Canadian ARC claims top Montney producer status
ARC Resources, which in April closed its acquisition of Seven Generations Energy, making it the largest pure-play Montney producer, nevertheless sustained a Q2 2021 net loss of C$123mn (US$98.9mn), it said July 29.
The loss, ARC said, reflected transaction costs associated with the Seven Generations acquisition, higher general and administrative costs and higher depletion, depreciation and amortisation. Additionally, it recognised increased risk management losses, driven primarily by the risk management contracts it inherited from Seven Generations.
But free funds flow was sharply higher yr/yr, rising to C$249.7mn from C$106.1mn as capital expenditures, including net property acquisitions, jumped to C$214.8mn from C$44mn in Q2 2020.
Despite the temporary impacts on its balance sheet from the Seven Generations acquisition, ARC remains on track to deliver annual synergies of C$160mn in 2022, with over half that total already achieved.
Operational impacts of the acquisition were notable, despite the effects of planned maintenance and turnaround activities across ARC’s asset base. Total production more than doubled, to 335,701 barrels of oil equivalent/day from 166,510 boe/day in Q2 2020 (and from 170,430 boe/day in Q1 2021). Natural gas production averaged 1.2bn ft3/d, up from 773.3mn ft3/d a year ago, while liquids production rose to 135,138 barrels/d from 37,631 b/d.
Blueberry River First Nations
The company also said it is monitoring closely a recent Supreme Court of British Columbia judgement regarding a claim by the Blueberry River First Nations (BRFN) – which encompasses most of the BC portion of the Montney – which could impact how future developments are carried out.
In its late June judgement, the court ruled that the rights of the BRFN under existing treaties had been infringed by the cumulative impacts of industrial developments within the Nations’ traditional territory.
“Depending on the outcome of any appeal, it could materially increase regulatory risks for new infrastructure projects in northeast British Columbia, and could extend to other areas in Canada where similar claims may be made,” Sander Duncanson, regulatory, environmental, aboriginal and land partner at Calgary law firm Osler, Hoskin & Harcourt, wrote in a subsequent review of the court’s ruling.
Earlier this week, the BC government said it would not appeal the ruling, and that it would work with BRFN and other First Nations to build a sustainable path forward for industrial developments in the province.
“The court's decision was clear that the province must improve its assessment and management of the cumulative impact of industrial development on Blueberry River First Nations’ Treaty rights, and to ensure these constitutional rights are protected,” BC attorney general David Eby said. “We have always sought collaborative dialogue on these matters with Blueberry River First Nations outside of the courts, and we have reached out to Blueberry River First Nations in order to start the negotiation process, which all parties, including industry, local government and stakeholders, are keen to pursue in earnest.”
Those negotiations, Duncanson wrote in his review, will be critical to future Montney developments.
“Unless BC…reaches a settlement with BRFN that would allow development to proceed, the future of any new development in this part of BC (including, again, most of the Montney gas play in BC) may require BRFN’s consent – thereby transferring control of a substantial portion of BC’s resource base from BC to BRFN.”