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In 2004, ARC safely and successfully executed the largest development program in its history. The $194 million capital program was directed at capitalizing on the numerous development opportunities that exist within our high-quality asset base.

DRILLING AND DEVELOPMENT ACTIVITY ARC’s drilling activity in its operated properties included 194 gross wells (165 net wells). Of these, 47 gross (42 net) wells were oil wells and 145 gross (121 net) were gas wells. Although ARC drilled wells in all of its core areas, the majority of the drilling was undertaken in the southeast Alberta/southwest Saskatchewan area, specifically in Jenner North where 57 gross wells (56 net) were drilled and in Hatton where ARC drilled 40 gross wells (25 net). All of these wells have been successfully tied-in and brought on production. The Hatton, Horsham and Crane Lake areas of southwest Saskatchewan will see significant ongoing drilling activity over the next three to six years as we develop over 800 infill locations required to downspace to 80 acre spacing. In southeast Saskatchewan, 2004 proved to be the most productive year to date. Initial production of over 1,500 barrels of oil per day was added through the drilling of six horizontal wells. The positive outcome from the 2004 drilling has proved up additional drilling locations for 2005. At ARC’s Lougheed field, ARC continued to expand the waterflood to the north of the field with the addition of three new injectors and also undertook significant facility expansion to increase injection pressure and capacity.



NI 51-101 Proved plus Probable Reserves

Proved plus Probable Reserves


(company interest)

Central Alberta



SE Alberta/SW Saskatchewan




% of Total Proved plus Probable Reserves

2004 Average Production

% of Total Production







Northern Alberta & BC






SE Saskatchewan






Pembina Total

Another area with substantial activity was ARC’s Cranberry Slave Point D Pool in the Prestville property in northern Alberta. The initial discovery well was drilled in 2003 and tested light, sweet crude oil at rates of up to 650 barrels per day. Subsequent drilling at two other locations also encountered the same thick dolomitized Slave Point interval. During 2004, ARC constructed production facilities capable of handling 3,000 boe per day of production and conducted technical work which confirmed that the Cranberry Slave Point D Pool is amenable to waterflooding. Five new wells planned for 2005 will be followed by waterflood facilities construction and injector conversion. This area is currently subject to rate limitations that restrict production to approximately 1,000 boe per day. Rate restrictions will be removed when ARC receives approval for a waterflood of the field. We anticipate a ramp up in production towards year-end 2005 to approximately 2,000 boe per day.













ARC continues to develop its Ante Creek and Dawson properties in its northern Alberta and British Columbia core area. ARC has developed significant expertise in developing tight oil and gas formations such as Ante Creek and Dawson, respectively. Tight reservoirs are characterized by low permeability rock. To successfully produce from these formations, large hydraulic fracture stimulations are required along with sophisticated completion techniques. Capital costs in these types of resource plays require a higher commodity price than conventional projects but deliver a much more stable long-term return. After an initial period of steep decline, these wells will produce at stable rates for a long time and have long-life reserve life index (“RLI’s”). These properties are very attractive since more of the hydrocarbons-in-place will be recovered over time as drilling and completion technology advances. ARC’s major tight gas development is the Dawson field in northeast British Columbia where ARC drilled five wells in 2004. Due to the early stage nature of the development, ARC’s proved reserves in Dawson are based on a 15 per cent recovery factor; however, analogous areas show recoveries of up to 25 per cent after only 10 years of production. The RLI on ARC’s Dawson property is 24.2 years. Significant ongoing drilling activity will occur in Dawson over the next three to five years as we fully develop the property. Ante Creek is ARC’s major tight oil property. Since the acquisition of our initial interests in the area in 2000, ARC has amassed a significant land base in the area and has been able to undertake a disciplined drilling and optimization program. This continued in 2004 with a successful step-out drilling program that included nine vertical wells bringing the total wells drilled to date to 61 with a 100 per cent success rate. All of ARC’s core areas have significant development opportunities identified for 2005. ARC’s capital development program for 2005 is budgeted at $240 million, an increase of $46 million (24 per cent) over the 2004 expenditures. The additional $46 million is budgeted to cover increases in costs and services and also to enable ARC to exploit new strategic opportunities that include natural gas from coal (NGC), also known as coal bed methane, and moderate risk exploration; and also to test some new technologies to improve production and reserves. The following table outlines ARC’s 2005 capital expenditure program:


Annual Report

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