ARC Energy Trust announces budget for 2008 including a $355 million capital expenditure program



    CALGARY, Nov. 7 /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 2008 that includes a $355 million capital expenditure program.
    John Dielwart, ARC's President and CEO, said, "We plan to spend
approximately $305 million on base asset development to maintain production at
approximately 63,000 boe/d. In addition we plan on spending $50 million on
strategic investments to position ARC for continued success in the future. We
will continue our focus on resource play development and enhanced oil recovery
(EOR) including start-up of a CO2 pilot at Redwater. The Redwater initiative
is particularly important for the Trust as it starts us down the path towards
realizing the potential value from our CO2 EOR assets."

    
    Highlights of the 2008 Budget

    -   ARC expects to replace natural production decline from
        internally generated opportunities through delivering an estimated
        10,000 boe/d of new production by year-end 2008

    -   Production target of approximately 63,000 boe/d comprise 32,100
        bbl/d of crude oil and NGLs and 185 mmcf/d of natural gas

    -   Capital expenditure budget of $355 million, reflecting an approximate
        300 gross operated well drilling program (242 net wells)

    -   An increased focus on low risk oil developments with a second
        drilling rig deployed in southeast Saskatchewan and increased oil
        drilling programs in Redwater, Pembina and Youngstown

    -   A total of $50 million dedicated towards strategic investments, with
        the intention to explore for and expand upon our large inventory of
        resource plays, including natural gas from coal (NGC) as well as
        directing funds towards our EOR projects

    -   An eight per cent increase in operating costs to approximately
        $235 million. On a $/boe basis, operating costs are expected to be
        approximately $10.20

    Capital Program

    The $355 million capital program is a modest $5 million increase over
estimated 2007 capital expenditures despite the increase in spending on
strategic opportunities. We are assuming that development costs will be at or
below 2007 levels on the expectation of lower industry utilization rates.
Relative to 2007, the primary changes in the budget are:

    -   A $26 million decrease in the land budget as significant amounts were
        spent in 2006 and 2007 to acquire undeveloped land in and around our
        core areas

    -   A $9 million increase in spending on EOR projects as we launch our
        Redwater CO2 pilot

    -   Increased development in the core oil areas of Redwater, Pembina and
        southeast Saskatchewan

    -   A decrease in our planned spending in British Columbia as the result
        of the successful completion of an aggressive expansion at Dawson
        which has seen our production increase by 15 mmcf/d
    

    Based on 2008 budget projections, ARC will operate the drilling of
approximately 300 gross wells (100 wells targeting oil and 200 wells targeting
natural gas) and approximately 242 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 140 gross wells with ARC's share of
expenditures being approximately $50 million.
    All ARC core areas have significant opportunities for continued
development and growth with the largest capital programs being focused on our
northern Alberta/BC core area. At Dawson, in northeast BC, we expect to spend
approximately $43 million on a drilling program consisting of six horizontal
wells and four vertical wells as we look to maintain production in excess of
40 mmcf/d in this core area. At Ante Creek in northern Alberta, we expect to
spend $36 million as we intend to drill up to eight vertical wells in 2008 as
well as three horizontal injectors as we expand our waterflood.
    At Redwater, in central Alberta, we plan on spending $32 million on
drilling nine Leduc wells, six Viking wells and two Mannville gas wells as
well as launching our CO2 pilot. We will also follow up on the successful oil
well reactivation program to complete as many of these as possible prior to
the royalty relief program being discontinued in 2008.
    Throughout ARC's other core areas, numerous development activities will
take place. At Pembina, ARC expects to drill over 30 gross Cardium oil wells
and approximately 10 shallow gas wells. In central Alberta ARC will pursue
further NGC and Viking gas locations in Delburne, as well as various other
mid-depth drilling and recompletion opportunities. In southeast Alberta and
southwest Saskatchewan, a $35 million program of approximately 120 gross wells
will be drilled by ARC targeting shallow gas as part of our ongoing multi-year
staged development program. In southeast Saskatchewan and southwest Manitoba
ARC plans on increasing spending to approximately $71 million from $50 million
in 2007 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 30 wells on operated properties including five horizontal wells
at Lougheed, 16 horizontal wells throughout our other southeast Saskatchewan
properties and three vertical wells in Goodlands, Manitoba.
    Major projects on some of our non-operated properties include a 40 gross
well infill drilling program at Weyburn and a 10 gross well drilling program
at Midale, both of which are oil pools in southeast Saskatchewan that are
currently being flooded with CO2. Plans also include drilling nine gross
horizontal wells at Virden and four gross horizontal wells at Routledge in
Manitoba.

    
    The budgeted capital expenditures for 2008, by type are:

    ($ million)                      2006(Actual) 2007(Estimate) 2008(Budget)
    Development drilling                     225            217          207
    Facilities & pipelines                    36             27           26
    Maintenance                                8             19           23
    Optimization                              11              8           17
    Land                                      32             35            9
    Seismic                                    9              6           10
    Other                                     12             10           13
    Natural gas from coal (NGC)               14              8           18
    Enhanced Oil Recovery
     (strategic)                               -              4           13
    Exploration                               17             16           19
                                    -----------------------------------------
    Total                                    364            350          355
    Operated Wells Drilled(gross)    2006(Actual) 2007(Estimate) 2008(Budget)
    Natural gas wells                        222            179          200
    Oil wells                                 72             97          100
                                    -----------------------------------------
    Total                                    294            276          300


    Capital Budget by Area:
    ($ million)                      2006(Actual) 2007(Estimate) 2008(Budget)
    Northern Alberta and
     British Columbia                        166            187          129
    Drayton Valley                            30             32           41
    Central Alberta                           44             23           35
    Southeast Alberta &
     Southwest Saskatchewan                   51             35           34
    Southeast Saskatchewan &
     Manitoba                                 54             50           71
    Redwater                                  14             13           32
    Corporate                                  5             10           13
                                    -----------------------------------------
    Total                                    364            350          355
                                    -----------------------------------------

                                    -----------------------------------------
    Alberta Total                            213            205          218
                                    -----------------------------------------
    Saskatchewan and Manitoba
     Total                                    81             53           93
                                    -----------------------------------------
    British Columbia Total                    70             92           44
    

    The significant reduction in capital directed towards projects in British
Columbia is the result of completion in 2007 of a major well and facility
expansion at Dawson which has seen production more than double since 2005. The
capital program is subject to change and will be re-evaluated both as to the
aggregate of expenditures, the location of expenditures and the type of
expenditures during 2008 and accordingly the foregoing provides only the
present planning of ARC for 2008 capital expenditures.

    Impact of Alberta Royalty Changes

    This budget was prepared prior to the finalizing of the new Alberta
royalties and as such the geographical split for 2008 may end up different
than that listed above. While the budget approval provides the authority to
spend up to $355 million, the individual projects that this is based on may
change during the year. We have already reallocated capital in 2007 from
Alberta to another province. With approximately 67 per cent of our production
coming from the province of Alberta, a significant amount of our capital will
likely remain in this province, but we are still evaluating the impact the new
royalties will have on our planned spending and would anticipate reallocating
a portion of the capital identified to be spent in Alberta to other
jurisdictions.

    Production Volumes

    Target production volumes for 2008 are approximately 63,000 boe/d, which
includes an estimate of two per cent downtime for unplanned outages.
Production is expected to decline to approximately 61,500 boe/d in the second
quarter as a result of post breakup declines as well as planned maintenance
activities, but should increase in the fourth quarter on the expected success
from the capital program to a target 2008 fourth quarter volume of
approximately 63,500 boe/d. These higher volumes are expected to carry over
into the following year providing a strong start to 2009.
    The anticipated 2008 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 and increases in non-operated
expenses particularly at Weyburn and Midale, have resulted in an eight per
cent increase in total operating costs to approximately $235 million.
Therefore $/boe costs will be approximately $10.20 per boe, up from an
estimated $9.50 per boe for 2007.

    General and Administrative ("G&A") Expense

    ARC expects cash G&A expenses to be approximately $2.55 per boe in 2008.
Part of the increase in 2008 G&A costs is attributed to an increase in staff
count as ARC staffs up important strategic initiatives such as CO2 EOR. In
addition, 2008 will see full vesting in both the spring and fall of ARC's
"Whole Unit" Long-Term Incentive Plan ("LTIP"). For more information on ARC's
LTIP, please see the Management Discussion and Analysis section of our
quarterly release.
    ARC's budget numbers include a $12 million cash LTIP payment to be
charged against G&A in the second quarter and a $6 million payment in the
fourth quarter. If ARC's three year total return for the periods ending April
15th and October 15th is not in the top quartile of its peers, the cash
payments will be less than those budgeted.

    
    ($ million)                      2006(Actual) 2007(Estimate) 2008(Budget)
    Base G&A costs                          32.9           36.9         40.5
    Cash costs for Whole Unit Plan
     (estimated)                             3.5            9.8         18.0
                                   ------------------------------------------
    Total cash costs                        36.4           46.7         58.5
    LTIP - non-cash                          8.2            2.0            0
    Incentive rights - non-cash              2.5              0            0
                                   ------------------------------------------
    Total G&A                               47.1           48.7         58.5
    

    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 2008, 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 November 2, 2007(1)(2)
                     --------------------------------------------------------
                           Q4 2007            Q1 2008            Q2 2008
    Crude Oil         US$/bbl  bbl/day   US$/bbl  bbl/day   US$/bbl  bbl/day
    Sold Call           88.47    9,310     85.23   11,000     85.23   11,000
    Bought Put          72.78   13,293     68.06   14,000     66.91   13,000
    Sold Put            62.11   13,293     54.91   11,500     54.27   11,000
    Natural Gas       CDN$/GJ   GJ/day   CDN$/GJ   GJ/day   CDN$/GJ   GJ/day
    Sold Call            7.65   42,289      7.58   47,478      8.18   41,101
    Bought Put           6.53   42,289      6.49   47,478      6.46   41,101
    Sold Put             4.49   10,551      4.48   10,551      4.80   31,101
    FX                CAD/USD $Million   CAD/USD $Million   CAD/USD $Million
    Bought Put         1.1397    36.80    1.0750     3.00    1.0750     3.00
    Sold Put           1.1096    36.00    1.0300     3.00    1.0300     3.00
    Swap               1.1096     3.20         -        -         -        -
                     --------------------------------------------------------

                     -------------------------------------
    Crude Oil              Q3 2008            Q4 2008
    Sold Call         US$/bbl  bbl/day   US$/bbl  bbl/day
    Bought Put          85.63    8,000     85.63    8,000
    Sold Put            63.91    8,000     63.91    8,000
    Natural Gas         51.07    7,000     51.07    7,000
    Sold Call         CDN$/GJ   GJ/day   CDN$/GJ   GJ/day
    Bought Put           8.18   41,101      8.51   27,840
    Sold Put             6.46   41,101      6.54   27,840
    FX                   4.80   31,101      4.86   10,480
    Bought Put        CAD/USD $Million   CAD/USD $Million
    Sold Put           1.0750     3.00    1.0750     3.00
    Swap               1.0300     3.00    1.0300     3.00
                     -------------------------------------

        (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 hedging positions as of November 1,
            2007.
    

    Funding of the 2008 Capital Program

    The Trust's current plan is to finance the $355 million capital program
through a combination of cash flow, ongoing distribution re-investment
proceeds and debt. The exact split will be dependent on commodity prices,
operational performance and possible acquisitions and dispositions.

    Reclamation Fund

    As at September 30, 2007 the Trust's reclamation funds stood at
$26.2 million. The Trust's budget currently incorporates a contribution of
$12 million to the funds in 2008 to provide for the eventual abandonment of
the Trust's oil and gas properties. For the 2008 fiscal period the Trust plans
on withdrawing approximately $3 million from the reclamation fund to spend on
ongoing reclamations and well abandonments.

    
    Detailed Guidance -
    Production                       2006(Actual) 2007(Estimate) 2008(Budget)
    Oil (bbls/d)                          23,282         28,600       28,500
    NGL's (bbls/d)                         4,005          4,000        3,600
    Gas (mmcf/d)                             174            182          185
    Total (boe/d)                         56,254         63,000       63,000

    Costs and Expenses ($/boe)       2006(Actual) 2007(Estimate) 2008(Budget)
    Operating costs                         8.49           9.50        10.20
    Transportation costs                    0.63           0.70          .80
    Cash G&A expenses                       1.58           2.15         2.55
    Non-cash G&A expenses                   0.47           0.10            0
    Interest                                1.38           1.70         1.90
    Cash taxes                              1.01              0            -

    Weighted average units
     outstanding including units
     held for exchangeable shares
     (millions)                              207            210          216
    

    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 2008 and the
amount and type of 2008 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 2007 and 2008 and the continuation of the current regulatory and
tax regime in Canada, and necessarily involve known and unknown 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 $5.0 billion. The
Trust currently produces approximately 63,000 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

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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