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ARC Resources (TSE:ARX)
TSX:ARX
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ARC Resources
(TSX:ARX)
70Outperform
Positive Factors
Production Growth
ARC's Q4/24 production set a new record, driven by the strong ramp-up at Attachie and growth at Kakwa.
Shareholder Returns
The company emphasizes its commitment to return 100% of free cash flow to investors, highlighting strong asset performance.
Negative Factors
Revenue Projections
Revenue growth guidance for the fiscal year is reduced, affecting future projections.
ARC Resources (ARX) vs. S&P 500 (SPY)
Market Cap
$15.55B
Dividend Yield2.79%
Average Volume (3M)2.01M
Price to Earnings (P/E)14.0
Beta (1Y)0.93
Revenue Growth-9.83%
EPS Growth-27.76%
CountryCA
Employees584
SectorEnergy
Sector Strength76
IndustryFossil Fuels
Share Statistics
EPS (TTM)1.89
Shares Outstanding589,862,500
10 Day Avg. Volume2,337,932
30 Day Avg. Volume2,008,961
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.64
Price to Cash Flow (P/CF)6.00
P/FCF Ratio5.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$32.71Price Target Upside26.20% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
ARC Resources Business Overview & Revenue Model
Company DescriptionARC Resources Ltd. (ARX) is a Canadian energy company primarily engaged in the exploration, development, and production of oil and natural gas. Operating in the energy sector, ARC Resources focuses on generating sustainable energy solutions while maximizing shareholder value. The company holds significant positions in the premier Montney resource play in Alberta and northeast British Columbia, Canada, where it develops and produces natural gas and natural gas liquids, as well as crude oil.
How the Company Makes MoneyARC Resources generates revenue through the sale of natural gas, natural gas liquids, and crude oil produced from its operations in the Montney region. The company's revenue model is primarily based on extracting hydrocarbons from its extensive resource base and selling these commodities at prevailing market prices. Key revenue streams include the production and sale of natural gas, oil, and natural gas liquids. ARC Resources benefits from its strategic partnerships and joint ventures, which enhance its production capabilities and access to markets. Additionally, the company focuses on cost-efficient operations and technological innovations to improve production efficiency and reduce operating expenses, thereby enhancing profitability.
ARC Resources Financial Statement Overview
Summary
ARC Resources exhibits strong profitability and cash generation, though recent declines in net income and free cash flow indicate challenges in maintaining growth. The balance sheet remains strong with low leverage and a healthy equity ratio. The company needs to address decreasing ROE and net profit margins to sustain financial health.Income Statement
ARC Resources has shown a volatile revenue trend with a significant drop in 2022. The gross profit margin for 2023 was 59.0%, indicating strong profitability. However, the net profit margin declined from 28.2% in 2022 to 20.0% in 2023, reflecting reduced efficiency in converting revenue to profit. EBITDA margin remains robust at 52.3% in 2023.65
Positive
Balance Sheet
The company maintains a solid equity base with an equity ratio of 60.7% in 2023, indicating strong asset backing. The debt-to-equity ratio is relatively low at 0.30, suggesting prudent leverage management. Return on Equity (ROE) dropped from 34.6% in 2022 to 14.2% in 2023, reflecting diminished profitability.72
Positive
Cash Flow
Operating cash flow remained stable, highlighting strong cash generation capabilities. However, free cash flow decreased slightly in 2023. The operating cash flow to net income ratio was strong, suggesting effective cash conversion, but the free cash flow to net income ratio decreased due to lower free cash flow.68
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 5.62B | 5.66B | 9.85B | 5.51B | 1.17B | Gross Profit |
| 2.73B | 3.33B | 4.80B | 2.62B | -362.20M | EBIT |
| 0.00 | 1.72B | 4.04B | 2.04B | -685.00M | EBITDA |
| 2.95B | 3.57B | 4.39B | 2.18B | -185.70M | Net Income Common Stockholders |
| 1.12B | 1.60B | 2.30B | 786.60M | -547.20M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 0.00 | 1.10M | 57.10M | -869.30M | 400.00K | Total Assets |
| 13.10B | 12.38B | 11.62B | 11.38B | 4.95B | Total Debt |
| 2.39B | 2.21B | 1.79B | 2.57B | 751.10M | Net Debt |
| 2.39B | 2.21B | 1.73B | 3.44B | 750.70M | Total Liabilities |
| 5.15B | 4.96B | 4.97B | 5.45B | 2.16B | Stockholders Equity |
| 7.95B | 7.43B | 6.65B | 5.93B | 2.79B |
| Cash Flow | Free Cash Flow | |||
| 546.90M | 567.80M | 2.41B | 953.90M | 320.90M | Operating Cash Flow |
| 2.35B | 2.39B | 3.83B | 2.01B | 655.70M | Investing Cash Flow |
| -1.91B | -1.69B | -1.41B | -808.10M | -364.30M | Financing Cash Flow |
| -443.50M | -759.60M | -2.36B | -1.20B | -299.50M |
ARC Resources Technical Analysis
Positive
25.92
Price Trends
26.27
Negative
25.45
Positive
24.58
Positive
Market Momentum
-0.15
Positive
49.49
Neutral
60.92
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:ARX, the sentiment is Positive. The current price of 25.92 is below the 20-day moving average (MA) of 26.22, below the 50-day MA of 26.27, and above the 200-day MA of 24.58, indicating a neutral trend. The MACD of -0.15 indicates Positive momentum. The RSI at 49.49 is Neutral, neither overbought nor oversold. The STOCH value of 60.92 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:ARX.
ARC Resources Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | C$3.11B | 10.49 | 11.55% | 8.12% | -14.63% | -18.40% | |
70 Outperform | C$24.32B | 18.36 | 8.55% | 1.99% | -8.29% | -30.52% | |
70 Outperform | $15.55B | 13.95 | 14.67% | 2.79% | -9.83% | -27.76% | |
68 Neutral | C$2.38B | 10.46 | 5.99% | 3.10% | 22.71% | ― | |
62 Neutral | $1.82B | ― | -1.59% | 4.33% | -1.72% | 79.87% | |
57 Neutral | $8.37B | 5.59 | -4.20% | 7.40% | 0.23% | -68.56% | |
47 Neutral | $272.17M | ― | -27.57% | 9.99% | 2.24% | -332.95% |
* Energy Sector Average
Performance Comparison
TSE:ARX
ARC Resources
25.92
3.48
15.49%
TSE:BTE
Baytex Energy
2.98
-1.41
-32.20%
TSE:PNE
Pine Cliff Energy
0.74
-0.17
-19.04%
TSE:VET
Vermilion Energy
10.77
-4.13
-27.74%
TSE:PEY
Peyto Exploration & Dev
16.27
3.23
24.77%
TSE:TOU
Tourmaline Oil
65.46
7.71
13.35%
ARC Resources Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: 5.15% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call was largely positive, highlighting strong operational results, successful project completions, and significant growth in free cash flow and production. However, challenges such as weak natural gas prices and potential inflationary pressures on future projects were noted.Highlights
Strong Operational Performance
ARC successfully commissioned the first phase at Attachie, increasing production to 20,000 BOE per day with plans to reach 40,000 BOE per day by year-end.
Dividend Increase
ARC announced a 12% dividend increase and continued share buybacks, reflecting strong shareholder returns.
Record Production Expected
2025 production is expected to be between 380,000 and 395,000 BOE per day, a 10% growth from 2024.
Free Cash Flow Growth
Free cash flow is expected to more than double to about $1.5 billion in 2025 at strip pricing.
Attachie Phase 1 Completion
Attachie Phase 1 was completed on time and on budget, a significant achievement in project management.
Lowlights
Weak Natural Gas Prices
ARC curtailed production at Sunrise due to weak Western Canadian natural gas prices, impacting overall production.
Inflationary Pressures on Phase 2
Attachie Phase 2 is expected to encounter inflationary pressures compared to Phase 1, although costs are projected to remain flat.
Company Guidance
In the ARC Resources third quarter 2024 earnings call, guidance highlighted several key metrics and strategic initiatives. The company reported an average production of 327,000 BOE per day, with 89,000 barrels per day of light oil and condensate, marking a 20% increase quarter-over-quarter. ARC maintained its 2024 production guidance, aided by high deliverability at Kakwa, which averaged 180,000 BOE per day. They also announced a 12% dividend increase and continued share buybacks to enhance shareholder returns. The capital budget for 2025 is set between $1.6 billion and $1.7 billion, targeting a production increase to 380,000-395,000 BOE per day, with a 20% growth in condensate production and a 10% reduction in capital expenditures compared to 2024. The company expects to generate approximately $1.5 billion in free cash flow, promising to return this to shareholders through dividends and share repurchases. Furthermore, the Attachie Phase 1 project, recently commissioned on time and budget, is expected to produce approximately 40,000 BOE per day by year-end, contributing significant cash flow and improving margins. Looking ahead, ARC plans to advance Attachie Phase 2, expected to be included in the 2026 budget, with an on-stream date of 2028, further enhancing production and margin growth.ARC Resources Corporate Events
Business Operations and Strategy
ARC Resources Secures Long-Term LNG Deal with ExxonMobil
Positive
Mar 11, 2025
ARC Resources Ltd. has entered into a long-term sale and purchase agreement with ExxonMobil LNG Asia Pacific for the supply of liquefied natural gas from the Cedar LNG Project. This agreement marks a significant step in ARC’s strategy to link a substantial portion of its future natural gas production to international pricing, enhancing its market diversification and margin expansion. The partnership with ExxonMobil provides the latter with its first long-term offtake position on Canada’s Pacific Coast, strengthening both companies’ positions in the global LNG market.
Business Operations and StrategyFinancial Disclosures
ARC Resources Achieves Record Year-End Production and Financial Gains in 2024
Positive
Feb 6, 2025
ARC Resources Ltd. reported record production in the fourth quarter of 2024, with significant increases in both condensate and light oil production, driven by successful operations at Attachie Phase I and Kakwa. The company strategically managed natural gas production curtailments to optimize profitability, and as a result, ARC realized strong financial performance, including high funds from operations and reduced net debt by the year’s end.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.