist Arc Resources Ltd. back into a profitable producer during the first six months of this year.
Increased output and prices of all products – natural gas, oil and condensate, and natural gas liquids (NGL) – more than offset the initial costs of the company’s takeover of Calgary peer Seven Generations Energy Ltd. The deal closed in April.
Gas production grew to 999.9 MMcf/d in the first half of 2021 from 732.7 MMcf/d a year earlier. Oil and condensate doubled to 56,448 b/d from 28,243 b/d. NGLs jumped 3.5-fold to 30,479 b/d from 8,779 b/d.
Arc fetched an average price for its natural gas of C$3.87/Mcf ($3.10/Mcf) in the first half of 2021, nearly double its C$1.98 ($1.58( on markets weakened by the pandemic a year earlier.
Meanwhile, oil prices increased on average year/year to C$68.89/bbl ($55.11/bbl) from C$38.53 ($30.82/). Condensate rose to C$76.93/bbl (US$61.54/bbl) from C$43.48 ($34.78). NGLs jumped to C$23.45/bbl ($18.76/bbl) from C$8.76 ($7.00).
The firm continues to tap its Montney Shale properties at a brisk pace. After spending C$418.5 million ($334.8 million) to drill 52 wells and complete 72 in the first six months of this year, the firm is forecasting full-year capital expenditures of C$950 million to C$1 billion ($760-800 million).
Arc posted earnings of C$55 million ($44 million) or C10 cents/share (8 cents/share) in the first half of 2021. The earnings reversed losses of C$601.4 million ($481 million) or C$1.70/share ($1.36/share) in the first half of 2020..
Arc scored improved financial results despite booking a second-quarter 2021 loss of C$123 million ($98.4 million) or C17 cents/share (14 cents/share) to account for transaction expenses and other costs associated with the Seven Generations takeover.
Annual savings generated by fully completing the combination, such as corporate cost savings and improved drilling efficiency, are forecast to reach about C$160 million ($128 million) as of 2022.
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