ARC Resources Ltd.

hello and welcome to our second quarter 2021 review i'm chris vivi senior vice president and chief financial officer and today i'm with me terry anderson our chief executive officer and president welcome terry thanks chris today we're going to look at the second quarter highlights as well talk about some operational items highlights financially as well as a historical highlight that we reached during the quarter Provide a little bit of context. Last quarter during these videos, we were talking about legacy seven generations operations plus legacy arc operations to get a pro forma combined entity view. Now that we have a quarter behind us after the business combination closing on April 6th, we'll just be able to talk about our combined operations in ones which should be a little bit more straightforward. As always, our investor relations team is available to take any questions that come up from the video or even in normal course business. And on that note, I'd like to welcome a new member to the investor relations team. Dale Luko has joined us as manager of capital markets. So we'd like to welcome Dale to the team and look forward to working with him going forward. So Terry, there's another active quarter for us. A great deal of capital and operations activity across the asset base. Business combinations with 7th Generation closed on April 6th successfully, as well as we're going through a period of very strong commodity pricing, which is certainly putting some wind in our sails. And then finally, ARK celebrated its 25th anniversary or birthday, depending on how you want to look at it, on July 11th. And we started trading on the TSX back on July 11th, 1996, so quite a positive achievement. So when you're looking at the quarter, what are the key takeaways?

Well, first, thank you, Chris, and thanks to everybody that's tuning in. And, yeah, it has been a very busy quarter, and as you mentioned, we're very proud of our 25-year history of being a Canadian energy producer. I'll touch on three key takeaways from the quarter. So first was our demonstration of our free cash flow generation capability within the organization. We generated $250 million of free cash flow. We continue to execute our disciplined approach to capital allocation. So firstly, we reduced debt by $270 million in the quarter, and we increased our dividend by 10%. Second was showing our commitment to operational excellence. We had numerous turnarounds and maintenance activities across our operations and all of them came in ahead of schedule and on budget. And then third is our integration of our seven generations asset and people within the organization. And this is going very well. And we're approximately halfway to capturing our $160 million of synergies to date. And so we'll realize the remainder of that into 2022. Excellent.

As you said, a very busy quarter. I do want to dive in a little bit, and I know we're going to be talking about a lot of those key themes here over the next several minutes, but on the dividend increase, I do want to just spend a little bit of time, given it's been an area of focus and a lot of discussion recently. In terms of our approach, we're now four months into the business combination running together, and we're continuing to see strong free funds, slow generation, as well as normalized earnings increases, so really that is what set us up to be able to do this, and In alignment with our risk-managed approach, we're increasing the dividend, as you mentioned, 10% at this time. And really, when we were looking at that, we considered, will we be able to sustain this dividend throughout all commodity price cycles? And that was obviously the key analysis we were doing, and we're very comfortable we will be able to do so. So, very happy with that outcome. The dividend at ARC is a core principle and component of our shareholder returns, and we're increasing the dividend modestly at this time, and we have the flexibility to enhance these returns going forward. This is the start of our journey on increased returns to shareholders, and hopefully later this year we'll be able to put in an NCIB when we are coming up with our third quarter results.