ARC Resources Ltd. Reports Second Quarter 2024 Results

Press Release

Aug. 1, 2024

CALGARY, AB, Aug. 1, 2024  – (TSX: ARX) ARC Resources Ltd. (“ARC” or the “Company”) today reported its second quarter 2024 financial and operational results.

HIGHLIGHTS

• ARC delivered second quarter 2024 production of 330,046 boe⁽¹⁾ per day (65 per cent natural gas and 35 per cent crude oil and liquids⁽²⁾), in line with the top end of the second quarter production guidance range of 325,000 to 330,000 boe per day. Second quarter production decreased four per cent year-over-year reflecting planned turnaround activity completed at Greater Dawson and Kakwa.
• ARC generated funds from operations of $503 million⁽³⁾ ($0.84 per share⁽⁴⁾) and capital expenditures totalled $532 million⁽⁵⁾, therefore free funds flow registered at ($29) million⁽⁵⁾ or ($0.05) per share⁽⁶⁾. ARC recognized cash flow from operating activities of $543 million⁽⁴⁾ ($0.91 per share) and net income of $240 million ($0.40 per share).
• Company guidance in 2024 remains unchanged. Capital expenditures are planned between $1.75 to $1.85 billion⁽⁷⁾, and production is forecast to average between 350,000 and 360,000 boe per day (63 per cent natural gas and 37 per cent crude oil and liquids).
  • In response to weak natural gas prices, ARC has elected to curtail approximately 250 MMcf per day of natural gas production at Sunrise to preserve value for periods when prices are higher. Despite the curtailment at Sunrise, 2024 production guidance is unchanged with current expectations to be at the low end of the guidance range.
  • The inclusion of the natural gas curtailment at Sunrise is expected to result in average third quarter production between 330,000 and 335,000 boe per day, with a higher percentage of crude oil and liquids relative to the second quarter of 2024.
  • Fourth quarter production is expected to average between 380,000 and 385,000 boe per day. This includes restored volumes at Sunrise, increased condensate-rich production from Kakwa and Greater Dawson relative to the first half of 2024, and initial production contribution from Attachie.
• Attachie Phase I remains on schedule and budget. Initial commissioning volumes are planned for the fourth quarter of 2024, and full productive capacity of 40,000 boe per day (40 per cent natural gas, 60 per cent crude oil and liquids) is anticipated for the first quarter of 2025.
• In July, the Government of B.C. and Halfway River First Nation announced an agreement which includes a Landscape Planning Pilot for an area that encompasses ARC’s Attachie development. As a result, ARC’s Attachie development is no longer limited by the disturbance cap for petroleum and natural gas development outlined in the Blueberry River First Nations Implementation Agreement.
• ARC distributed $118 million to shareholders during the second quarter, and intends to return essentially all free funds flow to shareholders in 2024 through the base dividend and share repurchases.
  • ARC declared dividends of $102 million or $0.17 per share and repurchased 0.7 million common shares for $16 million under its normal course issuer bid (“NCIB”).
• As of June 30, 2024, ARC’s long-term debt balance was $1.4 billion and its net debt balance was $1.5 billion⁽³⁾ or 0.6 times funds from operations⁽³⁾.

ARC’s unaudited condensed interim consolidated financial statements and notes (the “financial statements”) and Management’s Discussion and Analysis (“MD&A”) as at and for the three months and six months ended June 30, 2024, are available on ARC’s website at www.arcresources.com and under ARC’s SEDAR+ profile at www.sedarplus.ca. The disclosure under the section entitled “Non-GAAP and Other Financial Measures” in ARC’s MD&A as at and for the three and six months ended June 30, 2024 (the “Q2 2024 MD&A”) is incorporated by reference into this news release.

(1)	ARC has adopted the standard six thousand cubic feet (“Mcf”) of natural gas to one barrel (“bbl”) of crude oil ratio when converting natural gas to barrels of oil equivalent (“boe”). Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
(2)	Throughout this news release, crude oil (“crude oil”) refers to light, medium, and heavy crude oil product types as defined by National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Condensate is a natural gas liquid as defined by NI 51-101. Throughout this news release, natural gas liquids (“NGLs”) comprise all natural gas liquids as defined by NI 51-101 other than condensate, which is disclosed separately. Throughout this news release, crude oil and liquids (“crude oil and liquids”) refers to crude oil, condensate, and NGLs.
(3)	See Note 8 “Capital Management” in the financial statements and “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for information relating to this capital management measure, which information is incorporated by reference into this news release.
(4)	See “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for an explanation of the composition of this supplementary financial measure, which information is incorporated by reference into this news release.
(5)	Non-GAAP financial measure that is not a standardized financial measure under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and may not be comparable to similar financial measures disclosed by other issuers. See “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for information relating to this non-GAAP financial measure, which information is incorporated by reference into this news release. See “Non-GAAP and Other Financial Measures” of this news release for the most directly comparable financial measure disclosed in ARC’s current financial statements to which such non-GAAP financial measure relates and a reconciliation to such comparable financial measure.
(6)	Non-GAAP ratio that is not a standardized financial measure under IFRS Accounting Standards and may not be comparable to similar financial ratios disclosed by other issuers. Free funds flow, a non-GAAP financial measure, is used as a component of the non-GAAP ratio. See “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for the non-GAAP ratio for the comparative period and other information relating to this non-GAAP ratio, which information is incorporated by reference into this news release.
(7)	Refer to the section entitled “About ARC Resources Ltd.” contained within the Q2 2024 MD&A for historical capital expenditures, which information is incorporated by reference into this news release.

FINANCIAL AND OPERATIONAL RESULTS

(Cdn$ millions, except per share amounts(1), boe amounts,	Three Months Ended			Six Months Ended
and common shares outstanding)	March 31, 2024	June 30, 2024	June 30, 2023	June 30, 2024	June 30, 2023
FINANCIAL RESULTS
Net income	185.4	239.5	278.9	424.9	853.8
Per share	0.31	0.40	0.46	0.71	1.39
Cash flow from operating activities	636.3	543.0	550.9	1,179.3	1,091.2
Per share(2)	1.06	0.91	0.90	1.97	1.77
Funds from operations	606.9	502.8	560.8	1,109.7	1,278.2
Per share	1.01	0.84	0.92	1.85	2.08
Free funds flow	102.3	(29.5)	144.3	72.8	374.3
Per share	0.17	(0.05)	0.24	0.12	0.61
Dividends declared	101.6	101.6	103.7	203.2	195.6
Per share	0.17	0.17	0.17	0.34	0.32
Cash flow used in investing activities	499.8	643.4	464.4	1,143.2	861.8
Capital expenditures	504.6	532.3	416.5	1,036.9	903.9
Long-term debt	1,144.0	1,379.5	1,122.0	1,379.5	1,122.0
Net debt	1,336.1	1,477.9	1,281.1	1,477.9	1,281.1
Common shares outstanding, weighted average diluted (millions)	598.4	598.2	611.5	598.3	615.4
Common shares outstanding, end of period (millions)	596.7	596.7	608.4	596.7	608.4
OPERATIONAL RESULTS
Production
Crude oil and condensate (bbl/day)	82,672	74,713	83,540	78,693	81,268
Natural gas (MMcf/day)	1,322	1,286	1,289	1,304	1,277
NGLs (bbl/day)	49,411	40,994	45,202	45,203	46,991
Total (boe/day)	352,328	330,046	343,630	341,187	341,018
Average realized price
Crude oil ($/bbl)(2)	83.83	100.28	88.13	91.10	90.42
Condensate ($/bbl)(2)	94.58	103.73	93.43	98.96	98.58
Natural gas ($/Mcf)(2)	3.19	1.86	2.83	2.53	4.34
NGLs ($/bbl)(2)	25.65	21.69	20.89	23.85	24.87
Average realized price ($/boe)(2)	37.49	33.35	35.97	35.49	42.97
Netback per boe
Commodity sales from production ($/boe)(3)	37.49	33.35	35.97	35.49	42.97
Royalties ($/boe)(3)	(4.15)	(4.19)	(4.38)	(4.16)	(6.14)
Operating expense ($/boe)(3)	(4.26)	(5.51)	(4.81)	(4.87)	(4.66)
Transportation expense ($/boe)(3)	(5.35)	(5.22)	(5.34)	(5.29)	(5.47)
Netback per boe ($/boe)(3)	23.73	18.43	21.44	21.17	26.70
TRADING STATISTICS(4)
High price	24.32	26.18	18.44	26.18	18.44
Low price	19.44	23.45	15.38	19.44	14.33
Close price	24.15	24.41	17.67	24.41	17.67
Average daily volume (thousands of shares)	3,343	3,648	4,009	3,498	4,979

(1)	Per share amounts, with the exception of dividends, are based on weighted average diluted common shares.
(2)	See “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for an explanation of the composition of this supplementary financial measure, which information is incorporated by reference into this news release.
(3)	Non-GAAP ratio that is not a standardized financial measure under IFRS Accounting Standards and may not be comparable to similar financial measures disclosed by other issuers. Netback, a non-GAAP financial measure, is used as a component of the non-GAAP ratio. See “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for the non-GAAP ratio for the comparative period and other information relating to this non-GAAP ratio, which information is incorporated by reference into this news release.
(4)	Trading prices are stated in Canadian dollars on a per share basis and are based on intra-day trading on the Toronto Stock Exchange.

OUTLOOK

ARC’s strategic priorities center on growing free funds flow per share while upholding its principles of capital discipline, profitability, and financial strength.

With these principles in mind, ARC introduced a long-term plan to attain its objectives in 2023. The strategy is focused on delivering a competitive total return by balancing profitable investment in the Montney with margin expansion initiatives and a substantial return of capital.

One year later, ARC remains on-track to achieve its targets established in its long-term plan. Attachie – ARC’s single largest growth asset – is advancing as planned with commissioning scheduled for later this year and operational efficiencies are being realized across the base assets that will contribute to higher profitability over the next five years.

Attachie Phase I Update

Attachie Phase I remains on schedule and on-budget. First volumes are expected late in the fourth quarter, with full productive capacity of 40,000 boe per day anticipated for the first quarter of 2025. ARC invested $182 million at Attachie in the second quarter of 2024, and $362 million through the first six months of 2024.

Attachie Phase I is approximately 75 per cent complete:

• ARC has drilled 30 of the approximately 40 wells required to fill the 40,000 boe per day facility capacity, and stimulated 20 wells.
• Plant construction is approximately 75 per cent complete.
• The transmission line, natural gas sales line, and water ponds are all complete.
• The liquids and gathering pipelines are on schedule and nearing completion.

Investor Tour

ARC plans to host an Investor Field Tour at Attachie for institutional investors and research coverage analysts on Wednesday, October 2, 2024.

Operational Update

Sunrise

• Subsequent to quarter-end, in response to record low natural gas prices in Western Canada, ARC has elected to curtail approximately 250 MMcf per day of natural gas production at its sole dry gas asset, Sunrise. ARC will resume full production when natural gas prices recover to levels that support ARC’s return requirements.
• Sunrise is a low-cost natural gas asset, with a full cycle break-even of approximately C$1.10 per Mcf, inclusive of both cash costs of approximately $0.65 per Mcf (operating, transportation, and royalties) and finding and development cost.
• Recent well design changes at Sunrise are yielding stronger productivity and returns.
  • On a per well basis, the well design change in the Upper Montney is expected to yield a 40 per cent increase in natural gas production over the initial twelve months, with only a 25 per cent increase in well costs due to higher intensity completions.
  • As a result, annual sustaining capital at Sunrise in developing both the Upper and Lower Montney is expected to decrease by 10 per cent relative to the previous development plan.

Kakwa

Production growth at Kakwa in the second half of 2024 will focus on higher condensate-rich regions of the asset compared to development in 2023.

• Subsequent to the quarter, ARC completed the construction of the 10-10 superpad expansion, supporting long-term investment in ARC’s condensate-rich asset. A key component of this expansion is increased takeaway optionality which provides additional flexibility moving  product  to market.

2024 Guidance

Capital expenditures and production guidance for 2024 remain unchanged. ARC plans to invest between $1.75 and $1.85 billion and generate average production of between 350,000 and 360,000 boe per day (63 per cent natural gas, 37 per cent crude oil and liquids). Full-year average production will be influenced by the duration of the natural gas curtailment at Sunrise and to a lesser extent, downtime related to extreme temperatures in the third quarter, with current expectations to be at the low end of the guidance range.

• The inclusion of the natural gas curtailment at Sunrise is expected to result in average third quarter production between 330,000 and 335,000 boe per day, with a higher percentage of crude oil and liquids relative to the second quarter of 2024.
• The effect on funds from operations is anticipated to be negligible at prevailing forward prices, attributable to a higher operating netback resulting from a greater proportion of condensate-weighted production.
• Fourth quarter production is estimated to average between 380,000 and 385,000 boe per day. This includes the restored production at Sunrise and the growth in production relative to the first half of 2024 from ARC’s condensate-rich assets such as Greater Dawson and Kakwa, as well as some contribution from Attachie Phase I coming on-stream.

ARC’s 2024 annual guidance and a review of 2024 year-to-date results are outlined below.

(1)	See “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for an explanation of the composition of these supplementary financial measures, which information is incorporated by reference into this news release.
(2)	Excludes accretion of ARC’s asset retirement obligation.
(3)	Refer to the section entitled “About ARC Resources Ltd.” contained within the Q2 2024 MD&A for historical capital expenditures, which information is incorporated by reference into this news release.

ARC’s 2024 corporate guidance is based on various commodity price scenarios and economic conditions; certain guidance estimates may fluctuate with commodity price changes and regulatory changes. ARC’s guidance provides readers with the information relevant to Management’s expectations for financial and operational results for 2024. Readers are cautioned that the guidance estimates may not be appropriate for any other purpose. Refer to the section entitled “Annual Guidance” in the Q2 2024 MD&A, available on ARC’s website at www.arcresources.com and under ARC’s SEDAR+ profile at www.sedarplus.ca.

2025 Outlook

The 2025 outlook incorporates lower anticipated capital spending relative to 2024 and approximately 10 per cent production growth reflecting a full-year contribution from Attachie Phase I. This is expected to drive a meaningful increase in free funds flow, which is planned to be returned to shareholders through a combination of a growing base dividend and share repurchases.

The outlook for 2025 production and capital expenditures is unchanged from the first quarter of 2024, and outlined in the table below.

	2024	2025
Total production (boe/day)	350,000 – 360,000	375,000 – 400,000
Natural gas production (%)	63 %	60 %
Crude oil and liquids production (%)	37 %	40 %
Capital Expenditures ($ billions)(1)	1.75 – 1.85	1.6 – 1.8
Funds from Operations ($ billions)(2)(3)	2.4 – 2.7	3.0 – 3.3

(1)	Refer to the section entitled “About ARC Resources Ltd.” contained within the Q2 2024 MD&A for historical capital expenditures, which information is incorporated by reference into this news release.
(2)	Based on the forward curve at July 19, 2024 (2024: WTI US$79 per barrel; US$2.30/MMbtu NYMEX; C$1.50/Mcf AECO; 2025: WTI US$74 per barrel; US$3.30/MMbtu NYMEX; C$2.50Mcf AECO).
(3)	See Note 8 “Capital Management” in the financial statements and “Non-GAAP and Other Financial Measures” in the Q2 2024 MD&A for information relating to this capital management measure, which information is incorporated by reference into this news release.

FINANCIAL AND OPERATIONAL RESULTS

Production

• ARC’s production averaged 330,046 boe per day during the second quarter of 2024 (65 per cent natural gas and 35 per cent crude oil and liquids), in line with the top-end of the previously announced second quarter production guidance range of 325,000 to 330,000 boe per day.
  • Higher than forecast well productivity at Sunrise drove the slightly higher production and natural gas weighting.
  • Combined production from Kakwa and Greater Dawson decreased by approximately 20,000 boe per day compared to the first quarter of 2024 due to planned turnaround activity, which was completed on schedule and within budget.

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

• Second quarter 2024 funds from operations was $503 million ($0.84 per share), representing a decrease of nine per cent on a per share basis ($0.08 per share) from the same quarter of 2023. This decrease was primarily driven by lower production and lower average realized commodity prices. Partially offsetting these items were increased realized gains on risk management contracts.
  • Realized gains on risk management contracts increased by $73 million in the second quarter of 2024, compared to the same period in the prior year.
  • ARC has approximately 20 per cent of its natural gas hedged at AECO for the remainder of 2024, through a combination of collars and swaps, at an average floor price of C$3.15 per GJ.
• ARC generated cash flow from operating activities of $543 million ($0.91 per share) and free funds flow of ($29) million or ($0.05) per share during the second quarter of 2024.

The following table details the change in funds from operations for the second quarter of 2024 relative to the first quarter of 2024.

Funds from Operations Reconciliation	$ millions	$/share(1)
Funds from operations for the three months ended March 31, 2024	606.9	1.01
Production volumes
Crude oil and liquids	(86.3)	(0.14)
Natural gas	(10.3)	(0.02)
Commodity prices
Crude oil and liquids	51.7	0.10
Natural gas	(155.5)	(0.27)
Sales of commodities purchased from third parties	39.6	0.07
Other income	0.8	—
Realized gain on risk management contracts	46.9	0.08
Royalties	7.2	0.01
Expenses
Commodities purchased from third parties	(32.5)	(0.05)
Operating	(29.0)	(0.05)
Transportation	14.8	0.02
G&A	25.7	0.04
Interest and financing	(1.2)	—
Current income tax	22.4	0.04
Realized gain on foreign exchange	1.0	—
Other	0.6	—
Funds from operations for the three months ended June 30, 2024	502.8	0.84

(1)	Per share amounts are based on weighted average diluted common shares.

The following table details the change in funds from operations for the second quarter of 2024 relative to the second quarter of 2023.

Funds from Operations Reconciliation	$ millions	$/share(1)
Funds from operations for the three months ended June 30, 2023	560.8	0.92
Production volumes
Crude oil and liquids	(82.1)	(0.13)
Natural gas	(0.8)	—
Commodity prices
Crude oil and liquids	74.1	0.12
Natural gas	(114.2)	(0.19)
Sales of commodities purchased from third parties	56.7	0.09
Other income	1.4	—
Realized gain on risk management contracts	72.9	0.12
Royalties	10.9	0.02
Expenses
Commodities purchased from third parties	(57.9)	(0.10)
Operating	(15.1)	(0.03)
Transportation	10.2	0.02
G&A	1.3	—
Interest and financing	(6.4)	(0.01)
Current income tax	(14.6)	(0.02)
Realized gain on foreign exchange	6.3	0.01
Other	(0.7)	—
Weighted average shares, diluted	—	0.02
Funds from operations for the three months ended June 30, 2024	502.8	0.84

(1)	Per share amounts are based on weighted average diluted common shares.

Shareholder Returns

• During the second quarter, ARC distributed $118 million ($0.20 per share) to shareholders through a combination of dividends and share repurchases under its NCIB.
  • During the second quarter 2024, ARC declared dividends of $102 million ($0.17 per share).
  • ARC repurchased 0.7 million common shares under its NCIB at a weighted average price of $23.29 per share.
• Since commencing its initial NCIB in September 2021, ARC has repurchased approximately 18 per cent of total outstanding shares or 132 million common shares, at a weighted average price of $16.17 per share.
• ARC intends to renew its NCIB on or about September 1, 2024 for an additional 10 per cent of the public float, subject to review and approval by the TSX.
• ARC plans to distribute essentially all of its free funds flow to shareholders in 2024.

Operating, Transportation, and General and Administrative Expense

Operating Expense

• ARC’s second quarter 2024 operating expense of $5.51 per boe was in line with Company expectations and $0.70 per boe above the second quarter of 2023. The increase was due to lower production volumes and planned turnarounds that were concentrated in the second quarter 2024.
• Operating expense per boe is expected to decrease over the balance of the year with all major turnarounds completed.

Transportation Expense

• ARC’s second quarter 2024 transportation expense per boe of $5.22 was lower than ARC’s guidance range of $5.50 to $6.00 per boe primarily due to lower fuel gas expense related to lower natural gas prices.

General and Administrative Expense

• ARC’s second quarter 2024 G&A expense per boe of $1.85 decreased 27 per cent or by $0.69 per boe from the first quarter of 2024. G&A expense per boe for the quarter was within Company guidance.

Cash Flow Used in Investing Activities and Capital Expenditures

• Cash flow used in investing activities was $643 million during the second quarter of 2024. Of this, ARC invested $532 million into capital expenditures to drill 39 wells and complete 41 wells. Drilling was focused primarily at Kakwa, Greater Dawson, and Attachie.
• During the six months ended June 30, 2024, cash flow used in investing activities was $1.1 billion. Capital expenditures for the six month period registered at $1.0 billion. ARC drilled 77 wells and completed 65 wells across its asset base. The incremental investment has been focused on facilities and infrastructure associated with Attachie Phase I and the Kakwa 10-10 superpad.

The following table details ARC’s first six months of 2024 drilling and completion activities by area.

	Six Months Ended June 30, 2024
Area	Wells Drilled(1)	Wells Completed
Kakwa	26	31
Greater Dawson	20	21
Sunrise	6	10
Ante Creek	—	—
Attachie	25	3
Total	77	65

(1)	Excludes disposal wells.

Physical Natural Gas Marketing

• ARC’s infrastructure ownership and committed takeaway capacity to U.S. markets played a critical role in capturing higher natural gas price realizations relative to local benchmarks.
  • Subsequent to the quarter, ARC elected to shut-in a portion of its natural gas at Sunrise. ARC was able to leverage its dual-connected infrastructure and transport capacity to re-direct condensate-rich volumes away from Station 2, where natural gas prices were weakest, to AECO.
• In June 2024, Cedar LNG Partners LP reached a positive final investment decision for the Cedar LNG Project (the “Project”). Cedar LNG has secured 20-year take-or-pay liquefaction tolling services agreements with ARC and Pembina Pipeline for 1.5 Mtpa each. ARC will deliver approximately 200 MMcf per day of natural gas for liquefaction by the Project for a term of 20 years commencing with commercial operations, anticipated in late 2028.
  • ARC remains on track to execute a sale and purchase agreement by year end 2024 with an investment-grade rated company for the entirety of ARC’s LNG delivered from the Project.
  • With the anticipated execution of the sale and purchase agreement, ARC expects to achieve its long-term market diversification strategy, which includes linking approximately 25 per cent of its future natural gas production to international or LNG pricing.

Net Debt

• As at June 30, 2024, ARC’s long-term debt balance was $1.4 billion, and its net debt balance was $1.5 billion, or 0.6 times funds from operations.
  • ARC targets its net debt to be less than 1.5 times funds from operations and manages its capital structure to achieve that target over the long-term.
  • Long-term debt is comprised of $1.0 billion of senior notes outstanding and $385 million drawn on the syndicated credit facilities.
• ARC holds an investment-grade credit rating, which allows the Company to have access to capital and to manage a low-cost capital structure. ARC is committed to protecting its strong financial position.

Net Income

• ARC recognized net income of $240 million ($0.40 per share) during the second quarter of 2024,  a 29 per cent increase compared to the first quarter of 2024. The increase in net income compared to the prior quarter was primarily due to an increase in realized gains on risk management contracts in the second quarter of 2024.

CONFERENCE CALL

ARC’s senior leadership team will be hosting a conference call to discuss the Company’s second quarter 2024 results on Friday, August 2, 2024, at 8:00 a.m. Mountain Time (“MT”).

Date	Friday, August 2, 2024
Time	8:00 a.m. MT
Dial-in Numbers
Calgary	587-880-2171
Toronto	416-764-8659
Toll-free	1-888-664-6392
Conference ID	76324761
Webcast URL	https://app.webinar.net/8mG2Dzwqp6x

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 following the conference call.

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 Accounting Standards 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 Accounting Standards, such as net income, 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 monitor its capital investments relative to those budgeted by the Company on an annual basis. ARC’s capital budget excludes acquisition or disposition activities as well as the accounting impact of any accrual changes and payments under certain lease arrangements. The most 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.

Capital Expenditures	Three Months Ended			Six Months Ended
($ millions)	March 31, 2024	June 30, 2024	June 30, 2023	June 30, 2024	June 30, 2023
Cash flow used in investing activities	499.8	643.4	464.4	1,143.2	861.8
Acquisition of crude oil and natural gas assets	(0.1)	(5.0)	—	(5.1)	(0.5)
Disposal of crude oil and natural gas assets	—	—	—	—	73.6
Long-term investments	(2.8)	(1.3)	(3.2)	(4.1)	(4.4)
Change in non-cash investing working capital	3.0	(109.6)	(44.8)	(106.6)	(28.8)
Other (1)	4.7	4.8	0.1	9.5	2.2
Capital expenditures	504.6	532.3	416.5	1,036.9	903.9

(1)	Comprises non-cash capitalized costs related to the Company’s right-of-use asset depreciation and share-based compensation.

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 investment available to manage debt levels, pay dividends, and return capital to shareholders through share repurchases. 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 flow from operating activities. The following table details the calculation of free funds flow and its reconciliation to cash flow from operating activities.

Free Funds Flow	Three Months Ended			Six Months Ended
($ millions)	March 31, 2024	June 30, 2024	June 30, 2023	June 30, 2024	June 30, 2023
Cash flow from operating activities	636.3	543.0	550.9	1,179.3	1,091.2
Net change in other liabilities	6.7	(1.5)	(13.9)	5.2	(0.2)
Change in non-cash operating working capital	(36.1)	(38.7)	23.8	(74.8)	187.2
Funds from operations	606.9	502.8	560.8	1,109.7	1,278.2
Capital expenditures(1)	(504.6)	(532.3)	(416.5)	(1,036.9)	(903.9)
Free funds flow	102.3	(29.5)	144.3	72.8	374.3

(1)	Certain additional disclosures for these specified financial measures have been incorporated by reference. See “Cash Flow used in Investing Activities, Capital Expenditures, Acquisitions, and Dispositions” in the Q2 2024 MD&A.

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

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