ARC Resources (TSE:ARX) reported what management described as “exceptional” fourth-quarter results, led by record production and stronger realized natural gas pricing, while outlining a more cautious approach to development at its Attachie asset after recent Upper Montney wells underperformed early expectations.
Record fourth-quarter production and strong realized gas pricing
President and CEO Terry Anderson said fourth-quarter production reached a record 408,000 barrels of oil equivalent (BOE) per day, representing 7% year-over-year growth and 10% growth on a per-share basis. Condensate and oil production was 119,000 barrels per day in the quarter.
ARC also discussed its response to natural gas market conditions. With prices strengthening late in the year, the company restored production at Sunrise that had been curtailed during periods of weak pricing. Anderson said ARC realized a natural gas price of CAD 3.77 per Mcf, nearly CAD 1.50 per Mcf above AECO, supported by low-cost transportation to U.S. markets. He noted that in 2025 the company curtailed nearly 400 million cubic feet per day of Sunrise production when prices were low, allowing ARC to defer roughly CAD 50 million of capital while preserving resource.
LNG demand and international exposure coming into focus
Looking ahead, Anderson said AECO pricing appeared “constructive” and that ARC has commenced deliveries to the LNG Canada project under its agreement with Shell. He framed LNG Canada as an important source of incremental long-term Canadian gas demand.
Management also said ARC is about a year away from shipping a portion of its natural gas to international markets through LNG supply agreements, which would increase exposure to global LNG pricing. In closing remarks, Anderson added ARC expects to ship first volumes to international markets via the U.S. Gulf Coast in about a year, calling it a milestone in the company’s natural gas diversification strategy.
Attachie update: early well variability prompts a slower pace
ARC provided an update on Attachie, where it completed its first year of operations since commissioning the asset in late 2024. Fourth-quarter Attachie production averaged 28,000 BOE per day, including about 13,000 barrels per day of condensate. Anderson described Attachie as a large, condensate-rich asset with more than 360 net sections and said ARC has only worked on about 10% of the accumulated land base so far.
However, he said performance across Attachie wells has been mixed, with some strong and some weak results. While current production was described as about 30,000 BOE per day with 14,000 barrels per day of condensate, management said early results from the most recent Upper Montney pads brought on in late 2025 and early 2026 “are not meeting our expectations.” As a result, ARC is adjusting its development schedule to give technical teams more time to analyze results and determine the optimal path forward.
During Q&A, Anderson said there were no significant changes to completion design on the recent wells and emphasized the short production history—around five to six weeks for the latest Upper Montney pad—meaning it was “too early” to draw firm conclusions before the wells fully cleaned up. Responding to questions on the nature of the issue, he said the company was expecting “a little more hydrocarbon” and that the decision to slow down was aimed at spending capital more efficiently once results are better understood.
Later in the call, Anderson pointed to casing deformation as a key difference observed relative to earlier results, saying it was not seen on other pads and could affect ARC’s ability to stimulate the full lateral length. He compared the situation to prior challenges the company has worked through in Dawson and Parkland where stimulation effectiveness was initially limited but later resolved.
On the Lower Montney at Attachie, Anderson said it remained too early to assess the opportunity, with the first trial pad just about to come on stream.
2026 guidance held; potential capital reallocation toward Kakwa
Despite the Attachie slowdown and removal of asset-level guidance, ARC kept its 2026 corporate outlook unchanged. Management reiterated production guidance of 405,000 to 420,000 BOE per day and capital spending of CAD 1.8 billion to CAD 1.9 billion, while noting capital timing and activity could shift across the portfolio as the company evaluates Attachie data.
Asked where capital might be reallocated if Attachie spending is reduced, Anderson said the company sees opportunities in Kakwa, including development related to the July acquisition, while adding ARC could still allocate some capital to Attachie depending on incoming results. Management said teams were still working through specifics.
Chief Financial Officer Kris Bibby said ARC is maintaining a placeholder of about CAD 250 million for Attachie spending but emphasized the company intends to “read and react,” making it difficult to provide pad-by-pad detail at this stage.
Financial results, shareholder returns, and reserves highlights
Bibby said fourth-quarter results came in ahead of expectations. Production of 408,000 BOE per day was described as 4% above forecast, while funds from operations of CAD 874 million was 11% above. Free cash flow was CAD 415 million in the quarter, up 47% from the third quarter and 40% above analyst expectations, according to management. Full-year 2025 free funds flow totaled CAD 1.3 billion, which Bibby said was roughly double 2024 levels.
ARC returned 75% of 2025 free funds flow to shareholders, including repurchasing just under 20 million common shares for CAD 514 million and declaring CAD 452 million in dividends. The remaining free funds flow was used to reduce debt and maintain financial strength. ARC ended the year with about CAD 2.9 billion in net debt, which Bibby said was approximately 0.9 times 2025 cash flow and about CAD 200 million lower than the prior quarter.
For 2026, Bibby said ARC expects to generate approximately CAD 1.2 billion of free funds flow in the current price environment and plans to return “essentially all” free funds flow to shareholders through dividends and share buybacks.
On reserves, Anderson said the company reported record reserves across all three categories, with increases of 15% on a proved developed producing (PDP) basis and about 10% on a proved plus probable (2P) basis. He also cited a before-tax net present value of 2P reserves of CAD 39 per share, based on roughly a quarter of ARC’s internally identified inventory. In response to a question on reserve revisions, Bibby said ARC does not disclose asset-level reserve details, but noted there were minor adjustments at Attachie and that the booking of the July acquisition was the main change at Kakwa.
- 2025 average annual production was cited at a record 374,000 BOE per day.
- Management said production and reserves per share increased by about 10%.
- Free cash flow per share was said to have doubled to CAD 2.20 per share, supporting an 11% dividend increase for the fifth consecutive year.
In closing comments, Anderson acknowledged the decision to slow Attachie activity may be unpopular in the market near-term, but said management is focused on risk management and capital discipline to support long-term shareholder value.
About ARC Resources (TSE:ARX)
ARC Resources is an independent energy company engaged in the acquisition, exploration, development, and production of conventional oil and natural gas in Western Canada. The company produces light, medium, and heavy crude, condensate, natural gas liquids, and natural gas. Production averaged 163.6 thousand barrels of oil equivalent per day in 2020, and the company estimates that it holds approximately 879 million boe of proven and probable crude oil and natural gas reserves.
