ARC Energy Trust announces a $585 million capital budget for 2009 including an accelerated development plan for Dawson



    CALGARY, Oct. 30 /CNW/ - (AET.UN and ARX - TSX) ARC Energy Trust (the
"Trust" or "ARC") announced today that its Board of Directors has approved a
budget for 2009 that includes a $585 million capital expenditure program.
    John Dielwart, ARC's President and CEO, said, "A successful development
drilling program at Dawson and Sunrise on ARC's northeast British Columbia
Montney lands, has created significant economic value and set the stage for a
defined period of profitable growth for ARC. In a separate news release today
we have announced a 254 Bcf increase in proved plus probable reserves for the
Dawson field. With these stellar results we will be accelerating the
construction of the 60 mmcf per day gas plant in the Dawson area to be
operational early in 2010, six months earlier than previously projected. While
2009 should see production in the 64,000 per boe range, our production in 2010
is expected to exceed 72,000 boe per day."
    "We have always focused on risk managed value creation, which has served
our investors well. Our approach to running the business has not changed with
this budget. Even though it has more capital dedicated to expansion, we
believe that moving into a period of measured growth is the best way to create
value from our Montney assets" added Mr. Dielwart.

    
    Highlights of the 2009 Budget

    -  Capital expenditure budget of $585 million, with approximately $350
       million targeted to maintain production and $235 million for
       expansion

    -  Replacement of natural production decline by delivering an estimated
       10,000 boe per day of new production by year-end 2009 from internally
       generated opportunities

    -  A production target for 2009 of 64,000 boe per day comprising
       approximately 50 per cent crude oil and NGLs and 50 percent natural
       gas

    -  Capital expenditure budget of $585 million, reflecting an approximate
       292 gross operated well drilling program (245 net wells)

    -  A total of $140 million dedicated to the Dawson property, including
       the development of a 60 mmcf per day gas plant to be operational early
       in 2010

    -  A total of $104 million for development and exploratory drilling on
       our West Montney lands, with an emphasis on development of Sunrise

    -  The $244 million of expansion capital positions ARC for production in
       excess of 72,000 boe per day in 2010

    -  Base operating costs will remain flat in 2009 and costs associated
       with new wells drilled will result in a six per cent increase in total
       operating costs to $250 million. Operating costs are expected to be
       approximately $10.70 per boe
    

    Capital Program

    The $585 million capital program is a $55 million increase over estimated
2008 capital expenditures as we move our focus from Montney land acquisition
to Montney development. Relative to 2008, the primary changes in the budget
are:

    
    -  A $100 million decrease in the land budget as significant amounts were
       spent in 2007 and 2008 to acquire undeveloped land in and around our
       core areas

    -  A $94 million increase in spending in the greater Dawson area
       (excluding land costs) as we accelerate development of this area
       through the construction of a 60 mmcf per day gas plant and drilling
       of the associated development wells
    

    Based on 2009 budget projections, ARC will operate the drilling of
approximately 292 gross wells (96 wells targeting oil and 196 wells targeting
natural gas) and approximately 245 net wells including; vertical wells,
single-leg horizontal wells, multi-leg horizontal wells, injection wells and
horizontal re-entries. In our non-operated properties we anticipate our
partners will drill approximately 166 gross wells with ARC's share of
expenditures being approximately $52 million.
    Approximately $350 million of the budget is targeted at maintaining
production in the 63,000 - 64,000 boe per day range for the fourth consecutive
year, while the majority of the remainder will be spent to prepare for
significant growth in 2010. While significant expenditures will be made in all
of our core areas, our northeast British Columbia - northwest Alberta region
will account for more than 50 per cent of our total capital program. At
Dawson, in northeast BC, we expect to spend approximately $140 million on the
construction of a 60 mmcf per day gas plant and the drilling of 13 horizontal
wells and four vertical wells as we look to maintain production in excess of
50 mmcf per day in 2009 and prepare for production of 100 mmcf per day in
2010. Approximately $104 million will be spent on our West Montney lands as we
start the development of our Sunrise discovery with eight horizontal wells and
continue the exploration of our prospective lands. In total, we expect to
drill eight vertical exploration wells and eight horizontal wells in addition
to acquiring 3-D seismic and developing infrastructure. At Ante Creek in
northern Alberta, we expect to spend $23 million as we intend to drill up to
three vertical and three horizontal producing wells in 2009.
    At Redwater, in central Alberta, we plan on spending $25 million on
drilling eight vertical and two horizontal Leduc wells, five horizontal Viking
wells and two Mannville oil wells. Approximately $10 million will be spent on
the CO(2) Enhanced Oil Recovery ("EOR") pilot that is currently underway at
Redwater as well as the Heartland Area Redwater Project ("HARP") sequestration
project.
    Throughout ARC's other core areas, numerous development activities will
take place. At Pembina, ARC expects to drill 17 gross vertical and four
horizontal Cardium oil wells and approximately 10 shallow gas wells. In
central Alberta, ARC will pursue further NGC drilling in Delburne, as well as
various other mid-depth drilling and recompletion opportunities. In southeast
Alberta and southwest Saskatchewan, a $38 million program of approximately 140
gross wells will be drilled by ARC and partners targeting shallow gas as part
of our ongoing multi-year staged development program. In southeast
Saskatchewan and southwest Manitoba ARC plans to spend $84 million in
recognition of the better economics of drilling oil wells in those provinces
now that Alberta has increased royalty rates. ARC expects to drill
approximately 35 wells on operated properties including, Lougheed, Oungre,
Weirhill, Browning, Midale and other southeast Saskatchewan and Manitoba
properties.
    Major projects on some of our non-operated properties include a 25 gross
well infill drilling program at Weyburn and a 15 gross well drilling program
at Midale, both of which are oil pools in southeast Saskatchewan that are
currently being flooded with CO(2). Plans also include the drilling of 10
gross horizontal wells at Virden and four gross horizontal wells at Routledge
in Manitoba.
    Corporate capital includes $27 million of leasehold development costs
associated with ARC's new office premises at Jamieson Place. ARC expects to
relocate to the new premises in late 2009 or early 2010. The 14 year lease
carries a net average cost that was significantly less expensive than renewing
the existing lease and provides ARC significant growth space.

    
    The budgeted capital expenditures for 2009, by type are:

    ($ million)                                2007       2008        2009
                                             (Actual)  (Estimate)   (Budget)

    Development drilling                         198         224         315
    Facilities & pipelines                        21          38          63
    Maintenance                                   17          17          20
    Optimization                                  10          12          15
    Land                                          78         122          22
    Seismic                                        6  `       18          13
    Natural gas from coal (NGC)                   13          13          25
    Enhanced Oil Recovery
     (strategic)                                  25          44          42
    Exploration                                   19          25          26
    Other                                         10          17          44
                                             --------------------------------
    Total                                        397         530         585


    Operated Wells Drilled                      2007       2008        2009
     (gross)                                  (Actual)  (Estimate)  (Budget)

    Natural gas wells                            172         202         196
    Oil wells                                    102          91          96
                                             --------------------------------
    Total                                        274         293         292


    Capital Budget by Area:
    ($ million)                                 2007       2008        2009
                                              (Actual)   (Estimate)  (Budget)
    Northern Alberta and
     British Columbia                              223        272        314
    Drayton Valley                                  32         39         34
    Central Alberta                                 23         41         38
    Southeast Alberta & Southwest Saskatchewan      39         31         38
    Southeast Saskatchewan & Manitoba               54        115         84
    Redwater                                        16         16         35
    Corporate                                       10         16         42
                                             --------------------------------
    Total                                          397        530        585
                                             --------------------------------
    Alberta Total                                  186        197        245
                                             --------------------------------
    Saskatchewan and Manitoba Total                 66        137         96
                                             --------------------------------
    British Columbia Total                         146        196        244
    



    Impact of Alberta Royalty Changes

    As 2008 has progressed, more details have emerged with regards to the
Alberta Government's proposed New Royalty Framework ("the Framework"). The
Trust's average royalty rate will increase from approximately 18 per cent in
2008 to between 20 and 28 per cent in 2009 depending upon commodity prices. In
response to the increase in Alberta royalties, approximately 60 per cent of
our 2009 budget will be targeted to opportunities in British Columbia,
Saskatchewan and Manitoba despite the fact that these provinces only account
for 35 per cent of our current production. The Framework is scheduled to pass
into legislation in November 2008.
    Following is a summary of the estimated total corporate royalty rate
under the Framework at various oil and natural gas prices:

    
                              Corporate Royalty Rate - New Royalty Framework

    Edmonton posted oil
     (Cdn$/bbl)(1)                       60         80        100        120
    AECO natural gas (Cdn$/GJ)(1)         6          8         10         12
    Corporate royalty rate(2)(3)        20%        23%        26%        28%

    (1) Canadian dollar denominated prices before quality differentials.
    (2) Estimated corporate royalty rates based on draft guidelines that are
        subject to interpretation. Changes to draft royalty guidelines may
        result in changes to the estimated royalty rates
    (3) Corporate royalty rate includes Crown, Freehold and Gross Override
        royalties for all jurisdictions in which the Trust operates.
    

    Production Volumes

    Target production volumes for 2009 are expected to be approximately
64,000 boe per day, which includes an estimate of two per cent downtime for
unplanned outages. Production is expected to decline to approximately 62,000
boe per day in the second quarter as a result of post breakup declines and
planned maintenance activities; we expect production to increase in the fourth
quarter on the expected success from the capital program to a target 2009
fourth quarter volume of approximately 65,000 boe per day. With the start-up
in January 2010 of the new 60 mmcf per day gas plant at Dawson, we estimate
that our 2010 production will be in excess of 72,000 boe per day.
    The anticipated 2009 and 2010 volumes do not reflect any additional
acquisitions or dispositions. Through the normal course of business, minor
acquisitions and dispositions are expected to occur that could impact the
forecasted volumes.
    Costs associated with new wells drilled have resulted in a six per cent
increase in total operating costs to approximately $250 million. Therefore,
$/boe costs will be approximately $10.70 per boe, up from an estimated $10.20
per boe for 2008.

    General and Administrative ("G&A") Expense

    ARC expects cash G&A expenses to be approximately $2.65 per boe in 2009,
a modest increase on the $2.60 expected for 2008. Additional non-cash G&A of
$0.15 per boe is budgeted in 2009 for the LTIP plan ($0.15 per boe expected in
2008).
    ARC's 2009 budgeted G&A includes estimated payments of $10.5 million and
$8.5 million for cash payments under the LTIP plan in the first half and
second half of 2009 respectively. If ARC's three year total return is not in
the top quartile of its peers as of vesting dates, the cash payments may be
less than those budgeted.

    
    ($ million)                                  2007      2008        2009
                                              (Actual)  (Estimate)   (Budget)

    Base G&A costs                                36.3       40.0       43.0
    Cash costs for Whole Unit Plan (estimated)     9.6       21.4       19.0
                                             --------------------------------
    Total cash costs                              45.9       61.4       62.0
    LTIP - non-cash                                3.2        3.5        3.5
                                             --------------------------------
    Total G&A                                     49.1       64.9       65.5
    

    Risk Management

    As part of its overall strategy to provide stable, dependable
distributions, ARC uses a variety of instruments to hedge crude oil, natural
gas, foreign exchange rates, electrical power costs and interest rates.
    For 2009, the Trust has in place protection on both crude oil and natural
gas on volumes extending to the fourth quarter with greater volumes on the
earlier periods of the year. ARC has entered into positions in both swaps and
foreign exchange floors to mitigate ARC's foreign exchange exposure.

    
    -------------------------------------------------------------------------
    Hedge Positions

    as at October 28, 2008(1)(2)

                       ------------------------------------------------------
                             Q4 2008           Q1 2009          Q2 2009
    -------------------------------------------------------------------------
    Crude Oil           US$/bbl  bbl/day  US$/bbl  bbl/day  US$/bbl  bbl/day
    -------------------------------------------------------------------------
    Sold Call             90.00   10,000        -        -        -        -
    Bought Put            68.13   10,000    55.00    3,000    55.00    3,000
    Sold Put              51.07    7,000    40.00    3,000    40.00    3,000
    -------------------------------------------------------------------------
    Natural Gas         CDN$/GJ   GJ/day  CDN$/GJ   GJ/day  CDN$/GJ   GJ/day
    -------------------------------------------------------------------------
    Sold Call              9.68   48,570    10.51   42,202        -        -
    Bought Put             7.42   48,570     7.81   42,202        -        -
    Sold Put               5.26   10,480        -        -        -        -
    -------------------------------------------------------------------------
    FX                 CDN$/US$ $Million CDN$/US$ $Million CDN$/US$ $Million
    -------------------------------------------------------------------------
    Bought Put           1.0750     3.00        -        -        -        -
    Sold Put             1.0300     3.00        -        -        -        -
    Swap                 1.0150    12.00        -        -        -        -
    -------------------------------------------------------------------------


    -------------------------------------------------------
                              Q3 2009         Q4 2009
    -------------------------------------------------------
    Crude Oil           US$/bbl  bbl/day  US$/bbl  bbl/day
    -------------------------------------------------------
    Sold Call                 -        -        -        -
    Bought Put            55.00    3,000    55.00    3,000
    Sold Put              40.00    3,000    40.00    3,000
    -------------------------------------------------------
    Natural Gas         CDN$/GJ   GJ/day  CDN$/GJ   GJ/day
    -------------------------------------------------------
    Sold Call                 -        -        -        -
    Bought Put                -        -        -        -
    Sold Put                  -        -        -        -
    -------------------------------------------------------
    FX                 CDN$/US$ $Million CDN$/US$ $Million
    -------------------------------------------------------
    Bought Put                -        -        -        -
    Sold Put                  -        -        -        -
    Swap                      -        -        -        -
    -------------------------------------------------------

    (1) The prices and volumes noted above represents averages for several
        contracts. The average price for the portfolio of options listed
        above does not have the same payoff profile as the individual option
        contracts. Viewing the average price of a group of options is for
        indicative purposes only. The natural gas price shown translates all
        NYMEX positions to an AECO equivalent price. In addition to positions
        shown here, ARC has entered into additional basis positions.

    (2) Please refer to the Trust's website at www.arcenergytrust.com under
        "Hedging Program" within the "Investor Relations" section for details
        on the Trust's current hedging position.
    

    Funding of the 2009 Capital Program

    The Trust will pursue cost effective means of financing its 2009 capital
program through a combination of cash flow, existing credit facilities, DRIP
proceeds, potential asset dispositions and new borrowings or equity if
necessary. The exact split will be dependent on commodity prices, operational
performance and possible acquisitions and dispositions. Management will review
the 2009 capital program on a regular basis in the context of prevailing
economic conditions and make adjustments as deemed necessary to the program,
subject to review by the Trust's Board of Directors.

    Reclamation Fund

    As at September 30, 2008, the Trust's reclamation funds stood at $26.9
million. The Trust's budget currently incorporates a contribution of $12
million to the funds in 2009 to provide for the eventual abandonment of the
Trust's oil and gas properties. For the 2009 fiscal period the Trust plans on
withdrawing approximately $6.1 million from the reclamation fund to spend on
ongoing reclamations and well abandonments.

    
    Detailed Guidance -


    Production                                   2007       2008       2009
                                               (Actual)   (Estimate) (Budget)
    Oil (bbls/d)                                28,682     28,350     28,250
    NGLs (bbls/d)                                4,027       3750      3,250
    Gas (mmcf/d)                                   180        195        195
    Total (boe/d)                               62,723     64,750     64,000

    Costs and Expenses ($/boe)                   2007       2008       2009
                                              (Actual)  (Estimate)   (Budget)
    Operating costs                               9.54      10.20      10.70
    Transportation costs                          0.72       0.80       1.15
    Cash G&A expenses                             2.01       2.60       2.65
    Non-cash G&A expenses                         0.14       0.15       0.15
    Interest                                      1.61       1.50       1.85
    Cash taxes                                       -       0.01          -

    Weighted average units outstanding
     including units held for
     exchangeable shares (millions)                210        213        219
    


    This press release contains forward-looking statements as to the Trust's
internal projections, expectations or beliefs relating to future events or
future performance, including the Trust's Detailed Guidance for 2009 and the
amount and type of 2009 budgeted capital expenditures set forth herein. In
some cases, forward-looking statements can be identified by terminology such
as "may", "will", "should", "expects", "projects", "plans", "anticipates" and
similar expressions. These statements represent management's expectations or
beliefs concerning, among other things, future capital expenditures and future
operating results and various components thereof or the economic performance
of ARC Energy Trust ("ARC" or "the Trust"). The projections, estimates and
beliefs contained in such forward-looking statements are based on management's
assumptions relating to the production performance of ARC's oil and gas
assets, the cost and competition for services throughout the oil and gas
industry in 2008 and 2009, the market price for oil and gas, expectations
regarding the availability of capital, estimates as to the size of reserves
and resources, and the continuation of the current regulatory and tax regime
in Canada, and necessarily involve known and unknown risks and uncertainties
inherent in exploration and development activities, geological, technical,
drilling and processing problems and other risks and uncertainties, including
the business risks discussed in managements discussion and analysis and ARC's
annual information form, which may cause actual performance and financial
results in future periods to differ materially from any projections of future
performance or results expressed or implied by such forward-looking
statements. Accordingly, readers are cautioned that events or circumstances
could cause results to differ materially from those predicted. The Trust does
not undertake to update any forward looking information in this document
whether as to new information, future events or otherwise except as required
by securities rules and regulations.

    ARC Energy Trust is one of Canada's largest conventional oil and gas
royalty trusts with an enterprise value of approximately $4.4 billion. The
Trust currently produces approximately 64,000 barrels of oil equivalent per
day from five core areas in western Canada. ARC Energy Trust trades on the TSX
under the symbol AET.UN.

    Note: Barrels of oil equivalent (BOE's) may be misleading, particularly
if used in isolation. In accordance with NI 51-101, a BOE conversion ratio for
natural gas of 6 Mcf:1bbl has been used, which is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.

    
    ARC RE

SOURCES LTD. John P. Dielwart, President and Chief Executive Officer %SEDAR: 00001245E %CIK: 0001029509

For further information:

For further information: Investor Relations, E-mail:
ir@arcresources.com, Telephone: (403) 503-8600, Fax: (403) 509-6417, Toll Free
1-888-272-4900, ARC Resources Ltd., 2100, 440 - 2nd Avenue S.W., Calgary, AB
T2P 5E9, www.arcenergytrust.com


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