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MD&A

    

#ASH&LOW AND%ARNINGS MILLIONS

  









AR 2005

#ASH&LOW %ARNINGS 

In addition to capital expenditures on development activities, the Trust completed net property acquisitions of $91.3 million in 2005. Major property acquisitions were in the following areas: Berrymoor and Buck Creek in Alberta and Weirhill and Steelman in Saskatchewan. The Trust also completed a number of corporate acquisitions including Romulus Exploration Inc. in June 2005 for total consideration of $42 million and companies holding the Redwater and NPCU properties in December 2005 for total consideration of $463 million. Capital expenditures on development activities and acquisitions resulted in an increase in proved plus probable oil and gas reserves from 244 mmboe at year end 2004 to 287 mmboe at year end 2005. Approximately 95 per cent of the $269 million capital program was financed from cash flow from operations in 2005 versus 57 per cent in 2004. Property and corporate acquisitions were financed through a combination of debt and equity. A breakdown of capital expenditures and net acquisitions is shown below: Capital Expenditures 2005

2004

% Change

Geological and geophysical Drilling and completions Plant and facilities Other capital

9,219 200,873 55,032 3,710

5,388 144,487 41,089 2,820

71 39 34 32

Total capital expenditures

268,834

193,784

39

Producing property acquisitions (1) Producing property dispositions (1) Corporate acquisitions (2)

111,324 (20,038) 504,996

(529) (57,691) 72,009

Total capital expenditures and net acquisitions

865,116

207,573

Total capital expenditures and net acquisitions financed with cash flow Total capital expenditures and net acquisitions financed with debt

256,104 609,012

110,846 96,727

($ thousands)

(1) (2)

318

Value is net of post-closing adjustments. Represents total consideration for the transactions, including fees but is prior to the related future income tax liability, asset retirement obligation and working capital assumed on acquisition.

ARC expects to undertake significant development activities again in 2006 resulting in a $340 million capital budget. New activities include spending $25 million on a commercial scale Natural Gas from Coal (“NGC”) project and incurring a $17 million increase in capital allocated to moderate risk exploration.

Asset Retirement Obligation and Reclamation Fund At December 31, 2005, the Trust has recorded an Asset Retirement Obligation (“ARO”) of $165.1 million ($73 million at December 31, 2004) for future abandonment and reclamation of the Trust’s properties. The ARO increased by $76.2 million during 2005 as a result of additional liabilities associated with the acquisitions of Redwater and NPCU, and the wells drilled in 2005. Also the ARO increased because the inflation factor used to calculate the future retirement obligation was increased from 37

2005  

Annual Report

2005  

Annual Report

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