History
ARC grew from a trust built on acquisitions and equity raisings into a Montney-focused corporation, selling its Saskatchewan assets for $700 million in 2016 after halving its dividend.
2003-2005: Building the trust through acquisitions
The record opens with ARC Energy Trust funding growth by acquisition. In June 2003 United ARC L.P. converted $200 million of the $320 million special debenture issued for the Star Oil & Gas acquisition into 16,891,891 trust units, sold at $11.95. The Trust received no proceeds, but its debt fell. In November 2003 it closed a bought deal, a offering sold in bulk to underwriters, of 14.5 million units at $13.40, raising $194.3 million gross. The money first repaid bank debt and then funded capital spending.
In December 2005 ARC announced a record $340 million capital program for 2006, aiming for about 61,000 barrels of oil equivalent a day (boe/d). It also announced the Redwater and North Pembina Cardium Unit acquisition, a long-life oil purchase that closed December 16, 2005. A bought deal of 9,000,000 units at $26.65 raised $240 million gross and repaid the bank debt used for it.
2009-2010: Raising money, buying Ante Creek and Storm
The record is quiet from 2006 to 2008. In February 2009 ARC sold 15,474,400 units at $16.35, raising about $253 million gross to help fund that year's capital program. In April 2009 it placed about US$125 million of senior secured notes in three parts, at 7.19%, 8.21% and 6.5%, to repay bank debt and diversify its credit sources.
In December 2009 ARC completed the Ante Creek and other Northern Alberta asset purchase. In January 2010 it sold 13 million units at $19.40, raising about $252 million gross, of which $180 million repaid the bank debt for that purchase. In May 2010 the security on its bank facilities and notes was released, and it closed US$150 million of unsecured notes at 5.36%.
Then came Storm Exploration. The deal, closed August 17, 2010, was valued at about $645 million at $19.53 per ARC unit. Storm holders also received shares in a spun-out company, Storm Resources, plus warrants and cash. ARC issued 23,524,456 trust units and 1,744,038 exchangeable shares, assumed about $89 million of debt, and expected 2010 production of 72,500 to 74,500 boe/d.
2010-2014: Becoming a corporation
In November 2010 the board approved converting the Trust into a dividend-paying corporation, ARC Resources Ltd., with each unit becoming one common share. The target date was January 1, 2011, and the planned dividend was $0.10 a month. ARC said it had about $2.4 billion of tax pools and expected no material income tax until 2014.
In August 2012, citing low natural gas prices and volatile crude oil price differentials, ARC cut its 2012 capital program to $600 million from $760 million. It sold about 14.6 million shares at $23.65, for about $345 million gross, once the over-allotment option was fully used. It also placed US$300 million at 3.81%, US$60 million at 3.31% and $40 million at 4.49% of unsecured notes. In May 2013 shareholders approved a Stock Dividend Program, letting holders take dividends as new shares at a 5% discount. In September 2014 ARC closed US$150 million of 3.72% notes, and the Prudential shelf agreement was raised to US$350 million. The release cited 2014 production guidance of 110,000-114,000 boe/d.
2015-2017: Lower prices, a dividend cut and the Saskatchewan sale
In January 2015, citing continued deterioration in commodity prices, ARC cut its 2015 capital budget to $750 million from $875 million. It kept production guidance at 120,000-125,000 boe/d. It issued about 15.53 million shares at $22.55, then a further 2.329 million on the over-allotment, for about $402 million in total, to reduce bank debt temporarily and fund capital programs.
In February 2016 the board halved the monthly dividend to $0.05 from $0.10, starting March 15, 2016. ARC said this cut funding needs by about $200 million a year.
In November 2016 ARC agreed to sell all its Saskatchewan assets, about 7,500 boe/d, to Spartan Energy Corp. for $700 million cash, closing December 8, 2016. The sale covered 37,893 thousand barrels of oil equivalent of proved plus probable reserves at year-end 2015. ARC said the proceeds would strengthen its balance sheet and support its Montney assets. It also ended the 3% discount on its reinvestment plans from January 1, 2017, then in February 2017 had its board approve eliminating both plans entirely from the April 17, 2017 dividend.
As of April 7, 2017, the bank facility had been cut to $950 million from $1,000 million, maturing November 6, 2020. Post-closing adjustments on the Saskatchewan sale were pending, and the record did not state how the $700 million was used. The $0.05 monthly dividend was confirmed through March 15, 2017, and enterprise value was stated at $7.8 billion in February 2017.
Written from the 23 story beats below (2003 to 17 Feb 2017), which come from the company's own announcements and filings.