ARC Resources issues $300M in shares
ARC Resources Ltd. bolstered its balance sheet with a $300-million equity issue Wednesday after reporting that low commodity prices had again pounded its quarterly earnings.
The gas-weighted former energy trust also confirmed that it had called off a process launched in February to sell about 10 per cent of its B.C. Montney natural gas assets after failing to attract an acceptable offer. ARC’s shares ended the day at $24.20, off 83 cents or three per cent, but not far from their 12-month high of $26.74 set in December.
After the close, the company said it had placed 12.7 million common shares at $23.65 per share through a syndicate of underwriters led by RBC Capital Markets. An overallotment option could bring the gross take to $345 million.
“We thought it was a great quarter,” said David Carey, ARC’s senior vice-president of capital markets, noting production jumped 14 per cent to a record 94,000 barrels of oil equivalent per day from 82,400 boe/d a year ago and second-quarter liquids production of 36,000 bpd was 19 per cent higher.
ARC reported net income in the three months ended June 30 fell to $38 million or 13 cents per s hare, barely 25 per cent of the $150 million or 52 cents recorded in the second quarter of 2011.
Cash flow was $166 million, versus $210 million, and operating income came in at $30 million, compared with $76 million in second quarter 2011.
Analyst Gord Currie of Salman Partners said the financial results met forecast expectations and applauded the company’s efforts to keep its balance sheet strong.
“They tried to sell some properties and didn’t get the price they wanted so they’ve done two things, trimmed out more of their debt, which leaves the balance sheet in great shape, and then they did this equity issue,” said Currie.
Last week, ARC said it would raise $400 million by issuing long-term fixed rate notes to replace existing debt.
ARC posted average prices for gas of $2.03 per thousand cubic feet in the quarter, compared with $4.05 a year earlier, while selling natural gas liquids for an average of $41.17 per barrel versus $48.40.
Carey said the $300 million share issue was done to assure the market that ARC will be able to advance its hefty capital spending plans.
After cutting its budget from $760 million to $600 million this year, ARC plans to spend $800 million in 2013 to advance projects including the first of two 60 million cubic feet per day B.C. gas plants that would include 130 barrels per million of liquids processing capacity.
“We want to provide certainty to the markets that we can build that gas plant next year,” he said.