Q1 2022 ARC Resources Ltd Earnings Call

May 6, 2022

Operator: Good morning, ladies and gentlemen, and welcome to the ARC Resources Ltd. Q1 2022 earnings conference call. At this time, note that all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on Friday, 6 May 2022. I would like to turn the conference over to Dale Lewko. Please go ahead.

Good morning, ladies and gentlemen, and welcome to the ARC Resources Limited Q1 2022 Earnings Conference Call. At this time, note that all lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session, and if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on Friday, May 6, 2022, and I would like to turn the conference over to Dale Luko. Please go ahead.

Good morning, ladies and gentlemen, and welcome to the Arc Resources Ltd, Q1, 2022 earnings Conference call. At this time I'd note that all lines are in a listen only mode.

Following the presentation, we will conduct a question and answer session and if at any time during this call you'll be quiet.

Please press Star zero for the operator also note that the call is being recorded on Friday may six 2022, and I would like to turn the conference over to Dale Newco. Please go ahead.

Dale Lewko: Thank you, operator. Good morning, everyone, and thank you for joining us on our Q1 earnings conference call. Joining me on the call today are Terry Anderson, President and Chief Executive Officer, Kris Bibby, Chief Financial Officer, Armin Jahangiri, Chief Operating Officer, Lara Conrad, Chief Development Officer, and Ryan Berrett, Senior Vice President, Marketing. Before I turn it over to our executive team to take you through our Q1 results, I'll remind everyone that this conference call includes forward-looking statements and non-GAAP and other financial measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated. Finally, the press release, financial statements and MD&A are available on our website as well as SEDAR, and following our prepared remarks, we'll open the line to questions.

Thank you operator, and good morning, everyone and thank you for joining us on our first quarter earnings Conference call. Joining me on the call today are Terry Anderson, President and Chief Executive Officer, Chris <unk>, Chief Financial Officer arm, and Jan Gary Chief Operating Officer, Lara Conrad Chief Development Officer, and Ryan Berrett Senior.

Thank you, operator. Good morning, everyone. And thank you for joining us on our first quarter earnings conference call. Joining me on the call today are Terry Anderson, President and Chief Executive Officer, Chris Bibby, Chief Financial Officer, Armin Jahangiri, Chief Operating Officer, Laura Conrad, Chief Development Officer and Ryan Barrett, Senior Vice President, Marketing.

The president marketing.

Before I turn it over to our executive team to take you through our first quarter results, I'll remind everyone that this conference call includes forward-looking statements and non-GAAP and other financial measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated. Finally, the press release, financial statements, and MD&A are available on our website as well as CDAR, and following our prepared remarks, we'll open the line to questions.

Before I turn it over to our executive team to take us through our first quarter results I'll remind everyone that this conference call includes forward looking statements and non-GAAP and other financial measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated.

Finally, the press release financial statements and MD&A are available on our website as well as SEDAR and following our prepared remarks, we'll open the lines for questions with that I'll turn it over to our President and CEO Terry Anderson Terry. Please go ahead.

Dale Lewko: With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead.

With that, I'll turn it over to our President and CEO , Terry Anderson. Terry, please go ahead.

Terry Anderson: Thanks, Dale, and good morning, everyone. Today, I want to take a moment to review three items related to our financial and operational results and how we are progressing our business. As it relates to the quarter, ARC delivered on our strategy. We profitably invested in our assets and capitalized on elevated commodity prices to reduce debt and accelerate returns to our shareholders. Since closing the Seven Generations acquisition a year ago, ARC has sustained production at greater than 340,000 Boe a day and generated over CAD 1.6 billion of free funds flow, equivalent to about 15% of our market cap today. In Q1, we allocated two-thirds of our free funds flow to our shareholders through the base dividend and share repurchases and the remainder to debt reduction.

Thanks, Dale, and good morning, everyone. Today I want to take a moment to review three items related to our financial and operational results and how we're progressing our.

Thanks, Dale and good morning, everyone. Today I wanted to take a moment to review three items related to our financial and operational results and how we are progressing our business.

As it relates to the quarter arc delivered on our strategy, we possibly invested in our assets and capitalized on elevated commodity prices to reduce debt and accelerate returns to our share.

As it relates to the quarter arc delivered on our strategy, we profitably invested in our assets and capitalize on elevated commodity prices to reduce debt and accelerate returns to our shareholders.

Since closing the seventh generation acquisition, a year ago Arquette sustained production at greater than 340000, BOE, a day and generated over $1 $6 billion of free funds flow equivalent to about 15% of our market cap today.

Since closing the 7th generation acquisition a year ago, ARC has sustained production at greater than 340,000 BOE a day and generated over $1.6 billion of free funds flow, equivalent to about 15% of our market cap.

In Q1, we allocated two-thirds of our free funds flow to our shareholders through the base dividend and share repurchases and the remainder to debt reducts.

In Q1, we allocated two thirds of our free funds flow to our shareholders through the base dividend and share repurchases and the remainder to debt reduction.

Terry Anderson: Since initiating the buyback program in September last year, we have invested and retired approximately 6% of our shares at an average price 30% lower than today. Retiring our shares below intrinsic value has proven to be a great use of capital and an effective way to grow our per share metrics. We'll continue to use the tool to complement the base dividend as long as it is good returns for our shareholders. In addition, we announced a 20% dividend increase in the quarter. This further demonstrates our commitment to shareholder returns as we grow our business. Importantly, the dividend is sustainable through the cycle. We can sustain the business and fund the dividend with cash flow at $40 WTI and $2 AECO. ARC is an ESG leader and very proud to have one of the lowest emissions intensities in North America.

Since initiating the Buy Back program in September last year, we have invested and retired approximately 6% of our shares at an average price 30% lower than today. Retiring our shares below intrinsic value has proven to be a great use of capital and an effective way to grow our per-share metrics, so we'll continue to use the tool to complement the base dividends as long as it is good returns for our shareholders.

Since initiating the buyback program in September last year, we have invested and retired approximately 6% of our shares at an average price 30% lower than today retiring our shares below intrinsic value has proven to be a great use of capital in an effective way to grow our per share metrics. So we will continue to use.

The tool to complement the base dividend as long as it has good returns for our shareholders. In addition, we announced a 20% dividend increase in the quarter. This further demonstrates our commitment to shareholder returns as we grow our business importantly, the dividend is sustainable through the cycle, we can sustain the business and fund the dividend with cash.

In addition, we announced a 20% dividend increase in the quarter. This further demonstrates our commitment to shareholder returns as we grow our business. Importantly, the dividend is sustainable through the cycle. We can sustain the business and fund the dividend with cash flow at $40 WTI and $2 ACO. ARC is an ESG leader and very proud to have one of the lowest emissions intensities in North America.

Cash flow at $40, <unk> and $2 eight call arc as an ESG leader and very proud to have one of the lowest emissions intensities in North America. We are pleased to announce that we have achieved certification of our northeast B C assets under equitable origin standards for responsible energy development. This is the.

Terry Anderson: We are pleased to announce that we have achieved certification of our Northeast BC assets under Equitable Origin Standard for Responsible Energy Development. This is the second certification we've achieved, the first at our Kakwa asset, which means approximately 95% of our operations is certified. As a result, ARC now holds the largest volumes of independently certified production in Canada. We're also excited to announce another LNG supply agreement. This is an important next step in our market diversification and market expansion strategy. ARC will supply 140 million Btu per day or about 12% of our current gas production to Cheniere beginning in 2027 or possibly sooner. In exchange, ARC will receive JKM-linked pricing net of shipping costs and liquefaction fees.

We are pleased to announce that we have achieved certification of our Northeast BC assets under Equitable Origins Standard for Responsible Energy Development. This is the second certification we've achieved, the first at our CAQA asset, which means approximately 95% of our operations is certified. As a result, ARC now holds the largest volumes of independently certified production in Canada.

Second certification, we've achieved the first at our CAC with asset, which means approximately 95% of our operations is certified as a result are now holds the largest volumes of independently certified production in Canada.

We're also excited to announce another LNG supply agreement. This is an important next step in our market diversification and market expansion strategy.

We're also excited to announce another LNG supply agreement. This is an important next step in our market diversification and market expansion strategy arc will supply of 140 million Btu per day or about 12% of our current gas production to cheniere, beginning in 2027 or possibly sooner.

ARC will supply 140 million BTU per day, or about 12% of our current gas production to Chenier beginning in 2027, or possibly sooner.

In exchange, ARC will receive JKM link pricing, net of shipping costs and liquefaction fees. Our scale, strong financial position and leading emissions profile were all important factors in securing this transaction. And it supports our broader strategy to expand margins by gaining access to markets where demand for our products is strong and growing.

Exchange arc will receive J km link pricing net of shipping costs and liquefaction fees, our scale strong financial position and leading emissions profile were all important factors in securing this transaction and it supports our broader strategy to expand margins by gaining access to market square.

Terry Anderson: Our scale, strong financial position, and leading emissions profile were all important factors in securing this transaction, and it supports our broader strategy to expand margins by gaining access to markets where demand for our products is strong and growing. We continue to explore additional opportunities to insert ourselves and own more of the value chain. There is growing demand for low cost, low carbon natural gas, and ARC has a deep, deep inventory and the expertise to responsibly develop it. Finally, our priorities for the balance of the year have not changed. We will remain disciplined with our capital. We'll focus on costs and operational efficiencies given the inflationary pressures, and we'll resume investment in BC growth projects like Attachie and our Sunrise expansion once the regulatory environment is supportive. Our plan yields an attractive return for our shareholders.

Demand for our products is strong and growing.

We continue to explore additional opportunities to insert ourselves and own more of the value chain. There is growing demand for low-cost, low-carbon natural gas, and AHRQ has a deep, deep inventory and expertise to responsibly develop it.

We continue to explore additional opportunities to insert ourselves and own more of the value chain. There is growing demand for low cost low carbon natural gas and arc has a deep deep inventory and the expertise to responsibly develop at <unk>.

Finally our priorities for the balance of the year have not changed. We will remain disciplined with our capital.

Finally, our priorities for the balance of the year have not changed we will remain disciplined with our capital.

We'll focus on costs and operational efficiencies given the inflationary pressures and we'll resume investment in B.C. growth projects like Atachi and our Sunrise expansion once the regulatory environment is supportive. Our plan yields an attractive return for our shareholders. At strip pricing, we expect to generate free funds flow of approximately $2.5 billion in 2022 or approximately $3.70 per share.

Focus on costs and operational efficiencies given the inflationary pressures and will resume investment in BC growth projects like attached in our Sunrise expansion once the regulatory environment is support of our planned yields an attractive return for our shareholders at strip pricing, we expect to generate fee free.

Terry Anderson: At strip pricing, we expect to generate free funds flow of approximately CAD 2.5 billion in 2022, or approximately CAD 3.70 per share. ARC has a significant commodity and geographic optionality to help us manage risk. We are capitalizing on that optionality today as we await clarity and resolution on the regulatory environment in BC. ARC is starting to receive incremental development permits from the BC Oil and Gas Commission, which is a very encouraging step towards establishing a foundation for future investment in the province. The most efficient operating plan for ARC currently is to redirect activity to Kakwa as we await more clarity. At this time, there's no change to our overall capital spending plan or production guidance.

And flow of approximately $2 5 billion in 2022 or approximately $3 70 per share.

Arc has a significant commodity and geographic optionality to help us manage risk we are capitalizing on that optionality today, as we await clarity and resolution on the regulatory environment in BC arc is starting to receive incremental development permits from the BC oil and gas Commission, which is very encouraging step towards establishing.

ARC has a significant commodity and geographic optionality to help us manage risk. We are capitalizing on that optionality today as we await clarity and resolution on the regulatory environment in BC.

AHRQ is starting to receive incremental development permits from the B.C. Oil and Gas Commission, which is a very encouraging step towards establishing a foundation for future investment in the province.

<unk> our foundation for future investment in the province, the most efficient operating plan for art currently is to redirect activity to capa as we await more clarity.

The most efficient operating plan for AHRQ currently is to redirect activity to CAFWA as we await more clarity.

At this time there is no change to our overall capital spending plan or a production guidance the economics incentive in CAC for our high given the condensate fundamentals and prices are very strong and we have improved efficiencies at the asset level and are able to leverage existing infrastructure to profitably deliver.

At this time, there is no change to our overall capital spending plan or production guidance.

Terry Anderson: The economic incentives in Kakwa are high, given the current market fundamentals and prices are very strong, and we have improved efficiencies at the asset level and are able to leverage existing infrastructure to profitably deliver growth. The optimal production for level four Kakwa is between 180,000 to 200,000 Boe per day, approximately 15,000 Boe per day above what we produced in Q1. This is the appropriate production level that optimizes free cash flow and returns by balancing capital, inventory, and available infrastructure. With that, I'll turn it over to our CFO, Kris Bibby, to go through our financial results.

The economic incentives in CAC are high, given the condensate fundamentals and prices are very strong. And we have improved efficiencies at the asset level and are able to leverage existing infrastructure to profitably deliver growth.

Both the optimum production for level four capa is between that 180000 to 200000 BOE per day, approximately 15000 Boe per day above what we produce in the first quarter. This is the appropriate production level that optimizes free cash flow and returns by balancing capital inventory.

The optimal production for level 4 CAQA is between that $180,000 to $200,000 BOE per day. Approximately $15,000 BOE per day above what we produce in the first quarter. This is the appropriate production level that optimizes free cash flow and returns by balancing capital, inventory, and available infrastructure.

And available infrastructure.

With that, I'll turn it over to our CFO , Chris Bibby, to go through our financial results.

With that I'll turn it over to our CFO , Chris <unk> to go through our financial results.

Kris Bibby: Thanks, Terry, and good morning, everyone. I'll be brief so we can leave some time for questions. As Terry said, we delivered a strong quarter, generally in line with expectations. ARC's once again demonstrated capital discipline and commitment to shareholder returns by distributing 65% of our free funds flow to shareholders through the dividend, investing in our shares. The balance was used to reduce debt, which is also a form of returns that accrues to shareholders. If you know ARC well, you know that we are a balance sheet first company, and we adhere to that guiding principle in Q1. At the end of the quarter, we had CAD 1.6 billion of long-term debt, of which CAD 1 billion is through our investment grade senior notes. This equates to a debt to cash flow ratio of roughly 0.6 times.

Thanks, Terry and good morning, everyone I'll be brief so we can leave some time for questions.

Thanks, Terry, and good morning, everyone. I'll be brief, so we can leave some time for questions. As Terry said, we deliver a strong quarter, generally in line with expectations. ARCS once again demonstrated capital discipline and commitment to shareholder returns by distributing 65% of our free funds to shareholders through the dividend, investing in our shares. The balance was used to reduce debt, which is also a form of returns that accrues to shareholders.

As Terry said, we delivered a strong quarter generally in line with expectations arcs. Once again demonstrated capital discipline and commitment to shareholder returns by distributing 65% of our free funds flow to shareholders through the dividend investing in our shares the balance was reduced used to reduce debt, which is also a form of returns that accrues to shareholders.

If you work well, you know that we are a balance sheet first company and we adhere to that guiding principle in the first quarter.

If you work well that we are our balance sheet first company and we adhere to that guiding principle in the first quarter.

At the end of the quarter, we had $1.6 billion of long-term debt, of which $1 billion is through our investment-grade senior note.

At the end of the quarter, we had $1 6 billion of long term debt of which $1 billion is through our investment grade senior notes.

This equates to a debt-to-cash flow ratio of roughly 0.6%.

This equates to a debt to cash flow ratio of roughly six times, we will continue to reduce debt with any excess free funds flow after dividends and share buybacks.

Kris Bibby: We will continue to reduce debt with any excess free funds flow after dividends and share buybacks. Terry alluded to our market diversification strategy as it returns to LNG and internationally linked pricing. This is complementary to our long-standing diversified portfolio of pricing points across North America, which continues to benefit us today. ARC realized a natural gas price of CAD 6 per MCF in the quarter, which is CAD 1.40 above the AECO benchmark in Western Canada. We have exposure across 5 different markets in North America, including delivery to the US Gulf Coast, and retain considerable flexibility through our company-owned infrastructure that allows us to capture value, especially in periods of commodity price volatility. Capital allocation remains top of mind in conversations with investors.

We will continue to reduce debt with any excess free funds flow after dividends and share buyback.

Terry alluded to our market diversification strategy as it returns to LNG and internationally linked.

Terry alluded to our market diversification strategy as it returns to LNG and internationally linked pricing this.

This is complementary to our long-standing diversified portfolio of pricing points across North America, which continues to benefit us today.

This is complementary to our long standing diversified portfolio of pricing points across North America, which continues to benefit us today.

Park realized a natural gas price of $6 an MCF in the quarter, which is $1.40 above the ACO benchmark in Western Canada.

Mark realized natural gas price of $6, an mcf in the quarter, which is $1 40 above the <unk> benchmark in Western Canada we.

We have exposure across five different markets in North America, including delivery to the U.S. Gulf Coast, and we're getting considerable flexibility through our company-owned infrastructure that allows us to capture value, especially in periods of commodity price volatility.

We have exposure across five different markets in North America, including delivery to the U S Gulf coast and retain considerable flexibility through our company owned infrastructure that allows us to capture value, especially in periods of commodity price volatility.

Capital allocation remains top of mind in conversations with investors.

Kris Bibby: We put forth a framework to return 50% to 80% of our free cash flow to shareholders last year and continue to deliver on that. We have allocated approximately 65% of our free cash flow to shareholders since its adoption last year through a growing base dividend and by repurchasing 6% of our shares to date. With their shares continuing to trade below intrinsic value, we intend to continue down this path. Our shares trade at approximately three times free cash flow on an unhedged basis at strip, and we can sustain that for decades on existing inventory. I will caveat that this is based on strong commodity price environment, however.

We put forth a framework to return, 50% to 80% of our free cash flow to shareholders last year continued to deliver on that.

We put forth a framework to return 50% to 80% of our free cash flow to shareholders last year and continue to deliver on that.

We have allocated approximately 65% of our free cash flow to shareholders since its adoption last year through a growing base dividend and by repurchasing 6% of our shares.

We have allocated approximately 65% of our free cash flow to shareholders since its adoption last year through a growing base dividend and by repurchasing 6% of our shares today.

With your shares continuing to trade below intrinsic value, we intend to continue down this path our shares trade at approximately three times free cash flow on an unhedged basis that strip and we can sustain that for decades on existing inventory.

With our shares continuing to trade below intrinsic value, we intend to continue down this path. Our shares traded approximately three times free cash flow on an unhedged basis at strip and we can sustain that for decades on existing dividends.

I will caveat. This is based on strong commodity price environment. However, through a different lens. Our shares are discounting of commodity price below our mid cycle prices of U S $60 and WTO and below where other assets are transacting in the public market that are both lower duration and not underpinned by our owned and operated infrastructure.

I will caveat that this is based on a strong commodity price environment, however. Through a different lens, our shares are discounting a commodity price below our mid-cycle prices of US$60 WTI and below where other assets are transacting in the public market that are both lower duration and not underpinned by our owned and operated inventory.

Kris Bibby: Through a different lens, our shares are discounting a commodity price below our mid-cycle prices of $60 WTI and below where other assets are transacting in the public market that are both lower duration and not underpinned by our owned and operated infrastructure. To summarize, we are confident in an attractive risk-adjusted investment for our shareholders. To front run the question I know is coming, if we continue to allocate 65% of our free cash flow to shareholders over the balance of the year and the remainder to debt, net debt would likely be below our CAD 1 billion investment-grade debt outstanding. In that scenario, where there's excess free cash flow beyond the needs of the business, we would logically return more profits to shareholders. As it pertains to our outlook, capital and production guidance were unchanged.

To summarize, we are confident in an attractive, risk-adjusted investment for our shares.

To summarize we are confidence and an attractive risk adjusted investment for our shareholders.

To front run the question I know its coming if we continue to allocate 65% of our free cash flow to shareholders over the balance of the year and the remainder of the debt net debt would likely be below our $1 billion investment grade notes outstanding.

To front run the question I know is coming, if we continue to allocate 65% of our free cash flow to shareholders over the balance of the year and the remainder to debt, that debt would likely be below our $1 billion investment grade so it stands.

In that scenario, where there is excess free cash flow beyond the needs of the business, we would logically return more profits to shareholders.

In that scenario, where there is excess free cash flow beyond the needs of the business, we would logically returned more profits to shareholders.

As it pertains to our outlook capital and production guidance were unchanged certain cost guidance items increased due to a combination of factors tax.

As it pertains to our outlook, capital and production guidance were unchanged. Certain cost guidance items increased due to a combination of factors.

Kris Bibby: Certain cost guidance items increased due to a combination of factors. Taxes increased due to higher commodity prices than we had budgeted, so a good thing. While higher pipeline tolls and fuel gas charges increased transportation, again linked to higher commodity prices. We are facing inflationary pressures like all other producers. So far, we have been able to mitigate most of it on the capital side through lasting efficiency improvements. Drilling efficiencies in the Kakwa region are best in class. We've reduced drilling days per well by roughly 15% and increased drilling meters per day by over 10% over the past 18 to 24 months. With that, I'll give it back to Terry for some closing remarks.

Taxes increased due to higher commodity prices than we had budgeted, so a good thing, while higher pipeline tolls and fuel gas charges increased transportation, again, linked to higher commodity prices.

Taxes increased due to higher commodity prices than we had budgeted a good thing while higher pipeline tools and fuel gas charges increased transportation again linked to higher commodity prices.

While we are facing an inflationary pressures like all other producers. So far we have been able to mitigate most of it on the capital side through lasting efficiency improvements drilling.

While we are facing inflationary pressures like all other producers, so far we have been able to mitigate most of it on the capital side through lasting efficiency improvements.

Drilling efficiencies in the CAFRA region are best in class. We've reduced drilling days per well by roughly 15% and increased drilling meters per day by over 10% over the past 18 to 24 months. With that, I'll give it back to.

Drilling efficiencies in the CAFTA region are best in class, we reduced drilling days per well by roughly 15% and increased drilling meters per day by over 10% over the past 18 to 24 months.

With that I'll give it back to Terry for some closing remarks.

Terry Anderson: Thanks, Kris. You know, I'm so excited about where ARC is heading. We are early in demonstrating an inflection point in profitability at a time where there is strong demand for responsible resource development. ARC has the attributes to grow and continue to lead in this regard. We have scale and world-class assets that is opening up numerous opportunities to get our product to key demand regions. We have one of the lowest emission profile and a path to improving it, all made possible by our team of high caliber and motivated people. ARC has been in business for over 25 years, and the future has never looked brighter. With that, I'll turn it back over to the operator.

Thanks, Chris.

I'm so excited about where arc is heading we are early in demonstrating an inflection point in profitability at a time, where there is strong demand for responsible resource development arc has the attributes to grow and continue to lead in this regard we have scale and world class assets that is opening up numerous opportunities to get our product.

You know, I'm so excited about where AHRQ is heading. We are early in demonstrating an inflection point in profitability at a time where there is strong demand for responsible resource development. AHRQ has the attributes to grow and continue to lead in this regard. We have scale and world-class assets that is opening up numerous opportunities to get our product to key demand regions. We have one of the lowest emissions profile and a path to improving it, all made possible by our team of high-caliber and motivated...

Key demand regions, we have one of the lowest emission profile and a path to improving it all made possible by our team of high caliber and motivated people arc has been in business for over 25 years in the future has never looked brighter.

AHRQ has been in business for over 25 years and the future has never looked brighter. With that, I'll turn it back over to

With that I'll turn it back over to the operator.

Operator: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw your question, simply press star followed by two. If you're using your speaker phone, we ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question will be from Michael Harvey at RBC Capital Markets.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw your question, simply press star followed by two. And if you're using your speakerphone, we ask that you please lift the handset before pressing any key.

Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please slowly press star followed by one on your Touchtone phone you will Danaher, Tom prompt acknowledging your request and if you would like to withdraw your question.

Simply press Star followed by two and if Youre using a speakerphone, we ask that you. Please lift the handset before pressing any keys. Please go ahead and press Star one now if you have a question.

please go ahead and press star 1 now if you have a question.

And your first question will be from Michael Harvey at RBC Capital Marks.

Your first question will be from Michael Harvey at RBC capital markets.

Michael Harvey: Yeah, sure. Good morning, everybody. Just a couple of quick ones, I guess. First, on this Cheniere deal, maybe for Ryan, do you have any sense for or maybe you can give us some color on the available firm transport on Great Lakes or otherwise, just to get your gas there? Or do you still have to kinda sort that out? The second one would be just more modeling based, and that's just focused on your royalties. You've got a bunch of moving parts that are kinda tougher for us to model, drilling credits rolling off, more Alberta drilling, just higher prices. Maybe you can give us a sense for where you would see your royalties going later this year, kind of at a strip pricing scenario.

Yeah sure. Good morning, everybody. So just a couple quick ones I guess first on this cheniere deal maybe for Ryan do you have any sense for Howard maybe you can give us some color on the available firm transport.

Yes, sure. Good morning, everybody. So just a couple of quick ones, I guess, first on this Chenier deal.

Maybe for Ryan, do you have any sense for, or maybe you can give us some colour on the available firm transport on Great Lakes or otherwise, just to get your gas there? Or do you still have to kind of sort that out? And the second one would be just more modelling based, and that's just focused on your royalties. So you've got a bunch of moving parts.

On great lakes, or otherwise just to get your gas there or do you still have to kind of sort that out and the second one would be just more a modeling based and that's just focused on your royalties. So you've got a bunch of moving parts.

uh... that are kind of tougher for us to model uh... drilling credits rolling off more alberta drilling

What are kind of tougher for us to model drilling credits rolling off more Alberta drilling just higher prices. So maybe you can give us a sense for where you would see your royalties going lay.

just higher prices so maybe you can give us a sense for where you would see your royalties going later this year kind of at a strip pricing scenario.

This year kind of at a strip pricing scenario.

Ryan Berrett: Hey, Mike, it's Ryan. Thanks for the question. Cheniere, obviously, you know, we're really excited to enter into the Cheniere transaction. Cheniere has a proven track record of delivering LNG to the world, and, you know, we're really excited to be a part of that. Specifically to your question on transport, we are utilizing our Alliance Pipeline capacity, and we are delivering in Chicago to Cheniere, and Cheniere takes our gas from there on their proprietary pipeline. This gives us, and one of the specific attributes to this deal, this preserves our NGPL capacity. So ARC still retains our capacity to the Gulf Coast that we can utilize for NYMEX exposure or future LNG exposure. Mike, it's Chris here.

Hey, Mike It's Ryan Thanks for the question Shneur obviously.

Hey, Mike, it's Ryan. Thanks for the question, Shanir. Obviously, you know, we're really excited to enter into the Shanir transaction. Shanir has a proven track record of delivering LNG to the world and

We're really excited to enter into the Cheniere transaction Cheniere has a proven track record of delivering LNG to the world.

You know, we're really excited to be a part of that. Specifically to your question on transport, we are utilizing our Alliance pipeline capacity and we are delivering in Chicago to Chenier and Chenier takes our gas from there on their proprietary pipeline. This gives us, and one of the specific attributes to this deal, this preserves our NGPL capacity. So ARC still retains our capacity to the Gulf Coast.

We're really excited to be a part of that specifically to your question on transport. We are utilizing our alliance pipeline capacity and we are delivering in Chicago to Cheniere and Cheniere takes our gas from their on their on their proprietary pipeline.

This gives us one of the specific attributes of this deal.

Reserves are in GPL capacity, so are still retains our capacity to the Gulf coast.

that we can utilize for NYMEX exposure or future LNG exposure.

We can utilize for nymex exposure or future LNG exposure.

And Mike It's Chris here on the royalties front you saw obviously, a higher royalties print this quarter given the high commodity prices.

And Mike, it's Chris here. On the royalties front, you saw obviously a higher royalties print this quarter given the high commodity prices.

Kris Bibby: On the royalties front, yeah, you know, you saw obviously a higher royalties print this quarter given the high commodity prices. If we look forward, you know, at strip is probably the easiest way to just talk to it. We see relatively stable royalties in that 14% range for the remainder of the year. You are right that, you know, there's some moving parts in terms of some different changes underneath. As you look out a bit, again, if you're using strip as kinda just to center it's reasonably stable. It kinda ticks down about 1% and then stabilizes kind of in that 13% range going forward based again on existing strip pricing.

If we look forward, you know, at Strip is probably the easiest way to just talk to it. We see relatively stable royalties in that 14% range for the remainder of the year.

If we look forward.

At strip is probably the easiest way to just talk to it.

We see relatively stable royalties in that 14% range for the remainder of the year.

You are right that there's some moving parts in terms of some different changes underneath. And then as you look out a bit, again, if you're using Strip, it's kind of just to center it. It's reasonably stable. It kind of ticks down about a percent and then stabilizes kind of in that 13% range going forward based, again, on existing Strip pricing.

You are right that there are some moving parts in terms of some.

Some different changes underneath and then as you look out a bit again, if youre using strip is kind of just et cetera, it's reasonably stable it kind of ticks down about a percent and then stabilize kind of in that 13% range going forward based again on existing strip pricing.

Michael Harvey: Sure. Thanks for that.

Sure Thanks for that.

Okay.

Operator: Thank you. Once again, ladies and gentlemen, as a reminder, if you would like to ask a question at this time, please slowly press star followed by one on your touchtone phone. At this time, I would like to turn the call back over to Mr. Anderson.

Thank you. Once again, ladies and gentlemen, as a reminder, if you would like to ask a question at this time, please slowly press star followed by 1 on your touch-tone phone.

Thank you once again, ladies and gentlemen, as a reminder, if you would like to ask a question at this time. Please slowly press star followed by one on you touched on the phone.

Okay.

And at this time I would like to turn the call back over to Mr. Anderson.

And at this time, I would like to turn the call back over to Mr. Anderson.

Terry Anderson: Well, that's all the questions. Thanks, everybody, for your time. We appreciate the time this morning, and we look forward to the next quarter. Appreciate it.

Well, that's all the questions and thanks, everybody for your time, we appreciate them.

Well, that's all the questions and thanks everybody for your time. We appreciate the time this morning and we look forward to the next quarter. Appreciate it.

The time this morning, and we look forward to the next quarter I appreciate it.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines. Have a good weekend.

Thank you Sir.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines. Have a good weekend.

Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines have a good weekend.

[music].

Yes.

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Hum.

Yeah.

Q1 2022 ARC Resources Ltd Earnings Call

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