About ARC

Proven Excellence 

ARC Energy Trust has operated as a sound and conservative oil and gas company, structured as a trust, since 1996. An industry leader, a socially responsible operator and a key contributor to the communities in which we work, ARC has a proven track record of performance. Today ARC remains committed to the future growth of its company and creating value for its unitholders.

Our Mission

ARC Energy Trust’s mission is to be one of the top performing conventional royalty trusts in Canada as measured by quality of assets, management expertise and investor returns. Since inception the Trust has been consistent in combining excellent managerial and technical expertise to maximise value to ARC Unitholders.

Our Profile

ARC Energy Trust is located in Calgary, Alberta, which is situated in the foothills of the Canadian Rocky Mountains.  Alberta is a province rich in oil and gas and as a result Calgary has developed into a thriving centre for oil and gas producers.  ARC is located in the heart of downtown Calgary in the newly established Ernst and Young Building.

The Trust commenced trading on the Toronto Stock Exchange on July 11, 1996 (AET.UN/TSX). The Initial Public Offier price was $10.00 per trust unit.

ARC Energy Trust is an actively managed royalty trust formed to provide investors with indirect ownership in cash generating energy assets, which currently consist of oil and gas assets but in the future may include other related energy assets. The distributable cash flow to unitholders is based on the production and sale of crude oil, natural gas liquids and natural gas.

The royalty trust structure allows net cash flow from oil and gas properties to flow directly to unitholders in a tax efficient manner. Business risk is minimized through property and commodity diversification and through allocating only a small percentage of capital to exploration activities.

Performance

As of Q3 2008 cumulative cash distributions paid to unitholders since inception now total $23.11, and are considered to be part return of capital (tax deferred) and part return on capital (taxable as other income). This amount exceeds the July 1996 Initial Public Offering price of $10.00 per trust unit.

Since inception ARC has outperformed the TSX Composite Index (previously the TSE 300 Index) and the Oil and Gas Producers’ Index and has emerged as a leader in the royalty trust sector, as investors increasingly discriminate on the basis of performance and positive underlying fundamentals.

Manager and Trustee

At a Special Meeting held August 28, 2002, unitholders approved the internalization of the Management Contract structure and all related fees. The elimination of external management re-enforces the alignment of management with unitholder interests and serves to improve corporate governance by allowing unitholders to elect all members of the Board of Directors.

Computershare Company of Canada is the Trustee of ARC Energy Trust and administers the Distribution Reinvestment and Optional Trust Unit Purchase Plan (DRIP) for Registered Unitholders.

Cash Distributions

Cash distributions are paid to ARC Energy Trust through a royalty derived from 99 per cent of the net cash flow received from oil and gas production as well as from interest payments on inter-company loans.

Net cash flow is production revenue minus

• Field operating expenses
• Crown and freehold royalty expenses
• General and administrative expenses
• Interest costs
• Taxes payable by ARC Resources Ltd.

The distributable income (net cash flow) is paid to unitholders as a cash distribution, on a monthly basis, after deductions are made for debt principal repayments, capital expenditures and reclamation fund contributions.

ARC has an established Distribution Objectives Policy that includes setting aside cash for future reclamation costs and funding a portion of the capital expenditures program to remain a vibrant, growing oil and gas producer by investing to replace production.

Capital Expenditures

Capital expenditures are focused on the development and exploitation of reserves in ARC’s core areas. ARC may participate in exploration activities undertaken by Operators on ARC Resources’ non-operating properties, provided participation is in the best interests of the Trust.

Borrowing

ARC Resources Ltd. and ARC Sask. Trust are wholly owned subsidiaries of the Trust and own the assets that generate the royalty income for the Trust. These subsidiaries may borrow funds to purchase additional revenue generating oil and gas properties or for capital expenditures required to bring production on stream from its existing assets.

Tax Considerations

Under the Income Tax Act (Canada), the Trust is entitled to claim various tax deductions such as the Canadian Oil and Gas Property Expense (COGPE), resource allowance and equity issue expenses. Historically, a portion of the Trust’s cash distributions have been considered "return of capital" to Canadian resident unitholders and are tax deferred. Distributions that are deemed "return of capital" reduce the original cost base of the trust units, deferring any tax until the units are sold. Any portion of cash distributions not considered return of capital is taxable as other income, in the year in which the distributions are received.  For 2007, three per cent of distributions were deemed return of capital.

ARC Energy Trust qualifies as a mutual fund trust under the Canadian Tax Act, and its trust units may be included as investments for RRSPs, RRIFs, RESPs and DPSPs.

The Trust has a December 31 year-end and each year must perform an income tax calculation and allocate any taxable income to unitholders of record for each cash distribution payment date throughout the year.