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ARC Resources Ltd. — Interim / Quarterly Report 2025
Jul 31, 2025
46719_rns_2025-07-31_32edac78-d5d4-4676-8976-9c43d0365c7d.pdf
Interim / Quarterly Report
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ARC RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(unaudited)
As at
| (Cdn$ millions) | June 30, 2025 | December 31, 2024 |
|---|---|---|
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 949.8 | — |
| Inventory | 10.1 | 12.4 |
| Accounts receivable | 519.6 | 691.0 |
| Prepaid expense | 189.4 | 107.4 |
| Risk management contracts (Note 9) | 179.2 | 190.1 |
| 1,848.1 | 1,000.9 | |
| Risk management contracts (Note 9) | 150.8 | 154.1 |
| Long-term investments | 27.8 | 27.7 |
| Exploration and evaluation assets | 366.7 | 338.1 |
| Property, plant and equipment (Note 3) | 10,634.8 | 10,373.9 |
| Right-of-use and other long-term assets (Note 4) | 901.5 | 956.8 |
| Goodwill | 248.2 | 248.2 |
| Total assets | 14,177.9 | 13,099.7 |
| LIABILITIES | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities | 846.3 | 634.4 |
| Current portion of lease obligations (Note 5) | 84.6 | 92.8 |
| Current portion of long-term debt (Note 6) | 450.0 | — |
| Current portion of other deferred liabilities | 23.9 | 23.3 |
| Current portion of asset retirement obligation (Note 7) | 17.0 | 17.0 |
| Dividends payable (Note 10) | 110.9 | 112.2 |
| Risk management contracts (Note 9) | — | 1.0 |
| 1,532.7 | 880.7 | |
| Risk management contracts (Note 9) | 21.9 | 37.1 |
| Long-term portion of lease obligations (Note 5) | 867.6 | 908.5 |
| Long-term debt (Note 6) | 1,540.8 | 1,387.4 |
| Long-term incentive compensation liability (Note 12) | 41.3 | 76.2 |
| Other deferred liabilities | 87.7 | 95.8 |
| Asset retirement obligation (Note 7) | 401.4 | 414.4 |
| Deferred taxes | 1,388.5 | 1,351.4 |
| Total liabilities | 5,881.9 | 5,151.5 |
| SHAREHOLDERS' EQUITY | ||
| Shareholders' capital (Note 10) | 6,109.9 | 6,194.3 |
| Contributed surplus | 28.2 | 31.6 |
| Retained earnings | 2,159.1 | 1,728.5 |
| Accumulated other comprehensive loss | (1.2) | (6.2) |
| Total shareholders' equity | 8,296.0 | 7,948.2 |
| Total liabilities and shareholders' equity | 14,177.9 | 13,099.7 |
Commitments and contingencies (Note 13)
See accompanying notes to the unaudited condensed interim consolidated financial statements.
ARC Resources Ltd.
ARC RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
For the three and six months ended June 30
| Three Months Ended | Six Months Ended | |||
|---|---|---|---|---|
| (Cdn$ millions, except per share amounts) | 2025 | 2024 | 2025 | 2024 |
| Commodity sales from production (Note 11) | 1,229.2 | 1,001.7 | 2,719.4 | 2,203.8 |
| Royalties | (120.7) | (125.8) | (283.5) | (258.8) |
| Sales from third-party purchases (Note 11) | 307.2 | 277.3 | 612.4 | 515.0 |
| Total revenue | 1,415.7 | 1,153.2 | 3,048.3 | 2,460.0 |
| Interest and other income | 2.3 | 3.2 | 13.2 | 5.1 |
| Gain on risk management contracts (Note 9) | 146.7 | 145.7 | 111.9 | 69.1 |
| Total revenue, interest and other income, and gain on risk management contracts | 1,564.7 | 1,302.1 | 3,173.4 | 2,534.2 |
| Operating | 168.1 | 165.6 | 330.6 | 302.2 |
| Transportation | 174.1 | 156.7 | 360.1 | 328.2 |
| Third-party purchases (Note 14) | 307.5 | 274.0 | 603.2 | 515.5 |
| General and administrative | 46.5 | 55.7 | 103.8 | 137.1 |
| Interest and financing | 27.8 | 32.6 | 56.5 | 63.8 |
| Impairment (reversal of impairment) of financial assets | (3.2) | 1.0 | (3.0) | 0.6 |
| Depletion, depreciation and amortization and impairment of property, plant and equipment (Notes 3 and 4) | 349.0 | 314.6 | 698.3 | 654.8 |
| Loss (gain) on foreign exchange | 13.6 | (4.4) | 15.0 | (15.0) |
| Gain on disposal of crude oil and natural gas assets | (4.0) | — | (4.0) | — |
| Total expenses | 1,079.4 | 995.8 | 2,160.5 | 1,987.2 |
| Net income before income taxes | 485.3 | 306.3 | 1,012.9 | 547.0 |
| Provision for income taxes | ||||
| Current | 65.0 | 37.6 | 175.0 | 97.6 |
| Deferred | 24.2 | 29.2 | 37.1 | 24.5 |
| Total income taxes | 89.2 | 66.8 | 212.1 | 122.1 |
| Net income | 396.1 | 239.5 | 800.8 | 424.9 |
| Other comprehensive income | ||||
| Items that may be reclassified to net income in subsequent periods: | ||||
| Net unrealized gain (loss) on foreign currency translation adjustment | 4.2 | (2.1) | 5.0 | (6.4) |
| Comprehensive income | 400.3 | 237.4 | 805.8 | 418.5 |
| Net income per share (Note 10) | ||||
| Basic | 0.68 | 0.40 | 1.37 | 0.71 |
| Diluted | 0.68 | 0.40 | 1.36 | 0.71 |
See accompanying notes to the unaudited condensed interim consolidated financial statements.
ARC Resources Ltd.
ARC RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
For the six months ended June 30
| (Cdn$ millions) | Shareholders' Capital (Note 10) | Contributed Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders' Equity |
|---|---|---|---|---|---|
| December 31, 2023 | 6,268.2 | 36.1 | 1,141.4 | (17.9) | 7,427.8 |
| Comprehensive income | — | — | 424.9 | (6.4) | 418.5 |
| Share-based compensation plans (Note 12) | 1.2 | (0.7) | — | — | 0.5 |
| Exercise of share options (Note 12) | 18.5 | (3.9) | — | — | 14.6 |
| Repurchase of shares for cancellation (Note 10) | (13.9) | — | (16.5) | — | (30.4) |
| Change in liability for share purchase commitment (Note 10) | 0.7 | — | (0.5) | — | 0.2 |
| Dividends declared (Note 10) | — | — | (203.2) | — | (203.2) |
| June 30, 2024 | 6,274.7 | 31.5 | 1,346.1 | (24.3) | 7,628.0 |
| December 31, 2024 | 6,194.3 | 31.6 | 1,728.5 | (6.2) | 7,948.2 |
| Comprehensive income | — | — | 800.8 | 5.0 | 805.8 |
| Share-based compensation plans (Note 12) | 2.6 | (2.1) | — | — | 0.5 |
| Exercise of share options (Note 12) | 11.2 | (1.3) | — | — | 9.9 |
| Repurchase of shares for cancellation (Note 10) | (85.7) | — | (129.0) | — | (214.7) |
| Change in liability for share purchase commitment (Note 10) | (12.5) | — | (19.0) | — | (31.5) |
| Dividends declared (Note 10) | — | — | (222.2) | — | (222.2) |
| June 30, 2025 | 6,109.9 | 28.2 | 2,159.1 | (1.2) | 8,296.0 |
See accompanying notes to the unaudited condensed interim consolidated financial statements.
ARC Resources Ltd.
ARC RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS (unaudited)
For the three and six months ended June 30
| Three Months Ended | Six Months Ended | |||
|---|---|---|---|---|
| (Cdn$ millions) | 2025 | 2024 | 2025 | 2024 |
| CASH FLOW FROM OPERATING ACTIVITIES | ||||
| Net income | 396.1 | 239.5 | 800.8 | 424.9 |
| Add items not involving cash: | ||||
| Unrealized loss (gain) on risk management contracts (Note 9) | (86.8) | (81.9) | (2.0) | 11.6 |
| Depletion, depreciation and amortization and impairment of property, plant and equipment (Notes 3 and 4) | 349.0 | 314.6 | 698.3 | 654.8 |
| Unrealized loss (gain) on foreign exchange | 2.3 | (3.0) | 3.0 | (13.2) |
| Gain on disposal of crude oil and natural gas assets | (4.0) | — | (4.0) | — |
| Deferred taxes | 24.2 | 29.2 | 37.1 | 24.5 |
| Other (Note 14) | 1.3 | 4.4 | 5.9 | 7.1 |
| Net change in other liabilities (Note 14) | (7.7) | 1.5 | (55.1) | (5.2) |
| Change in non-cash working capital (Note 14) | 24.7 | 38.7 | 228.1 | 74.8 |
| Cash flow from operating activities | 699.1 | 543.0 | 1,712.1 | 1,179.3 |
| CASH FLOW FROM (USED IN) FINANCING ACTIVITIES | ||||
| Draw of long-term debt under revolving credit facilities | 814.4 | 1,596.8 | 2,062.6 | 3,296.3 |
| Issuance of senior notes (Notes 6 and 15) | 1,000.0 | — | 1,000.0 | — |
| Repayment of long-term debt | (891.5) | (1,361.8) | (2,454.7) | (3,066.3) |
| Proceeds from exercise of share options | 5.5 | 8.4 | 9.9 | 14.6 |
| Repurchase of shares | (76.6) | (16.3) | (207.4) | (31.4) |
| Repayment of principal relating to lease obligations | (25.6) | (21.5) | (51.9) | (42.6) |
| Cash dividends paid | (111.3) | (101.6) | (223.5) | (203.3) |
| Change in non-cash working capital (Note 14) | 5.1 | (1.5) | 3.2 | (1.3) |
| Cash flow from (used in) financing activities | 720.0 | 102.5 | 138.2 | (34.0) |
| CASH FLOW USED IN INVESTING ACTIVITIES | ||||
| Acquisition of crude oil and natural gas assets | (0.8) | (5.0) | (4.8) | (5.1) |
| Disposal of crude oil and natural gas assets | 4.0 | — | 4.0 | — |
| Property, plant and equipment development expenditures (Note 3) | (472.7) | (520.2) | (908.1) | (1,017.6) |
| Exploration and evaluation asset expenditures | (15.5) | (7.3) | (28.7) | (9.8) |
| Long-term investments | (0.9) | (1.3) | (1.2) | (4.1) |
| Change in non-cash working capital (Note 14) | 14.7 | (109.6) | 38.3 | (106.6) |
| Cash flow used in investing activities | (471.2) | (643.4) | (900.5) | (1,143.2) |
| INCREASE IN CASH AND CASH EQUIVALENTS | 947.9 | 2.1 | 949.8 | 2.1 |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 1.9 | 1.1 | — | 1.1 |
| CASH AND CASH EQUIVALENTS, END OF PERIOD | 949.8 | 3.2 | 949.8 | 3.2 |
| The following are included in cash flow from operating activities: | ||||
| Income taxes paid in cash | 41.2 | 58.7 | 80.6 | 101.5 |
| Interest paid in cash | 14.8 | 21.0 | 46.9 | 55.2 |
See accompanying notes to the unaudited condensed interim consolidated financial statements.
ARC Resources Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2025 and 2024
1. Structure of the Business
The principal undertakings of ARC Resources Ltd. and any subsidiaries ("ARC" or the "Company") are to carry on the business of acquiring, developing, and holding interests in crude oil and natural gas assets.
ARC was incorporated in Alberta, Canada and the Company's registered office and principal place of business is located at 1500, 308 – 4th Avenue SW, Calgary, Alberta, Canada T2P 0H7. ARC's common shares are traded on the Toronto Stock Exchange ("TSX") under the symbol ARX.
2. Basis of Preparation
These unaudited condensed interim consolidated financial statements (the "financial statements") have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"). These financial statements are condensed as they do not include all of the information required by IFRS Accounting Standards for annual financial statements and therefore should be read in conjunction with ARC's audited consolidated financial statements for the year ended December 31, 2024. All financial information is reported in millions of Canadian dollars ("Cdn$"), unless otherwise noted as United States dollars ("US$").
The financial statements have been prepared on a historical cost basis, except those items that are presented at fair value as detailed in the accounting policies disclosed in Note 3 "Summary of Material Accounting Policies" of ARC's audited consolidated financial statements for the year ended December 31, 2024. All accounting policies and methods of computation followed in the preparation of these financial statements are consistent with those of the previous year, except for income taxes. Income taxes on net income in the interim periods are accrued using the income tax rate that would be applicable to the expected total annual net income.
All inter-entity transactions have been eliminated upon consolidation between ARC and any subsidiaries in these financial statements. ARC's operations are viewed as a single operating segment by the chief operating decision maker of the Company for the purpose of resource allocation and assessing performance.
These financial statements were authorized for issue by ARC's board of directors (the "Board") on July 31, 2025.
3. Property, Plant and Equipment ("PP&E")
| Cost | Development and Production Assets | Corporate Assets | Total |
|---|---|---|---|
| Balance, December 31, 2024 | 18,950.0 | 155.3 | 19,105.3 |
| Additions | 912.3 | 12.4 | 924.7 |
| Acquisitions | 4.8 | — | 4.8 |
| Change in asset retirement cost | (12.0) | — | (12.0) |
| Balance, June 30, 2025 | 19,855.1 | 167.7 | 20,022.8 |
Accumulated Depletion, Depreciation and Amortization ("DD&A")
| Balance, December 31, 2024 | (8,610.8) | (120.6) | (8,731.4) |
|---|---|---|---|
| DD&A | (652.5) | (4.1) | (656.6) |
| Balance, June 30, 2025 | (9,263.3) | (124.7) | (9,388.0) |
Carrying Amounts
| Balance, December 31, 2024 | 10,339.2 | 34.7 | 10,373.9 |
|---|---|---|---|
| Balance, June 30, 2025 | 10,591.8 | 43.0 | 10,634.8 |
For the three and six months ended June 30, 2025, $11.4 million and $25.2 million of overhead charges, including share-based compensation, were capitalized to PP&E ($13.1 million and $30.1 million for the three and six months ended June 30, 2024), respectively.
ARC Resources Ltd.
ARC Resources Ltd.
4. Right-of-Use ("ROU") and Other Long-term Assets
| Cost | Buildings | Leases | Equipment and Vehicles | Facilities | Other Service Contracts | Total |
|---|---|---|---|---|---|---|
| Balance, December 31, 2024 | 40.2 | 123.8 | 1,157.9 | 27.1 | 1,349.0 | |
| Additions | — | — | — | 2.3 | 2.3 | |
| Modifications | — | 2.8 | — | — | 2.8 | |
| Balance, June 30, 2025 | 40.2 | 126.6 | 1,157.9 | 29.4 | 1,354.1 | |
| Accumulated Depreciation | ||||||
| Balance, December 31, 2024 | (25.7) | (84.6) | (275.4) | (6.5) | (392.2) | |
| Depreciation (1) | (0.8) | (18.5) | (40.3) | (0.8) | (60.4) | |
| Balance, June 30, 2025 | (26.5) | (103.1) | (315.7) | (7.3) | (452.6) | |
| Carrying Amounts | ||||||
| Balance, December 31, 2024 | 14.5 | 39.2 | 882.5 | 20.6 | 956.8 | |
| Balance, June 30, 2025 | 13.7 | 23.5 | 842.2 | 22.1 | 901.5 |
(1) Includes $16.6 million of depreciation on equipment and vehicle ROU assets capitalized to PP&E.
5. Lease Obligations
| Carrying Amount | |
|---|---|
| Balance, December 31, 2024 | 1,001.3 |
| Modifications | 2.8 |
| Interest Expense | 24.9 |
| Repayments | (76.8) |
| Balance, June 30, 2025 | 952.2 |
| Lease obligations due within one year | 84.6 |
| Lease obligations due beyond one year | 867.6 |
6. Long-term Debt
| June 30, 2025 | December 31, 2024 | |
|---|---|---|
| Syndicated credit facilities | — | 392.0 |
| Senior notes | ||
| 2.354% note due March 10, 2026 | 450.0 | 450.0 |
| 3.577% note due June 17, 2028 | 550.0 | — |
| 3.465% note due March 10, 2031 | 550.0 | 550.0 |
| 4.409% note due June 17, 2032 | 450.0 | — |
| Total senior notes | 2,000.0 | 1,000.0 |
| Unamortized debt issuance costs | (9.2) | (4.6) |
| Total long-term debt outstanding | 1,990.8 | 1,387.4 |
| Long-term debt due within one year | 450.0 | — |
| Long-term debt due beyond one year | 1,540.8 | 1,387.4 |
6
In June 2025, ARC closed its offering of $1.0 billion aggregate principal amount of senior unsecured notes (the "2025 Notes"). The terms and rates of the 2025 Notes are summarized below:
| Issue Date | Principal | Coupon Rate | Maturity Date | Principal Payment Terms |
|---|---|---|---|---|
| June 17, 2025 | $550 million | 3.577 % | June 17, 2028 | Due upon maturity |
| June 17, 2025 | $450 million | 4.409 % | June 17, 2032 | Due upon maturity |
During the six months ended June 30, 2025, the maturity date of ARC's unsecured extendible revolving credit facility was extended to March 2029, with the borrowing capacity unchanged at $1.7 billion.
At June 30, 2025, ARC's total available credit capacity, including its credit facility and senior notes, was $3.7 billion ($2.7 billion at December 31, 2024), of which $2.0 billion was drawn ($1.4 billion at December 31, 2024).
There are no financial covenants associated with the 2025 Notes and there were no changes to any existing debt covenants. At June 30, 2025, ARC was in compliance with all of its debt covenants.
At June 30, 2025, the fair value of all long-term debt outstanding was $2.0 billion ($1.4 billion at December 31, 2024).
Subsequent to June 30, 2025, ARC obtained a $500.0 million two-year term loan and increased the borrowing capacity under its credit facility to $2.0 billion.
The proceeds from the 2025 Notes, the term loan, and drawings under the credit facility were used to fund the previously announced acquisition of condensate-rich Montney assets in the Kakwa region in Alberta (the "Kakwa Assets") from Strathcona Resources Ltd. ("Strathcona"). For more information, refer to Note 15 "Subsequent Event".
7. Asset Retirement Obligation ("ARO")
ARC has estimated the net present value of its total ARO to be $418.4 million at June 30, 2025 ($431.4 million at December 31, 2024) based on a total future undiscounted liability of $609.4 million ($599.7 million at December 31, 2024). Management estimates that these payments are expected to be made over the next 58 years with costs being incurred evenly over those years. The Bank of Canada's long-term risk-free bond rate of 3.6 per cent (3.3 per cent at December 31, 2024) and an average inflation rate of 2.0 per cent (2.0 per cent at December 31, 2024) were used to calculate the present value of ARO at June 30, 2025.
The following table reconciles ARC's provision for its ARO:
| Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | |
|---|---|---|
| Balance, beginning of period | 431.4 | 451.3 |
| Development activities | 7.7 | 21.8 |
| Change in estimates (1) | 1.3 | (8.4) |
| Change in discount rate | (21.0) | (31.2) |
| Settlement of obligations | (8.1) | (16.2) |
| Accretion | 7.1 | 14.1 |
| Balance, end of period | 418.4 | 431.4 |
| Expected to be incurred within one year | 17.0 | 17.0 |
| Expected to be incurred beyond one year | 401.4 | 414.4 |
(1) Relates to changes in cost estimates of future obligations and anticipated settlement dates of ARO.
8. Capital Management
ARC actively manages its capital structure and adjusts it in response to changes in economic conditions and the risk characteristics of its underlying assets. ARC has the ability to manage its capital structure by issuing or repurchasing shares, or issuing or repaying debt.
ARC Resources Ltd.
ARC's objective when managing its capital is to maintain a conservative structure that will allow it to:
- fund its development and exploration programs;
- maintain sustainable, meaningful returns of capital to shareholders; and
- maintain financial flexibility to execute on strategic opportunities.
During the six months ended June 30, 2025, ARC issued $1.0 billion of long-term debt, repurchased 7.8 million common shares under its normal course issuer bid ("NCIB"), and the Board declared dividends totaling $0.38 per share. The issuance of long-term debt is in conjunction with the acquisition of the Kakwa Assets, for more information refer to Note 15 "Subsequent Event".
Funds from Operations
ARC considers funds from operations to be a key measure of capital management as it demonstrates ARC's ability to generate the necessary funds to maintain production at current levels and fund future growth through capital investment. Management believes that such a measure provides an insightful assessment of ARC's financial performance on a continuing basis by eliminating certain non-cash charges and actual settlements of ARO, of which the nature and timing of expenditures are discretionary. Funds from operations is not a standardized measure and therefore may not be comparable with the calculation of similar measures by other entities.
Funds from operations for the three and six months ended June 30, 2025 and 2024 is calculated as follows:
| Three Months Ended June 30 | Six Months Ended June 30 | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Cash flow from operating activities | 699.1 | 543.0 | 1,712.1 | 1,179.3 |
| Net change in other liabilities (Note 14) | 7.7 | (1.5) | 55.1 | 5.2 |
| Change in non-cash operating working capital (Note 14) | (24.7) | (38.7) | (228.1) | (74.8) |
| Funds from operations | 682.1 | 502.8 | 1,539.1 | 1,109.7 |
Net Debt and Net Debt to Funds from Operations
Net debt and net debt to funds from operations are used by Management as key measures to assess the Company's liquidity position at a point in time. The determination of net debt and net debt to funds from operations is reflective of the measures used by Management to monitor its liquidity in light of operating and capital budgeting decisions. Net debt is not a standardized measure and therefore may not be comparable with the calculation of similar measures by other entities.
ARC manages its capital structure for the long term, with the objective of having its net debt less than 1.5 times funds from operations. At June 30, 2025, ARC's net debt was 0.4 times its funds from operations.
The following table details the composition of ARC's net debt and net debt to funds from operations as at June 30, 2025 and 2024:
| June 30, 2025 | June 30, 2024 | |
|---|---|---|
| Long-term debt (1) | 1,990.8 | 1,379.5 |
| Accounts payable and accrued liabilities | 846.3 | 585.1 |
| Dividends payable | 110.9 | 101.6 |
| Cash and cash equivalents, accounts receivable, and prepaid expense | (1,658.8) | (588.3) |
| Net debt | 1,289.2 | 1,477.9 |
| Funds from operations (2) | 2,901.9 | 2,471.1 |
| Net debt to funds from operations (ratio) (3) | 0.4 | 0.6 |
(1) Includes current portion of long-term debt at June 30, 2025 of $450.0 million.
(2) 12-month trailing funds from operations.
(3) Composed of net debt divided by 12-month trailing funds from operations.
ARC Resources Ltd.
ARC Resources Ltd.
9. Financial Instruments and Market Risk Management
Financial Instruments
At June 30, 2025, ARC's financial instruments include cash and cash equivalents, accounts receivable, long-term investments, risk management contracts, accounts payable and accrued liabilities, dividends payable, lease obligations, and long-term debt.
ARC's risk management contracts are carried at fair value on the unaudited condensed interim consolidated balance sheets (the "balance sheets"). All of ARC's risk management contracts are transacted in active markets, with the exception of embedded derivatives identified within certain natural gas sales contracts.
Risk management contracts and fair value disclosure for ARC's long-term debt are classified as Level 2 measurements in the three-level fair value measurement hierarchy. The fair value of ARC's long-term debt is disclosed in Note 6 "Long-term Debt". There were no transfers between levels in the fair value hierarchy for the six months ended June 30, 2025.
The carrying values of ARC's accounts receivable, accounts payable and accrued liabilities, and dividends payable as at June 30, 2025 approximate their fair values due to the short-term nature of these instruments.
Embedded Derivatives
The embedded derivatives identified within certain natural gas sales contracts are classified as Level 3 within the fair value hierarchy, as the fair values have been determined using a discounted cash flow valuation technique, which models incorporate significant unobservable inputs. For additional information regarding the significant unobservable inputs and sensitivity of the fair value of ARC's embedded derivatives, refer to Note 16 "Financial Instruments and Market Risk Management" of ARC's audited consolidated financial statements for the year ended December 31, 2024.
ARC recognizes a gain (loss) on risk management contracts in the unaudited condensed interim consolidated statements of comprehensive income ("statements of comprehensive income") related to its natural gas embedded derivatives. The gain (loss) is determined by the relative movements in fair value compared to the prior period balance sheet date. For the three and six months ended June 30, 2025, ARC recognized an unrealized gain of $57.5 million and $24.0 million ($13.4 million and $17.4 million for the three and six months ended June 30, 2024), respectively. At June 30, 2025, the fair value of the natural gas embedded derivatives was $49.2 million ($25.2 million at December 31, 2024).
Financial Assets and Financial Liabilities Subject to Offsetting
The following is a summary of ARC's financial assets and financial liabilities that are subject to offsetting as at June 30, 2025 and December 31, 2024:
| Gross Amounts of Recognized Financial Assets (Liabilities) | Gross Amounts of Recognized Financial Assets (Liabilities) Offset | Net Amounts of Financial Assets (Liabilities) Prior to Credit Risk Adjustment | Credit Risk Adjustment | Net Amounts of Financial Assets (Liabilities) Recognized on Balance Sheets | |
|---|---|---|---|---|---|
| As at June 30, 2025 | |||||
| Risk management contracts | |||||
| Current asset | 227.8 | (47.6) | 180.2 | (1.0) | 179.2 |
| Long-term asset | 194.6 | (43.4) | 151.2 | (0.4) | 150.8 |
| Current liability | (47.6) | 47.6 | — | — | — |
| Long-term liability | (65.3) | 43.4 | (21.9) | — | (21.9) |
| Net position | 309.5 | — | 309.5 | (1.4) | 308.1 |
| As at December 31, 2024 | |||||
| Risk management contracts | |||||
| Current asset | 250.9 | (60.0) | 190.9 | (0.8) | 190.1 |
| Long-term asset | 187.2 | (32.7) | 154.5 | (0.4) | 154.1 |
| Current liability | (61.1) | 60.0 | (1.1) | 0.1 | (1.0) |
| Long-term liability | (69.8) | 32.7 | (37.1) | — | (37.1) |
| Net position | 307.2 | — | 307.2 | (1.1) | 306.1 |
9
Risk Management Contracts
The following table details the composition of ARC's gain on risk management contracts:
| Three Months Ended June 30 | Six Months Ended June 30 | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Realized gain on risk management contracts | 59.9 | 63.8 | 109.9 | 80.7 |
| Unrealized gain (loss) on risk management contracts | 86.8 | 81.9 | 2.0 | (11.6) |
| Total gain on risk management contracts | 146.7 | 145.7 | 111.9 | 69.1 |
The following table summarizes ARC's risk management contracts as at June 30, 2025:
| Risk Management Contracts Positions Summary (1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| As at June 30, 2025 | 2025 (remainder) | 2026 | 2027 | 2028 | 2029 | |||||
| Crude Oil – WTI | US$/bbl | bbl/day | US$/bbl | bbl/day | US$/bbl | bbl/day | US$/bbl | bbl/day | US$/bbl | bbl/day |
| Ceiling | 82.99 | 25,000 | 81.16 | 10,000 | — | — | — | — | — | — |
| Floor | 69.50 | 25,000 | 65.00 | 10,000 | — | — | — | — | — | — |
| Sold Floor | 56.25 | 20,000 | 52.50 | 10,000 | — | — | — | — | — | — |
| Sold Swaption (2) | — | — | 90.00 | 6,000 | 89.51 | 4,000 | — | — | — | — |
| Total Crude Oil Volumes (bbl/day) | 25,000 | 10,000 | — | — | — | |||||
| Natural Gas – NYMEX Henry Hub (3) | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day |
| Ceiling | 4.62 | 100,000 | 6.16 | 50,000 | — | — | — | — | — | — |
| Floor | 3.00 | 100,000 | 3.00 | 50,000 | — | — | — | — | — | — |
| Sold Ceiling | 7.60 | 50,000 | — | — | — | — | — | — | — | — |
| Natural Gas – AECO 7A | Cdn$/GJ | GJ/day | Cdn$/GJ | GJ/day | Cdn$/GJ | GJ/day | Cdn$/GJ | GJ/day | Cdn$/GJ | GJ/day |
| Ceiling | 4.93 | 170,000 | 4.04 | 300,000 | 3.71 | 85,000 | — | — | — | — |
| Floor | 2.90 | 170,000 | 2.71 | 300,000 | 2.60 | 85,000 | — | — | — | — |
| Total Natural Gas Volumes (MMBtu/day) | 261,129 | 334,345 | 80,564 | — | — | |||||
| Natural Gas – AECO Basis (Differential to NYMEX Henry Hub) | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day | US$/MMBtu | MMBtu/day |
| Sold Swap | (0.89) | 183,152 | (1.05) | 92,500 | (1.05) | 92,500 | (1.05) | 92,500 | (1.05) | 21,075 |
| Foreign Exchange | Notional (US$ Millions) | Rate (Cdn$/US$) | Notional (US$ Millions) | Rate (Cdn$/US$) | Notional (US$ Millions) | Rate (Cdn$/US$) | Notional (US$ Millions) | Rate (Cdn$/US$) | Notional (US$ Millions) | Rate (Cdn$/US$) |
| Ceiling | 270.0 | 1.4190 | 120.0 | 1.4390 | — | — | — | — | — | — |
| Floor | 270.0 | 1.3483 | 120.0 | 1.3800 | — | — | — | — | — | — |
| Swap | 10.0 | 1.3600 | — | — | — | — | — | — | — | — |
(1) The prices and volumes in this table represent averages for several contracts representing different periods. The average price for the portfolio of options listed above does not have the same payoff profile as the individual option contracts. Viewing the average price of a group of options is purely for indicative purposes. All positions are financially settled against the benchmark prices.
(2) The sold swaption allows the counterparty, at a specific future date, to enter into a swap with ARC at the above-detailed terms. These volumes are not included in the total commodity volumes until such time that the option is exercised.
(3) Natural gas prices referenced to NYMEX Henry Hub Last Day Settlement.
ARC Resources Ltd.
10. Shareholders' Capital
| (thousands of shares) | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 |
|---|---|---|
| Common shares, beginning of period | 589,626 | 596,853 |
| Repurchase of shares for cancellation | (7,776) | (8,487) |
| Issued on exercise of share options and long-term incentive awards | 562 | 1,215 |
| Unvested restricted shares held in trust pursuant to the LTRSA Plan (1) | (8) | (18) |
| Restricted shares vested pursuant to the LTRSA Plan | 96 | 63 |
| Common shares, end of period | 582,500 | 589,626 |
(1) Unvested restricted shares held in trust pursuant to the Long-term Restricted Share Award ("LTRSA") Plan includes restricted shares purchased.
During the six months ended June 30, 2025, ARC repurchased 7.8 million common shares under its NCIB at a weighted average price per share of $27.53 for a total of $214.7 million, inclusive of all costs. Shares are cancelled upon repurchase.
At June 30, 2025, ARC has recognized a liability of $46.6 million ($15.1 million at December 31, 2024) for share repurchases that may take place during its internal blackout period under an automatic share purchase plan agreement with an independent broker. The transaction has been recognized as a reduction to share capital of $18.1 million and a reduction to retained earnings of $28.5 million ($5.6 million and $9.5 million at December 31, 2024, respectively).
Net income per common share has been determined based on the following:
| (thousands of shares) | Three Months Ended June 30 | Six Months Ended June 30 | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Weighted average common shares | 584,002 | 596,623 | 586,236 | 596,678 |
| Dilutive impact of share-based compensation (1) | 1,045 | 1,534 | 1,122 | 1,612 |
| Weighted average common shares, diluted | 585,047 | 598,157 | 587,358 | 598,290 |
(1) For the six months ended June 30, 2025, 0.1 million of share-based compensation awards were excluded from the diluted weighted average shares calculation, as they were anti-dilutive (0.3 million for both the three and six months ended June 30, 2024).
Dividends declared for the three and six months ended June 30, 2025 were $0.19 and $0.38 per share ($0.17 and $0.34 for the three and six months ended June 30, 2024), respectively.
11. Revenue
Commodity Sales from Production
ARC earns revenue from contracts with customers primarily through the transfer of commodities at a point in time representing the following major product types:
| Commodity Sales from Production, by Product | Three Months Ended June 30 | Six Months Ended June 30 | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Crude oil | 70.6 | 58.4 | 134.2 | 120.0 |
| Condensate | 706.7 | 645.0 | 1,477.8 | 1,287.0 |
| Natural gas | 379.5 | 217.4 | 911.8 | 600.6 |
| Natural gas liquids | 72.4 | 80.9 | 195.6 | 196.2 |
| Total commodity sales from production | 1,229.2 | 1,001.7 | 2,719.4 | 2,203.8 |
During the three and six months ended June 30, 2025, $198.3 million and $487.8 million of total commodity sales from production are attributed to the United States ($115.8 million and $318.6 million for the three and six months ended June 30, 2024), respectively, with the remainder attributed to Canada, based on the location of ARC's sales points.
ARC Resources Ltd.
At June 30, 2025, accounts receivable includes $481.4 million from contracts with customers ($607.1 million at December 31, 2024).
Sales from Third-Party Purchases
Through the normal course of business, ARC will purchase goods and services from third parties and will earn revenue upon the subsequent sale of these purchases. The following table presents the Company's disaggregation of sales from third-party purchases:
| Three Months Ended June 30 | Six Months Ended June 30 | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Sales of commodities purchased from third parties | 295.3 | 277.3 | 600.5 | 515.0 |
| Transportation assignment sales | 11.9 | — | 11.9 | — |
| Sales from third-party purchases | 307.2 | 277.3 | 612.4 | 515.0 |
12. Share-based Compensation Plans
Long-term Incentive Plans
The following table summarizes the changes in the Restricted Share Unit ("RSU"), Performance Share Unit ("PSU"), and Deferred Share Unit ("DSU") awards for the six months ended June 30, 2025:
| RSU, PSU, and DSU Plans
(number of awards, thousands) | RSUs | PSUs (1) | DSUs |
| --- | --- | --- | --- |
| Balance, December 31, 2024 | 1,557 | 2,862 | 1,079 |
| Granted | 333 | 899 | 52 |
| Distributed | (384) | (950) | — |
| Forfeited | (36) | (136) | — |
| Balance, June 30, 2025 (2) | 1,470 | 2,675 | 1,131 |
(1) Based on underlying awards before any effect of the performance multiplier.
(2) Includes 3,568 RSUs and 0.3 million DSUs that were acquired through a business combination which are eligible for continuation and exercise (the "Acquired Plans").
Compensation charges relating to ARC's share-based compensation plans are reconciled as follows:
| Three Months Ended June 30 | Six Months Ended June 30 | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| General and administrative ("G&A") | 5.2 | 14.3 | 26.3 | 52.4 |
| Operating | 1.0 | 1.5 | 1.7 | 4.4 |
| PP&E | 2.0 | 4.3 | 8.0 | 15.4 |
| Total compensation charge | 8.2 | 20.1 | 36.0 | 72.2 |
| Cash payment | — | 4.8 | 34.4 | 44.1 |
At June 30, 2025, compensation amounts of $96.6 million were recognized in accounts payable and accrued liabilities on the balance sheets ($60.0 million at December 31, 2024) and $41.3 million was included in long-term incentive compensation liability ($76.2 million at December 31, 2024).
ARC Resources Ltd.
Share Option Plans
At June 30, 2025, all outstanding share options were vested and exercisable. The changes in total share options outstanding and related weighted average exercise prices of share options outstanding were as follows:
| Share Option Plans | Share Options (number of units, thousands) | Weighted Average Exercise Price ($) |
|---|---|---|
| Balance, December 31, 2024 | 1,060 | 18.95 |
| Exercised | (562) | 17.61 |
| Balance, June 30, 2025 (1) | 498 | 20.32 |
(1) All share options pertain to the Acquired plans.
The following table summarizes information regarding share options outstanding at June 30, 2025:
| Range of Exercise Price per Common Share ($) | Number of Share Options Outstanding (thousands) | Weighted Average Exercise Price ($) | Weighted Average Remaining Term (years) |
|---|---|---|---|
| 5.98 - 18.00 | 166 | 10.59 | 3.4 |
| 18.01 - 27.89 | 332 | 25.21 | 1.4 |
| Total | 498 | 20.32 | 2.1 |
LTRSA Plan
The changes in total LTRSA outstanding and related fair value per restricted share for the six months ended June 30, 2025 were as follows:
| Granted Prior to 2020 | Granted Subsequent to 2019 | |||
|---|---|---|---|---|
| LTRSA (number of awards, thousands) | Fair Value per Restricted Share ($) | LTRSA (number of awards, thousands) | Fair Value per Restricted Share ($) | |
| Balance, December 31, 2024 (1) | 693 | 11.18 | 205 | 7.12 |
| Restricted shares purchased | 6 | 26.54 | 2 | 26.54 |
| Distributed | (96) | 28.71 | — | — |
| Forfeited | (44) | 12.04 | (20) | 6.17 |
| Balance, June 30, 2025 | 559 | 8.28 | 187 | 7.43 |
(1) Balances at December 31, 2024 have been revised to reflect forfeitures from awards granted prior to 2020, which had previously been attributed to awards granted subsequent to 2019.
ARC recognized G&A expense of $0.2 million and $0.4 million relating to the LTRSA Plan for the three and six months ended June 30, 2025 ($0.2 million and $0.5 million for the three and six months ended June 30, 2024), respectively.
13. Commitments and Contingencies
The following is a summary of ARC's contractual obligations and commitments as at June 30, 2025:
| Payments Due by Period | |||||
|---|---|---|---|---|---|
| 1 Year | 2-3 Years | 4-5 Years | Beyond 5 Years | Total | |
| Debt repayments | 450.0 | 550.0 | — | 1,000.0 | 2,000.0 |
| Interest payments (1) | 69.2 | 117.1 | 77.8 | 58.7 | 322.8 |
| Purchase and service commitments (2) | 193.8 | 102.8 | 857.6 | 7,340.1 | 8,494.3 |
| Transportation commitments | 688.5 | 1,147.3 | 1,079.4 | 4,697.3 | 7,612.5 |
| Total contractual obligations and commitments | 1,401.5 | 1,917.2 | 2,014.8 | 13,096.1 | 18,429.6 |
(1) Fixed interest payments on senior notes.
(2) Includes variable operating costs associated with the Company's lease obligations.
ARC Resources Ltd.
Total contractual obligations and commitments were $18.4 billion at June 30, 2025 ($17.6 billion at December 31, 2024).
ARC acquired additional commitments through its purchase of the Kakwa Assets. For more information, refer to Note 15 "Subsequent Event".
14. Supplemental Disclosures
Presentation in the Statements of Comprehensive Income
ARC's statements of comprehensive income are prepared primarily by nature of item, with the exception of employee compensation expense which is included in both operating and G&A expense line items. The following table details the amount of total employee compensation expense included in operating and G&A expense line items in the statements of comprehensive income:
| Three Months Ended June 30 | Six Months Ended June 30 | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Operating | 18.5 | 14.1 | 45.1 | 30.8 |
| G&A | 23.4 | 31.3 | 60.1 | 83.1 |
| Total employee compensation expense | 41.9 | 45.4 | 105.2 | 113.9 |
Through the normal course of business, ARC will purchase goods and services from third parties which are subsequently sold. The following table presents the disaggregation of the expenses associated with third-party purchases:
| Three Months Ended June 30 | Six Months Ended June 30 | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Commodities purchased from third parties | 295.5 | 274.0 | 591.2 | 515.5 |
| Transportation assignment | 12.0 | — | 12.0 | — |
| Third-party purchases | 307.5 | 274.0 | 603.2 | 515.5 |
ARC Resources Ltd.
Presentation in the Statements of Cash Flows
The following tables provide a detailed breakdown of certain line items contained within cash flow from operating, financing, and investing activities:
| Change in Non-cash Working Capital | Three Months Ended June 30 | Six Months Ended June 30 | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Accounts receivable | 44.4 | 16.1 | 127.3 | 107.9 |
| Accounts payable and accrued liabilities | 80.9 | (92.0) | 222.8 | (154.0) |
| Inventory | 4.0 | 17.8 | 3.6 | 27.3 |
| Prepaid and other long-term assets | (84.8) | (14.3) | (84.1) | (14.3) |
| Total change in non-cash working capital | 44.5 | (72.4) | 269.6 | (33.1) |
| Relating to: | ||||
| Operating activities | 24.7 | 38.7 | 228.1 | 74.8 |
| Financing activities | 5.1 | (1.5) | 3.2 | (1.3) |
| Investing activities | 14.7 | (109.6) | 38.3 | (106.6) |
| Total change in non-cash working capital | 44.5 | (72.4) | 269.6 | (33.1) |
| Other Non-cash Items | Three Months Ended June 30 | Six Months Ended June 30 | ||
| --- | --- | --- | --- | --- |
| 2025 | 2024 | 2025 | 2024 | |
| Accretion of asset retirement obligation | 3.5 | 3.6 | 7.1 | 7.0 |
| Share-based compensation expense | 0.2 | 0.2 | 0.4 | 0.5 |
| Impairment (reversal of impairment) of financial assets | (3.2) | 1.0 | (3.0) | 0.6 |
| Loss on long-term investments | 0.3 | — | 0.3 | — |
| Other income | — | (0.5) | — | (0.5) |
| Other amortization | 0.5 | 0.1 | 1.1 | (0.5) |
| Total other non-cash items | 1.3 | 4.4 | 5.9 | 7.1 |
| Net Change in Other Liabilities | Three Months Ended June 30 | Six Months Ended June 30 | ||
| --- | --- | --- | --- | --- |
| 2025 | 2024 | 2025 | 2024 | |
| Long-term incentive compensation liability | 4.2 | 11.2 | (34.9) | 11.6 |
| Risk management contracts | — | — | — | 1.2 |
| ARO cash settlements | (1.3) | (3.4) | (8.1) | (9.9) |
| Other deferred liabilities | (6.0) | (6.3) | (6.7) | (7.3) |
| Debt issuance costs | (4.6) | — | (5.4) | (0.8) |
| Total net change in other liabilities | (7.7) | 1.5 | (55.1) | (5.2) |
ARC Resources Ltd.
The following table provides a detailed breakdown of the cash and non-cash changes in financing liabilities arising from financing activities:
| Financing Liabilities | Current Financial Liabilities | Long-term Financial Liabilities | Total Financial Liabilities from Financing Activities |
|---|---|---|---|
| December 31, 2023 | 85.2 | 2,123.5 | 2,208.7 |
| Cash flows | |||
| Draw of long-term debt | — | 3,296.3 | 3,296.3 |
| Repayment of long-term debt | — | (3,066.3) | (3,066.3) |
| Repayment of lease obligations | (42.6) | — | (42.6) |
| Reclassified to current | |||
| Lease obligations | 45.6 | (45.6) | — |
| Non-cash changes | |||
| Lease modification | — | 5.2 | 5.2 |
| Other | — | 1.4 | 1.4 |
| Other changes | — | (0.8) | (0.8) |
| Balance, June 30, 2024 | 88.2 | 2,313.7 | 2,401.9 |
| Balance, December 31, 2024 | 92.8 | 2,295.9 | 2,388.7 |
| Cash flows | |||
| Draw and issuance of long-term debt | — | 3,062.6 | 3,062.6 |
| Repayment of long-term debt | — | (2,454.7) | (2,454.7) |
| Repayment of lease obligations | (51.9) | — | (51.9) |
| Reclassified to current | |||
| Long-term debt | 450.0 | (450.0) | — |
| Lease obligations | 43.6 | (43.6) | — |
| Non-cash changes | |||
| Lease modification | 0.1 | 2.7 | 2.8 |
| Other | — | 0.9 | 0.9 |
| Other changes | — | (5.4) | (5.4) |
| Balance, June 30, 2025 | 534.6 | 2,408.4 | 2,943.0 |
| Lease obligations due within one year | 84.6 | — | 84.6 |
| Lease obligations due beyond one year | — | 867.6 | 867.6 |
| Long-term debt due within one year | 450.0 | — | 450.0 |
| Long-term debt due beyond one year | — | 1,540.8 | 1,540.8 |
ARC Resources Ltd.
ARC Resources Ltd.
17
15. Subsequent Event
On July 2, 2025, ARC completed its previously announced acquisition of the Kakwa Assets from Strathcona for total cash consideration of $1.7 billion, subject to final closing adjustments (the "Transaction"). The Transaction will be accounted for as a business combination using the acquisition method in accordance with the accounting policies disclosed in Note 3 "Summary of Material Accounting Policies" of ARC's audited consolidated financial statements for the year ended December 31, 2024.
Purchase Price Allocation
The following preliminary purchase price allocation is based on Management's best estimate of the assets acquired and liabilities assumed and is subject to change.
| ($ millions) | July 2, 2025 |
|---|---|
| Cash consideration | 1,674.5 |
| Identifiable net assets | |
| Property, plant and equipment | 1,705.0 |
| Right-of-use assets | 50.8 |
| Lease obligations | (50.8) |
| Asset retirement obligation | (30.5) |
| Total identifiable net assets | 1,674.5 |
Liquidity and Commitments
The Transaction was financed with proceeds from the 2025 Notes, a $500.0 million two-year term loan, and borrowings under ARC's credit facility. The two-year term loan was issued by a similar syndicate of banks with the same terms and conditions and with the same pricing as ARC's credit facility, as detailed in Note 12 "Long-term Debt" of ARC's audited consolidated financial statements for the year ended December 31, 2024. Additionally, the borrowing capacity under ARC's credit facility was increased from $1.7 billion to $2.0 billion. There are no new financial covenants and no changes to ARC's existing debt covenants.
As a result of the Transaction, ARC assumed approximately $190.0 million of additional commitments relating to transportation and natural gas processing.