History of ARC
Cash Generating Oil and Gas Assets
ARC Energy Trust was formed to provide investors with indirect ownership in cash generating energy assets plus the market liquidity of a publicly traded security. The Trust was launched with the acquisition of 21 oil and gas properties from Mobil Oil Canada and the units commenced trading on the Toronto Stock Exchange on July 11, 1996 under the symbol AET.UN.
The Trust was built on a foundation of strong core properties complemented by other diverse properties to balance the asset portfolio. Initial assets were characterized by: high-quality core areas, long-life reserves, extensive production histories, low decline rates resulting in stable near-term distributions, low operating costs resulting in attractive netbacks and a diversified property mix, which reduces technical risk. As the trust has increased in size properties have become more diverse.
The ARC Timeline - Highlights
1996: ARC Energy Trust "The Trust" was launched with the acquisition of 21 properties (18 areas) from Mobil Oil Canada (Mobil) and the units commenced trading on the Toronto Stock Exchange on July 11, 1996. The Trust was built on a foundation of strong core properties complemented by diverse properties to balance the portfolio:
- High-quality core areas
- Long-life reserves
- Extensive production histories
- Low decline rates, resulting in stable near-term distributions
- Low operating costs, resulting in attractive netbacks
- A diversified property mix, reducing technical mix
ARC Energy Trust Units were issued at $10.00 per unit and closed the year at $12.25. The Trust developed a high level of support in the market and was one of the top performers among all conventional oil and gas trusts in 1996.
1997: During 1997 ARC Financial successfully implemented its going concern strategy by completing seven separate transactions for a total net acquisition of $94 million, which increased the Trust's year end reserves and production by approximately 40 per cent.
The Trust's cost structure, including general and administrative expenses and management fees, is amongst the lowest of all conventional oil and gas trusts.
1998: In 1998 the oil and gas industry faced its lowest commodity prices since 1977. The WTI oil price reached an astounding low of $10.76 during this year.
Despite the low market prices for oil during the year ARC managed to maintain distributions at $0.10. ARC also successfully increased production by 3,000 boe/d in this very volatile time.
1999: Exceptional performance in 1999 solidified the Trust's leadership position in the sector and further advanced the Trust towards realizing its vision of becoming the premier conventional oil and gas trust in Canada.
The Trust completed the acquisition of Orion Energy Trust ("Orion") and Starcor Energy Royalty Fund ("Starcor") at the bottom of the oil price cycle, which significantly enhanced our asset base just prior to the dramatic increase in commodity prices.
2000: In 2000 ARC was a standout as one of the top performing Royalty Trusts and also among the top companies in the oil and gas sector overall.
Towards the end of the year ARC announce the $485 million acquisition of Startech Energy Inc., which at the time became the largest acquisition in the companies history.
2001: ARC completed the acquisition of Startech Energy Inc. in January 2001. The results of the acquisition were reflected in 2001 as production increased by almost 16,000 boe/d from year 2000.
Through the Startech acquisition in January and a Trust Unit offering in November, units outstanding increased by about 50 per cent to 111.7 million.
2002: ARC demonstrated its commitment to leadership in our sector by becoming the first conventional oil and gas royalty trust to eliminate its external management contract and associated fees.
Stability and predictability remained key objectives for the Trust. Despite the challenge of volatile commodity prices, ARC Energy Trust maintained stable distributions throughout the year - remaining absolutely true to our long-standing policies and processes that are designed to create long term value for unitholders.
2003: ARC completed the $710 million acquisition of Star Oil & Gas Ltd. in 2003 ("Star"). Given the size of Star (approximately 22,000 boe/d) ARC attained historic heights in its unit price, production, revenue and cash flow.
Heading in to 2003 the Trust's capital budget for internal development projects was set at a record $115 million, expected to maintain production at a level just below that achieved in 2002. Given the acquisition of Star ARC increased production by just under 12,000 boe/d in 2003.
2004: For the fifth consecutive year ARC's performance outperformed the TSE Producers Index, TSX Exploration and Production Index and the Royalty Trust Index. ARC has managed to maintain a Reserve Life Index of above 12 years since inception in 1996.
In 1996 ARC identified three criteria for success, which we believed would generate superior unitholder returns. These criteria remain unchanged as we move into 2005. ARC focuses on:
- Management Expertise
- Quality Assets
- Commitment to Stakeholder Interests
Our superior results to date confirm our success in pursuing this strategy:
- Initial Unit Price: $10
- March 31, 2005 Price: $18.15
2005: On November 23, 2005, the Federal Government announced that it would reduce personal income taxes on dividends, thereby leveling the playing field between taxation of investors of income trusts and corporations. The announcement helped restore certainty to the income trust market after initial government comments that the income trust sector was causing a “drain” on the Canadian economy. Income trusts make a significant contribution to the Canadian economy through reinvestment, job creation, innovation and productivity enhancement. Millions of Canadians invest in income trusts and use their distributions to maintain their day-to-day expenses, pay for their medical costs and pay taxes to municipal, provincial and federal governments.
In December 2005 ARC completed the $462 million acquisition of long-life assets in central Alberta. ARC acquired a 45.57 per cent working interest in the North Pembina Cardium Unit No. 1(“NPCU) and a principal working interest in the Redwater oil field. Highlights of the acquired assets include the proved plus probable reserve life of 20 years and the potential to apply advanced recovery techniques such as CO2 miscible floods to revoer additional oil from our resources base. While no infrastructure currently exists in Alberta, ARC will be working with other interested parties to source economic quantities of CO2 from large emitters and to develop the necessary infrastructure to delver CO2 to its largest oil fields in Alberta.
2006: The Trust celebrated its ten year anniversary on July 11, 2006. The Trust has provided superior financial returns to its unitholders and is recognized as an industry leader both financially and with respect to industry and community initiatives. The emphasis on long-term planning, risk management and adherence to diligent acquisition criteria have been key contributors to the Trust’s success over its first ten years of operations.
On November 6, 2006 ARC was proud to announce its membership in the newly formed Coalition of Canadian Energy Trusts. The Coalition was formed to address Unitholder’s needs and to respond to the October 31, 2006 proposed taxation changes for income trusts. ARC CEO and President, John Dielwart, was amongst four CEO’s from Canadian energy trusts appointed co-chairs of the Coalition.
2007: The Alberta Government announced a New Royalty Framework in 2007, which the end result of is a 57 per cent increase in oil royalties in 2010 on conventional production. The province also expects a 10 per cent increase in gas royalties in 2010.
CO2 development continued in Redwater as a proposed pilot area was identified with seismic. ARC successfully drilled three wells for the pilot project and targets CO2 injection in the first half of 2008.