ARC Resources Ltd.

Good morning, my name is Ivo and I will be your conference operator today. At this time, I would like to welcome everyone to the AHRQ Resources Third Quarter 2024 Earnings Conference Call. All lines have been placed to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, Please press star followed by the number two. Thank you. Mr. Luko, you may begin your conference.

Thank you, operator. Good morning, everyone, and thank you for joining us for our third quarter earnings conference call. Joining me today are Terry Anderson, President and Chief Executive Officer, Chris Bibby, Chief Financial Officer, Armin Jahangiri, Chief Operating Officer, Lara Conrad, Chief Development Officer, and Ryan Barrett, Senior Vice President, Marketing. Before I turn it over to Chris and Terry to talk you through our third quarter results and 2025 budget, 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 in 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 all available on our website as well as CDAR+. Following our prepared remarks, we'll open the line to questions. With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead.

Thanks, Dale, and good morning, everyone. I want to begin by stating that AHRQ's longstanding principles of safety, capital discipline, and operational excellence are embedded in our culture and were once again evident in the quarter. We delivered strong operational results And in October, we successfully commissioned the first phase at Hitachi, which is our eighth major Montney development project. In addition, we continue to deliver on our commitment to shareholder returns, announcing a 12% dividend increase while continuing to buy back shares, both proof points that reaffirm our conviction in our business. Looking ahead, our asset base are performing very well with Hitachi on stream, ARP is positioned to deliver a significant step change in free cash flow per share growth in 2025. To expand on the quarter, we delivered average production of 327,000 DOE per day. This included 89,000 barrels per day of light oil and condensate, representing 20% growth quarter over quarter. This increase in condensate contributed to high margins and strong free cash flow generation. offsetting weak Western Canadian natural gas prices. We also maintain 2024 guidance as high deliverability at CAQA helped offset voluntary natural gas curtailment at our Sunrise asset. The strong CAQA performance was partly the result of frac design changes the team implemented earlier this year. Production at CAQA averaged 180,000 BOE per day and at times was producing in excess of 200,000 BUE per day. This is a great example of the technical strengths of our people and our commitment to continuous improvement. While Sunrise is one of the lowest cost dry gas assets in North America, the decision to curtail production showed our disciplined approach to profitability. As Western Canadian natural gas prices stayed low, we elected to shut in approximately 250 million cubic feet per day to preserve resource for a period of higher pricing. And currently, we're able to leverage our dual connected infrastructure and redirect gas to more attractively priced markets in the U.S. This resulted in higher realized pricing and better margins. An additional benefit of curtailing sunrise production is we can defer 20 to 30 million of capital next year that we would have spent maintaining production. In mid-October, we restored some volumes at Sunrise when natural gas prices recovered above levels required to exceed our hurdle rates. We have said this before, but it's worth mentioning again. ARC will always operate with a profitability over BOE mindset, and our operational decisions at Sunrise are a proof point of this. Moving on to Attachee. Back in May of 2023, when we announced we were proceeding with Phase 1, we committed to an 18-month construction timeframe. Today, 18 months later, I'm pleased to announce we've delivered on this promise and have commissioned phase one on time, on budget, and most importantly, safely. The achievement is the culmination of years of development planning, stakeholder and Indigenous engagement, and detailed technical work. Project management is what we do well. In total, This project involved more than 3 million combined work hours for construction and commissioning with our service providers. And I am proud of the way our team has executed this project, demonstrating once again that operational excellence and safety are core to how ARC operates. Today, Hitachi is producing about 20,000 BUE a day, of which 11,000 barrels per day is condensate. With our startup drilling and completion activities nearing completion, we are right on track to ramp up to our productive capacity of 40,000 DOE per day by year end. Hitachi is a critical part of achieving the profitable growth embedded in our long-term plan, so to see it come together is very exciting. Thank you to the whole team at ARC for successfully executing this project and for your continued focus on safe and efficient operations across our companies. Moving on to the budget. Next year, we have all the pieces in place to deliver a meaningful increase in free cash flow per share. Our capital budget of $1.6 to $1.7 billion is expected to deliver record average production of 380,000 to 395,000 BOE per day, representing 10% production growth, 20% growth in concept production, and a concurrent 10% reduction in capital of expenditures compared to 2024. We expect this program to more than double cut free cash flow to about $1.5 billion at strip pricing, which we plan to return to shareholders through a growing base dividend and share repurchases. Hitachi is set to deliver approximately 500 million in asset level cash flow on an annual basis. It will also increase margins by adding high value while cash costs per BOE remain flat. The result is a combination of production growth and margin expansion as we grow ATACHI. The improvement in the implied capital efficiencies compared to 2024 is driven by three main factors. First, we get the benefits of a full year of production from ATACHI phase one. Second, with the infrastructure investments at ATACHI complete, 90% of the capital is directed towards well-related activities, which drive a strong return on invested capital. And lastly, we are benefiting from better capital efficiencies at some of our core Montney assets, like Capua and Sunrise. Before I turn it over to Chris, I'd like to touch on Hitachi Phase 2. As a reminder, Phase 2 is a near replica of Phase 1, a 40,000 BOE per day facility that is comprised of approximately 60% of liquids of which the majority is condensate. We are ready to advance phase two as part of our long-term plan. We expect to include the capital investments with the 2026 budget with an on-stream date of 2028. Today, we have taken steps to gain further confidence in the regulatory environment. We maintain positive relationships with the First Nations with whom we operate, and the returns are well above our hurdle rates under low commodity price scenarios. Phase 2 lies in the heart of the concept-rich areas of the Montney. As a result, we expect growth and margin expansion to continue as we introduce higher margin Hitachi barrels into our base production. In summary, our conviction in Phase 2 remains strong, and we look forward to sharing more as we continue to advance this project. With that, I'll turn it over to Chris.