2002 Highlights 2002
CDN$ millions, except per share and volume data
2001
Cash flow from operations (1)
$ 224
$
260
Cash flow from operations per unit
$ 1.87
$
2.55
Net income
$
68
$
138
Net income prior to non recurring items (2)
$
94
$
138
Distributions per Unit
$ 1.56
$
Daily production (boe/d)
42,425
2.31 43,111
(1) Before changes in non-cash working capital (2) Prior to a one-time charge related to the internalization of the management contract
Strong crude oil prices, moderate natural gas prices and excellent drilling results combined to generate superior financial and operating results during 2002. Even with a 23 per cent decline in natural gas and natural gas liquids prices in 2002, cash flow from operations was $224 million with $68 million of earnings generated. The year-over-year decline in cash flow of $36 million was primarily caused by weaker gas prices offset in part by the Trust’s hedging activities which resulted in a hedging gain on natural gas production of $0.55/mcf in 2002 compared with a gain of $0.22/mcf in 2001. The Trust also experienced higher operating costs on its non-operated properties, as discussed in the Netbacks section of this report, but benefited from declining interest rates resulting in a $5.0 million decrease in interest expense. Net income was impacted by all the same factors as cash flow plus the one-time non-cash expense of $25.9 million for the internalization of the management contract that took place in the third quarter of 2002. Other non-cash expenses were relatively consistent from 2001 to 2002. A capital investment program of $207 million added reserves at an attractive rate of $9.27/boe. Oil and gas production rates declined 1.6 per cent with production additions offsetting natural production declines. In 2002, ARC took advantage of a significant number of acquisition opportunities in core areas for longer-term growth by purchasing reserves with substantial development drilling upside. The initial development drilling program on newly acquired lands was very successful, resulting in production additions in late 2002. ARC’s strategy focused on development of the significant inventory of internally generated development drilling prospects, which will continue to provide a low-risk, stable source of longer-term growth. ARC takes a very disciplined approach to making acquisitions to ensure accretion to the existing asset base for unitholders. Net acquisitions of $119 million were concentrated in the Trust’s five core operating areas increasing production by 4,100 boe per day and reserves by 13.0 mmboe for an average cost of approximately $29,000 per producing boe per day and $9.18/boe of established reserves.
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