- Record Production Growth: Achieved 408,000 BOE/day, up 7% YoY and 10% per share, with condensate/oil production at 119,000 barrels/day.
- Strong Financial Performance: Q4 funds from operations of $874M (11% above expectations) and free cash flow of $415M (40% above forecasts), with 2025 free funds flow doubling to $1.3B.
- Shareholder Returns: Returned 75% of free funds flow via $514M share repurchases and $452M in dividends, reflecting robust capital allocation.
- Reserve Value Growth: 2025 reserves increased 15% (PDP) and 10% (proved+probable), with $39/share NPV for 2P reserves, underscoring asset quality.
Operational Highlights
The company's operational performance was highlighted by its ability to achieve a natural gas price of $3.77 per Mcf, nearly $1.50 per Mcf above AECO. This was a significant achievement, demonstrating ARC's ability to navigate the complex natural gas market. The company's management team discussed the current state of their assets, including Attachie, Kakwa, and others, noting that they are reassessing their development plan at Attachie due to underperforming Upper Montney wells. As Terry Anderson emphasized, "we are focused on long-term value creation for shareholders and making the right business decisions, even if unpopular, to manage risk and create value."
Capital Allocation and Return to Shareholders
ARC returned 75% of free funds flow to shareholders in 2025, repurchasing 20 million common shares for $514 million and declaring dividends of $452 million. The company's balance sheet remains strong, with $2.9 billion of net debt and approximately 0.9x 2025 cash flow. For 2026, ARC plans to continue to return essentially all free cash flow to shareholders, with an expected $1.2 billion of free funds flow. Analysts estimate revenue growth of 1.9% for the next year.
Valuation and Outlook
ARC's valuation metrics suggest a reasonable price for the company's shares. The P/E Ratio is 10.26, while the EV/EBITDA ratio is 5.47. The Dividend Yield is 3.42%, and the Free Cash Flow Yield is 9.34%. These metrics indicate that ARC's shares are reasonably priced, considering the company's strong financial performance and growth prospects. With a ROE of 15.52% and ROIC of 9.19%, ARC is generating strong returns on equity and invested capital.