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RC’s major development activities in 2002 included drilling, completions and well tie-ins at Ante Creek, Lougheed, Alida, Youngstown, Midale, Weyburn and House Mountain. We drilled 32 operated wells and participated in 216 partner operated wells for a total of 248 gross wells (53 net wells). Major drilling programs were in southeast Alberta in Brooks, in southeast Saskatchewan in Alida and Midale, and at Ante Creek and Valhalla in northern Alberta. Key acquisitions in 2002 were made in Ante Creek, Medicine River/Gilby and Jenner. Reported operating costs increased in 2002 to $6.45/boe from $5.47/boe in 2001. The increase in costs was primarily due to higher costs on ARC’s non-operated properties, as operators performed maintenance and conducted facilities turnarounds, which increased operating costs and temporarily reduced volumes which resulted in higher per unit operating costs. The $6.45/boe cost was also impacted by third-party operators exceeding their approved operating budgets, including some costs related to prior periods which were billed to ARC in 2002. Our current outlook for 2003 operating costs is a modest decrease to $6.25/boe. In 2002, ARC replaced 145 per cent of its production at an average cost of $9.27/boe for established reserves. Our acquisition costs and our development costs were both lower than in 2001. Since inception, overall finding, development and acquisition (“FD&A”) costs have averaged $6.59/boe. We believe both our 2002 and three year average FD&A costs ($8.21/boe) will be amongst the lowest in our sector.

Production volumes for 2002 averaged 42,425 boe/d. Oil production increased 1.2 per cent to 20,655 barrels per day, natural gas production decreased 4.7 per cent to 110 million cubic feet (mmcf) per day and natural gas liquids production decreased 0.9 per cent to 3,479 barrels per day. ARC’s production portfolio was weighted 49 per cent to oil, 43 per cent to natural gas and eight per cent to natural gas liquids. ARC’s capital expenditures in 2002 were $88 million, down from $102 million in 2001. These expenditures were incurred on development drilling, geological and geophysical work and facilities expenditures, as ARC continues to develop its asset base. ARC’s established reserves increased to 185 mmboe at year-end 2002 from 178 mmboe in 2001. ARC’s 2003 capital program is budgeted at $115 million, which includes drilling 125 operated wells and participation in 90 partner operated wells. Our focus areas will be Ante Creek, Jenner and Lougheed. Well optimization activities will include re-completions, fracs, stimulations and artificial lift upgrades. Waterflood initiatives include optimization at Lougheed, a rejuvenation of a pilot at Glen Ewan and a pilot program at Ante Creek.



Annual Report

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