ARC Resources Sees Bigger Q1 Loss
Canada’s ARC Resources said May 6 its net loss in Q1 2020 increased to C$558.4mn (US$399.5mn) from C$10.2mn in Q4 2019 and C$54.6mn in Q1 2019 and – in keeping with “new” industry norms – it blamed much of the increased loss on impairment charges related to collapsing commodity prices.
The impairment charge of C$740mn (C$558.4mn net of deferred tax recovery) was recognised in the company’s northern Alberta cash-generating units, which include its Ante Creek and Pembina light oil assets.
The impairment charge came on top of increased foreign exchange losses related to a revaluation of ARC’s US-dollar denominated debt and recognised lower commodity sales from production due to lower price realisations.
Natural gas production averaged 692mn ft3/day in Q1, an increase of 3% from Q4 2019. Liquids production, at 36,411 b/d, was essentially unchanged from the prior quarter, but 9,000 b/d of crude oil and condensate production – 30% of the Q1 total – is currently shut-in, pending a recovery in commodity prices.
Like its peers, ARC has cut its planned spending for 2020 and now expects to see capex at not more than C$300mn, 40% below its initial budget, with most of the total expected to come in the first half and be largely directed at low-cost natural gas assets.
“The near-term outlook for natural gas has structurally improved with reduced capital activity in North America and the potential for material crude oil production shut-ins expected to reduce associated natural gas production,” the company said. “During this period of relative pricing strength, ARC is focused on maximising its low-cost Montney natural gas production.”