ARC Resources Stock

Good morning. Ladies and gentlemen, I'm Mike Culbert, the Chair of the Board of Directors of ARC Resources. And it is my pleasure to welcome you to the Special Meeting of the Shareholders of ARC Resources.

In order to cover the business of the meeting within a reasonable period of time, we have prearranged with certain persons to move and second special resolutions to be considered. And with that, we will now move to the formal part of our proceedings in accordance with the interim order of the Court of King's Bench. I will chair the meeting today, and we'll now call the meeting to order.

I've asked Grant Zawalsky to act as secretary of the meeting; and Stephanie Tuss of Computershare Trust Company of Canada to act as a scrutineer.

I can confirm I have received an affidavit of mailing from the scrutineer as to the mailing of the notice of the meeting and all other meeting materials to ARC shareholders on record as of June 1, the record date for the meeting.

Pursuant to the interim order granted by the Court of King's Bench of Alberta in respect to the proposed arrangement, a quorum for the meeting is 2 persons present, each being a shareholder of ARC or a duly appointed proxy holder or representative for the shareholder holding or representing a proxy of at least 25% of the ARC common shares entitled to be voted at this meeting. The scrutineer report has been received and I confirm there is a quorum of ARC shareholders present at this meeting. I declare that this meeting is regularly called and properly constituted for the transaction of business.

The only matter to be considered at this meeting is a special resolution, the full text of which is available in Appendix A of the management information circular and the proxy statement dated June 9, 2026, and to approve the plan of arrangement involving ARC, Shell plc, Shell Canada Limited and the shareholders of ARC under Section 193 of the Business Corporations Act of Alberta, all as more particularly described in the information circular.

We will conduct the voting by electronic ballot on the Lumi platform. Instructions on how to ask questions and information regarding the voting procedure will appear on your screen. If you have previously voted, you do not need to vote again when prompted. By voting again, you will revoke any previous vote made prior to the voting cutoff.

Voting is open for the resolution, which will allow you to choose to vote immediately or wait until the conclusion of discussion prior to casting your vote.

Once discussion has concluded, voting will be closed and the results will be tallied by the scrutineer and provided at the end of the meeting. The detailed voting results will be disclosed by news release following the meeting.

Pursuant to the interim order of the Court of King's Bench, Alberta, the number of votes required to pass the special resolution shall be at least 66-2/3% of the aggregate votes cast by ARC shareholders, either in person or represented by proxy at the meeting.

I will now entertain a motion regarding the special resolution.

My name is Taryn Bolder, and I move that the special resolution in the form set forth in Appendix A to the management information circular and proxy statement of ARC dated June 9, 2026, be approved.

My name is Jenny Monroe, and I second the motion.

Grant, are there any questions on the motion from registered ARC shareholders or proxy holders?

There are no questions.

Thank you. We have now concluded the items of business. We will pause for a moment to allow shareholders to complete the vote online.

[Voting]

The balloting is now closed. I'm advised by the scrutineer that the special resolution has been approved by more than 99% of the aggregate votes cast by ARC shareholders, either in person or represented by proxy at the meeting. Accordingly, I declare that the special resolution submitted to the meeting has been duly carried. A press release and report on voting results indicating the detailed outcome of the vote will be publicly filed after this meeting on SEDAR.

That concludes all business that may be brought before this meeting. Unless there are any questions from the floor, Chair would ask for a motion that the formal portion of the meeting be terminated. Grant, are there any questions?

There are no questions.

I move the meeting be terminated.

I second the motion.

I declare the meeting terminated. On behalf of the Board of Directors and management team, thank you to our shareholders for joining us today and for your continued support of ARC in this important transaction.

We are also deeply grateful for our employees and contractors for their unwavering dedication and hard work through this process. Their continued focus on safety, efficiency, executing business plan has been instrumental in helping us reach our milestone today.

On behalf of the Board of Directors and management team, I would also like to thank Hal Kvisle for his invaluable leadership and guidance. Since joining the ARC Board in 2009 and becoming Board Chair in 2016, Hal's leadership has been instrumental in ARC's early transformation into a leading Montney resource play company. Building on ARC's cultural legacy and prioritizing employee and contractor safety and well-being, the company rose to the challenge of repositioning the business. Technically strong and financially conservative, ARC successfully built a world-class asset base under Hal's mentorship. As we celebrate our 30th anniversary, we see a strong path forward for this asset base and for the employees of ARC to continue leading through responsible resource development and strong stakeholder relationships. Thank you.

Good morning. My name is Mike Culbert, Director of ARC Resources, and I'm standing in for our Chair, Harold Kvisle, who was unable to attend today's meeting. On behalf of my fellow directors, I'd like to welcome you to ARC's 2026 Annual Meeting of the Shareholders.

Today, we'll focus on the matters of the meeting as outlined in the 2026 Notice of Annual Meeting of Shareholders. A special meeting will be held in July to vote on the definitive arrangement agreement that ARC has entered to be acquired by Shell. Meeting materials related to the proposed transaction will be mailed out to shareholders in June.

The meeting will now come to order. I will act as Chair of the meeting. I will ask Grant Zawalsky to act as Secretary of the meeting and both Stephen Bandola and Stephanie Tuss, representative of Computershare Company of Canada, to act as scrutineers.

I can confirm I have received the declaration from Computershare Trust Company of Canada as to the mailing of the meeting materials to our shareholders. The scrutineer's report has now been received, and I confirm that a quorum of shareholders is present at the meeting.

I declare that the meeting is regularly called and properly constituted for the transaction of business. We will conduct the voting by electronic ballot on the Lumi System. Instructions on how to ask questions and information regarding the voting procedure appear on the screen. If you have previously voted, you will not have to vote again when prompted. By voting again, you will revoke any previous vote made prior to the cutoff of voting.

To my knowledge, each resolution considered today will be passed by proxies deposited in advance of the meeting. Voting will be open to all resolutions at the same time, which will allow you to choose to vote on each resolution immediately or wait until the conclusion of the discussion on each resolution prior to casting your vote. Once discussion on all items of the business is concluded, voting will be closed on all resolutions. The results will be then tallied by the scrutineers and will be provided at the end of the meeting. The voting detail results will be disclosed by a news release following the meeting. Also now open on all resolutions.

I would like to formally place the shareholder -- place before the shareholders the financial statements of ARC for the year ended December 31, 2025, and the auditor's report thereon, which were previously distributed to shareholders.

The next item of business is the election of directors of ARC. I will now entertain nominations for directors of ARC.

My name is Taryn Bolder, and I nominate Harold Kvisle, Carol Banducci, David Collyer, Hugh Connett, Michael Culbert, Denise Man, Michael McAllister, Marty Proctor, Jacqueline Sheppard, Leontine van Leeuwen-Atkins, Jonathan Wright and Terry Anderson as Directors of ARC.

I now declare the nominations closed. The Board of Directors of ARC have agreed to conduct an election on an individual basis for each director in accordance with the majority voting policy. Grant, are there any questions?

There are no questions.

The next item of business is the appointment of the auditors of ARC.

I move that PricewaterhouseCoopers LLP, Chartered Professional Accountants, be appointed as the auditors of ARC.

I second the motion.

Grant, are there any questions?

There are no questions.

The next item of business is the nonbinding vote on our approach to executive compensation known as say-on-pay vote.

I move that the nonbinding advisory resolution concerning ARC's approach to executive compensation as set forth in the information circular of ARC dated March 13, 2026, be approved.

I second the motion.

Grant, are there any questions?

There are no questions.

Thank you. As we now have concluded the items of business, we will pause for a moment to allow shareholders to complete the online ballot.

[Voting]

The balloting is now closed. I'm advised by the scrutineers that all directors receiving the majority of votes in favor of election, and I declare those nominated as duly elected directors of ARC. PWC has been appointed as the auditors of ARC in excess of 97.98% of the votes in favor of say-on-pay vote.

Grant, are there any remaining questions from the floor?

We have received a question from [ Ruth Saldanha, ] who has been appointed by an undisclosed shareholder holding 1,300 common shares of ARC. She asks, ARC has been a leader in sustainability disclosure, so it is surprising to see removal of critical information for investors despite the transition and physical risk of climate change highlighted as increasing risk factors in the 2025 annual report. In the latest Climate Engagement Canada benchmark, ARC did not meet the metric linking executive compensation and sustainability performance, where years prior, you did. As ARC works through its acquisition by Shell, at time of global uncertainty and commodity price volatility, investors would like strong incentive devised oversight competencies connected to transition risk. Page 14 of the circular notes, the Board holds responsibility for climate risk, carbon emission goals and measurement and energy transition. Can you disclose a named position at Board level with responsibility over these business strategies and risks?

Ruth, every Board member and our management team are responsible for the oversight of our strategy and risks related to our business. As it pertains to ESG matters you identified, oversight is held at the highest level of the Board, whose collective skills as outlined in the Director matrix, ensures exceptional governance of these matters. Ultimately, accountability lands with our Board Chair.

The chair would entertain a motion that the meeting has been terminated.

I move that this meeting be terminated.

I second the motion.

I declare this meeting terminated, and we'll now turn the meeting over to our CEO, Terry Anderson. Thank you.

Thanks, Mike, and good morning, everyone. I'm going to keep my comments brief as we held our first quarter conference call earlier this morning, a recording of the call is available on our website. Over the past 30 years, we have built an exceptional company defined by our world-class asset base, strong safety culture, commitment to operational excellence and high-performing team. These competitive strengths have translated into strong and sustained operational and financial performance that has created value for our shareholders, our employees and communities. It is the latter that I am especially proud of being able to support causes that matter to our neighbors and our employees, like the $1.5 million donation we made last year to the Dawson Creek Hospital Foundation for an MRI machine. The agreement that we announced earlier this week for Shell to acquire ARC recognizes the value we have worked hard to deliver and sets the company up to deliver even more as part of Shell's integrated global platform.

In closing, thank you to our shareholders for your ongoing support and to our employees, management team and directors for their continued dedication in safely executing our business and creating long-term value.

Thank you for joining our annual meeting, and have a good day.

Good morning, ladies and gentlemen, and welcome to the ARC Resources Limited Q1 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded today, Wednesday, April 29, 2026.

I would now like to turn the conference over to Dale Lewko. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for our first quarter earnings conference call. Joining me today are Terry Anderson, President and Chief Executive Officer; Kris Bibby, Chief Financial Officer; Armin Jahangiri, Chief Operating Officer; and Ryan Berrett, Senior Vice President, Marketing.

Before I turn it over to Terry and Kris to take you through our first quarter results, I'll remind everyone, this conference call includes forward-looking statements and non-GAAP measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated. Also, please note that we will not address questions on the events leading up to the signing of the definitive agreement with Shell. We plan to disclose that information to the market at the time of mailing of our management information circular for the transaction, which we expect to do in the next 30 days. Finally, the press release, financial statements and MD&A are available on our website as well as SEDAR. Following our prepared remarks, we'll open the line to questions.

With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead.

Good morning, everyone, and thank you for joining us today. This morning, I'll provide a brief discussion of the Shell acquisition of ARC that was announced this week and provide an overview of our first quarter results. After that, I'll turn it over to Kris to discuss our financial performance. On Monday, ARC announced that we have entered into a definitive arrangement agreement to be acquired by Shell for approximately CAD 22 billion, including debt. Over our 30-year history, we have built a high-quality Canadian energy company. The strategy was never to build and sell, however, we have always known that ARC's competitive strengths and attributes of the business would be attractive to others. We are a low-cost producer, have a long runway of world-class Montney assets, and we've assembled a team with a high-performance culture and technical depth that has been critical to our success.

Through this transaction, we captured tremendous value and become part of a truly dynamic global energy leader, capable of realizing the full potential of our business. And we join an organization that shares our core values and commitment to safety, community and responsible energy development. I want to thank our people, our employees and contractors for their commitment and contribution to ARC over the past 30 years. Your leadership in operational excellence and continuous improvement has led ARC to be the exceptional company that we are today and will support Shell in achieving their strategy tomorrow.

Before I get into our Q1 results, I'd like to speak briefly to safety. Thanks to the focus and discipline of our employees and contractors, we delivered another strong quarter of safety performance. On behalf of our leadership team, thank you for your ongoing commitment to keeping our people and work sites safe.

Turning now to the quarter. 2026 is off to a good start with strong operational and financial results. In a year marked so far by geopolitical instability and commodity price volatility, ARC has demonstrated the value of being Canada's largest condensate producer and having natural gas diversification to key demand markets in the U.S. Together, this contributed to about $1 billion of cash flow and $0.5 billion in free cash flow this quarter. Q1 production was just shy of 420,000 BOE per day, another record for ARC. This represented a 12% increase year-over-year and 17% on a per share basis. Condensate production averaged more than 111,000 barrels per day. On top of the strength in global oil prices, condensate markets are also tight. Over the past month, condensate has traded at an $8 per barrel premium to WTI with condensate prices in the second quarter to date averaging greater than $125 per barrel. While liquids drew the headlines, natural gas prices in certain U.S. markets were also strong earlier in the year. We have structured our natural gas marketing portfolio to capitalize on these volatile conditions as we have proven to consistently capture asymmetric upside when these price dislocations occur.

In the first quarter, ARC realized a natural gas price of $4.51 per Mcf, which was 81% higher than the local AECO benchmark. Our market diversification strategy put in place years ago is a sustainable competitive advantage for our business. We have low-cost transport in place to sell approximately 50% of our natural gas to premium markets south of the border, which has translated to higher natural gas margins.

Turning to operations. There are a few notable things contributing to our performance. At Kakwa, our largest condensate asset, we had really strong well performance. Production averaged approximately 208,000 BOE per day. We also captured and realized operational and cost synergies from the capital assets we acquired last year. As a reminder, we expanded our footprint at Kakwa with the completion of two tuck-in acquisitions. The most recent was $160 million tuck-in acquisition in Northwest Kakwa, which extends our condensate inventory at our most profitable asset.

Next, we had better than forecast production at Greater Dawson, which represents about 1/4 of our production. This is largely due to stronger well performance from enhanced completion designs and our culture of continuous improvement. At Attachie, production held steady in the quarter, averaging approximately 29,000 BOE per day. This included 13,000 barrels per day of condensate. Activity was limited to the completion of our first Lower Montney pad. Overall, we are continuing to advance our learnings and remain confident in the asset and our ability to realize its potential.

With that, I'll turn it over to Kris.

Thanks, Terry. Good morning, everyone. Our operating and financial performance surpassed analyst estimates again this quarter. Production of 419,000 BOEs a day was 1% above analyst forecast, while cash flow per share was 7% above. We generated $460 million of free cash flow, which is approximately 75% above analyst expectations, driven by lower capital spending and higher cash flow. Capital investment in the first quarter was close to $510 million. We drilled a total of 26 wells and completed 43, mainly at Kakwa and Greater Dawson.

Of the $460 million of free cash flow generated in the quarter, we returned $256 million to shareholders through share buybacks and our base dividend. We retired roughly 5 million shares for approximately $137 million and declared dividends of $120 million. The remaining free cash flow was directed to debt repayment following the close of the $160 million Kakwa acquisition. As a result, net debt was essentially flat quarter-over-quarter at approximately $2.9 billion or roughly 0.9x net debt to cash flow.

Moving on to our 2026 guidance. It's unchanged from when we first announced it last November. ARC plans to invest between $1.8 billion and $1.9 billion and produced between 405,000 and 420,000 BOEs per day, including approximately 110,000 barrels per day of condensate. At current forward curve, we expect to generate about $1.7 billion of free cash flow.

With that, I'll pass it back to Terry.

Thanks, Kris. ARC has always operated our business with long-term profitability in mind, and it's being made possible by the distinct competitive advantages of our business we've established over our 30 years. We have scale as Canada's largest Montney and condensate producer, a large inventory runway in a world-class asset, a differentiated marketing portfolio that cannot be replicated and an exceptional team with a proven track record of performance. All these attributes will be fully realized by Shell and strengthened its business. Perhaps most importantly, it will be executed maintaining our culture of operational excellence and safety that both companies have a shared commitment to achieve. Together, we look forward to delivering on Canada's exciting energy future. Thank you.

Operator, you can open the line to questions.

[Operator Instructions] We will now take our first question, and this comes from Sam Burwell from Jefferies.

Congratulations on getting the deal done. So Shell went over its plans yesterday. Just curious, was it always your plan to grow gas volumes to feed the Cedar and the Cheniere LNG supply contracts, or was the plan to keep gas production roughly flat through 2030 and just reduce exposure to local and other markets?

Hey, Sam, it's Kris here. I think you saw in our previous disclosures that we had a lot of optionality in the portfolio. So we have the enough gas within Canada to supply those contracts. And whether we chose to grow gas production to backfill the volumes that were being diverted was one of the options, but it was always going to be dependent on what our view of local gas prices were at the time. So we hadn't committed one way or the other, but we have the optionality in the portfolio.

Okay. Got you. And with respect to local gas prices, do you guys have any volumes curtailed at Sunrise or anywhere else right now? Station 2 pricing is not great, under a dollar, but I'm just curious, like did you have much Station 2 exposure left now that you are selling 150 MMcf to Shell and LNG Canada at this point?

Yes. Hey, Sam, it's Ryan. We don't have any production shut in at this current time. It's something, obviously, from past history, we will do if gas prices aren't sustainable to be profitable in our business. But at this time, we don't have any production shut-in.

And the next question comes from Jamie Kubik from CIBC.

I just had a question that we've received from a number of investors over the past few days is just why is ARC selling now? Is -- was this a competitive process? Can you just talk a bit about the nuances around that, Terry and team?

Hey, Jamie, it's Kris here. We did say at the beginning, we are not able to talk about any of the events leading up or through to the signing of the definitive agreement. So I'm sorry, we can't answer that.

[Operator Instructions] No questions have came through, I'll now hand the call over back to Dale Lewko. Please go ahead, sir.

All right. Thanks, everyone. That concludes the call.

Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.

Welcome, everyone, and thanks for joining Sinead and me to discuss Shell's acquisition of ARC Resources. Today, we want to talk about the strategic logic behind the acquisition, why it makes sense now and what it means for our business and our investors. Yesterday, we published a presentation together with our press release and today, we will make some brief comments before we go into Q&A.

Let me start by saying that I'm really pleased that the Boards of both companies have unanimously supported the deal, which is expected to close in the second half of 2026 subject to regulatory approvals. We look forward to continuing to work with ARC's management and Board as we move towards completion. ARC couldn't be a better strategic fit for Shell. As we outlined at our Capital Markets Day, where we see value, we will take the opportunity to add high margin, low cost and lower carbon intensity production to our portfolio in areas where we have competitive advantages.

ARC delivers exactly that. It is one of the largest pure-play operators in Canada's Montney basin with a substantial portfolio of Tier 1 undeveloped inventory, which are complementary to Shell's assets. And importantly, it establishes a long duration growth platform. And it's not just the assets that I'm excited about. I'm also excited about the people. ARC brings an impressive high-performance culture that has consistently achieved best-in-class delivery in multiple spheres over multiple years, as you will have seen from the presentation that we published yesterday.

By integrating ARC's liquid-rich gas portfolio into Shell, we are accelerating our integrated gas and liquid strategy with one transaction. Their acreage is highly contiguous with Shell's existing Groundbirch and Gold Creek assets and creates optionality across our portfolio, such as with LNG Canada. As we hope you know by now, every decision that we make is in pursuit of shareholder value creation. We believe this deal delivers that with double-digit returns above our hurdle rates as significant free cash flow of around $1.5 billion annually for the remainder of this decade and with upside beyond 2030.

We've always said that we are focused on value over volume. But it's important to note that with the addition of 390,000 barrels per day on average, our expected compound annual production growth rate to 2030 increases from approximately 1% to 4% compared to 2025. Given all of this, we hope you can see exactly why we are very pleased with the acquisition.

By combining ARC with our existing business, we established Canada as a new low-cost Heartland for Shell. We are the country's #1 LNG exporter and are now the third largest shale producer with a strong cost advantage versus basin peers. The assets we are acquiring are positioned well within the liquid-rich window of the Montney Basin in a stable jurisdiction, close to infrastructure and with low unit operating costs. Those operating costs are approximately 50% below Montney peers, complemented by strong carbon performance. Together, these characteristics materially strengthen our margins and portfolio resilience.

In Bridge Colombia specifically, the acquisition expands our contiguous Montney position around Groundbirch, now the primary supply source for LNG Canada Phase 1, creating clear upside through longer laterals, improved capital efficiency and greater leverage of our remote operations model. We expect to deliver meaningful synergies from combining our businesses, estimated at some $250 million per year by the end of year 1, with further upside linked to a potential FID for LNG Canada Phase 2.

And with our Scotford refining and chemicals complex, Quest and Polaris Carbon Capture Developments, together with our mobility and lubricants businesses, Canada already showcases Shell's integrated model. ARC becomes an integral part of this attractive and strong value chain. As I said earlier, the combination of ARC's volumes and growth profile will drive significant incremental free cash flow while extending Shell's production base. Of the 390,000 barrels per day that ARC adds annually on average through to 2030 approximately 130,000 barrels of these are liquids that, over time have priced at or around WTI.

As we said in the press release, 70% of ARC's revenue is from liquids from only 40% of the volume. In essence, the value we are getting is from the liquids and the volume that we are accessing is natural gas, which we can upgrade to LNG if Phase 2 is sanctioned. And by 2035, we expect overall production growth across this portfolio to exceed 100,000 barrels per day, including the synergies I mentioned, we expect $1.5 billion of free cash flow based on our CMD '25 price assumptions of $70 per barrel real.

Beyond 2030, the incremental free cash flow is expected to be around $2 billion on average subject to future growth decisions. Liquids will continue to be a core part of the investment case and will contribute up to 150,000 barrels per day of liquids by 2035. That helps to close a significant portion of the liquids gap that we had previously identified.

Natural gas remains equally important. If a final investment decision is taken on LNG Canada Phase 2, there is scope to redirect a substantial portion of gas volumes to higher-priced Asian LNG markets, creating meaningful incremental value beyond current assumptions.

With that, I'll hand over to Sinead to walk through the financial and capital allocation rationale.

Thank you, Wael. Let me first take a step back and remind you of the capital allocation journey Shell has been on. When Wael became CEO in January 2023, we took a deliberate pause to reassess Shell's capital allocation model. This process articulated at Capital Markets Day 2023 focused on improving performance and unlocking value with urgency and discipline. This marked one of the most significant shifts in Shell's capital allocation history and has delivered peer-leading shareholder returns and improved valuation. That discipline positions us for this deal.

During Sprint 1, we deliberately ruled out major M&A, while we rebuilt trust an embedded rigor. By Capital Markets Day 2025, we made clear that any inorganic growth would focus on upstream and integrated gas.

The acquisition of ARC fits the strategy perfectly. ARC shareholders will receive CAD 8.2 in cash, plus some 0.4 Shell shares per ARC share, representing a 20% premium to the 30-day VWAP. The transaction also offers continued participation in Shell's value creation, including an attractive dividend and share buybacks.

For Shell shareholders, our improved equity valuation and relative outperformance of our shares means we've been able to structure the deal with 75% equity consideration. And from 2027, the deal is accretive on a free cash flow per share basis. This means we are accessing growth and long-duration free cash flows, whilst preserving the balance sheet, strength and financial flexibility.

As Wael alluded to earlier, I also want to emphasize that the capital we are allocating today is based on value, not volume. Our self-imposed discipline has enabled active capital recycling and portfolio high grading. For example, recently, we have divested noncore assets, such as the Colonial Pipeline and Jiffy Lubes and multiples of approximately 9x EBITDA well above those of the growth portfolio we are acquiring and there is more to come.

In addition, we have been disciplined with CapEx, consciously spending well within our capital budget, in essence, $21 billion in each of the last 2 years. The combination of these capital allocation choices has funded the cash component of this transaction, whilst allowing us to maintain a strong balance sheet. We will continue to remain disciplined with our capital allocation framework, which is unchanged. This means that we will absorb ARC's development spending within our existing guidance for 2027 and 2028 of $20 billion to $22 billion of cash CapEx. We will also continue to deliver on our commitment to pay out 40% to 50% of CFFO to our shareholders, which we consider as sacrosanct. And we hope that you see that when we say something, you can trust us to deliver.

With that, I'll hand back to Wael.

Thanks, Sinead. And before going to Q&A, I want to recognize and thank our people. Despite ongoing geopolitical uncertainty, our teams have continued to execute safely and perform consistently. Without those people, we could not have reached this important milestone. This deal represents a turning point in our journey, and we're excited about this next phase as we have so much more to come.

I look forward to welcoming ARC's employees to Shell and thank Terry, his team and ARC's Board for the company that they have built and for their professionalism and collaboration throughout the process. Last, but not least, I would also like to thank our shareholders for their continued support.

Now before I open up for questions, and now that we've closed off on the prepared remarks, let me maybe just share a few more reflections on where we are on this journey. If I step back now 3-plus years ago, we had set ourselves the task of making Shell the best performing, best returning company in the sector, implicitly building resilience as well as longevity into our portfolio.

Now Phase 1, as Sinead has already talked about, has offered us the opportunity to be able to really lean the company, drive the simplification, enhance our capital discipline and most importantly drive a performance culture in the company that has allowed us to consistently deliver the outcomes we had sought to deliver. Now having said all that, we still have a long way to go. We recognize that there is much more in the tank, and that is what we are going after. But what we said in Capital Markets Day 2025, is we also wanted to now pivot towards capital reallocation, unlock more value. And Sinead gave you a great example of some of the multiples that we have been able to realize in our divestments versus the multiple we are acquiring here.

So I'm really pleased with that momentum. But I'm also pleased that, that has afforded us the opportunity to be able to take the step that we announced yesterday. An important step in that transformation that we are driving, that methodical transformation of the company and its culture.

Now let's talk for a moment just about ARC. I think with ARC what I particularly have admired about this company. And by the way, this is a company that we have been looking at for more than 2 years now. What we have particularly admired is that it is sitting in one of the most prolific hydrocarbon basins in the world in the Montney basin, an exciting basin.

And this company sits on some of the highest quality resources, the lowest cost resources, the longest duration resources and some of the lowest carbon intensity resources in that basin. It will catapult us to one of the leaders in the basin, and it does so with a combination of staff whether it's the ARC folks that have, over the past 3 decades built a real culture of excellent capital allocation, a real focus on performance -- operational performance and a value system that is very aligned with Shell's as well as combining our people on the ground, a team in Shell Canada, a team of around 3,000 that has actually outdelivered on all the promises that they had set.

With more potential to be able to unlock, of course, as you combine those 2 organizations together. That is what excites me about this opportunity. And what we have put out there is a value for this acquisition that allows us not just to be able to unlock the value that is inherent within the $250 million plus per annum synergies that we expect to see. I expect my team to go after the upside that we have identified with this acquisition. And we see billions of dollars of potential upside.

Yes, LNG Canada Phase 2 could be one of them but there is a lot more that we have been able to see. And that will require real hard work, and that is what I will hold my team to account on. And so having said all that, I do think -- this is a time -- this is a timely opportunity for us. I couldn't have asked for the stars to align in a better way, and we can talk about that as we get through the Q&A. But I think it's done at the right time for the right value, and most importantly it allows us to really be buying a company that is first and foremost in my mind, a liquid-rich player. It's a liquid-rich player that allows us to be able to, first and foremost, get the liquids, which deliver 70% of the value, and I see the gas as the upside, the upside that could be monetized either through the U.S. or into LNG value chain, which, of course, we have through LNG Canada Phase 1 and potentially even more through LNG Canada Phase 2.

And so my ask is don't look at this as the acquisition of a Canadian Domestic E&P player that has a predominantly gas portfolio, actually look at it as a liquid-rich addition to Shell with an upside of LNG that we are uniquely positioned to be able to unlock. Let me leave it there and now to go to Q&A. Luke, I think is our operator today. Let's please leave it to 1 to 2 questions per person, just to make sure that everyone gets the opportunity to ask their questions. Luke?

Our first caller is Alejandro Vigil from Santander.

Congratulations for the transaction. The first question is about the -- you discussed before the timing of this transaction, $100 per barrel and you have always talked about countercyclical M&A, but also, you discussed that you have been looking at this target for 2 years. So if you can elaborate on all these factors and why now this transaction?

Yes. Thanks, Alejandro. Let me maybe sort of step back. Then 2, 3 years ago, when we identified this target, we identified the strategic fit into Shell. And I've described some of those elements. But the stars hadn't aligned for a number of reasons. We didn't think our paper was -- we could not actually transact with our paper. That's why we were very patient in setting ourselves up to drive the performance, discipline, simplification, agenda that resulted in the outperformance in our shares.

And of course, over the last 2 months, the macro has even pushed out those shares even further. What you have seen over the last couple of months is, of course, ARC hasn't enjoyed some of that upside. It's been relatively flat against that macro. And we think there's a couple of elements at play there. It is partly seen as more gas indexed. I would encourage those of you who have the time this afternoon to actually watch Terry and the team presenting the ARC Resources to give you a sense of the WTI Indexation that ARC is all about.

In my mind, ARC is a WTI Index company more so than an AECO Index company. And hopefully, you will see some of that playing up. So we think there was a bit of a mispricing in that for ARC. And we think that the unique synergies that we brought allowed us to unlock a lot of that value. So where our share price was and the fact that ARC hasn't necessarily enjoyed the upside to crude prices. We were able to essentially bank that deal. And it's important to recognize we were able to transact at a breakeven for us that is continuing to be consistent with what we outlined at CMD '25. In other words, this deal is at a breakeven burdened at the level which we were very comfortable with on our reference prices, putting aside the upside that we see in the current environment.

Our next caller is Josh Stone from UBS.

Just question on the assets themselves and particularly the Attachie asset because that's one of the reasons the shares were underperforming. So how comfortable are you with the reservoir risk there and operational risk of that asset? And when that could come in, what are you assuming with regards to that? And are there other things that you think Shell can do differently or things that are going to happen anyway that you can apply to that asset? So if you could just talk about Attachie and how you see that risk, that would be helpful.

Yes. Let me ask Sinead to say a few words on that. Sinead?

Certainly. And thank you, Josh. Yes, indeed, when you look at a company like this, you're looking at the overall valuation of the company. And we've been looking at it as Wael said, for several years now. So as you'll see, there's one slide that's in that -- in the deck that we put forward, which shows you actually the different assets as they work through. So you can see it's almost in the order at which we have looked at them. So you can see it starts with Kakwa, you've got Greater Dawson, then you've got Sunrise and then you've got into Attachie as well. If you look at the numbers, more than 75% of their volumes are actually coming from the first 2 of those. So what you can see is if we were doing this deal, we wouldn't have been doing it for Attachie by itself. We're actually underwriting this transaction by virtue of the other assets that are there that we can already see.

So that's where we get great comfort in it. We've had our technical teams all over this, and we have great confidence in the resource potential that's there. I've actually been really, really impressed with looking also at how Terry and his team have looked to unlock Attachie. They've tried different options. They looked at different spacing. They've looked at different frac intensity as well. So we've built all of that into our consideration and taking it in with our technical teams to be able to get great confidence in the fact that we can see how to take it forward.

So fundamentally, we're underwriting the money that we're putting forward on this transaction, not because of Attachie but because of everything else. If you add the other assets in, you then add in the synergies that we feel we can unlock, including the joys of our trading and optimization business, which allows us to get international pricing if we did FID on Phase 2, but also, frankly, outside of that because we can manage to direct volumes into the U.S. and other locations that gives us great confidence in the underlying assets. So Attachie for us is actually upside at the end of the day, and we look forward to working with an amazing team who are really understanding the subsurface there in the current ARC people and being able to understand how to unlock that for really that uplift.

Our next caller is Alastair Syme from Citi.

Can I just ask about the capital frame. So ARC, had CapEx of something like $1.3 billion -- $1.4 billion a year. And I think you're essentially saying this gets offset somewhere else in the Shell portfolio. So can you just explain how that offsetting has been done? And I guess what was -- what is or was marginal in the current portfolio that's now not going to be funded, if that makes sense.

Yes. Thanks for that. Sinead, please.

Happy to. Indeed. So a couple of things here probably to talk through, Alastair as well. So you know we've been very disciplined in terms of $20 billion to $22 billion has been our range. So what we're looking at is 2 aspects, of course, for '27 and '28, we said it will fit within our range and how do we get comfort in that? Well, first and foremost, you can see that in the last couple of years, we've really been spending around about $21 billion, and that's been with inorganic acquisitions in there as well, Alastair. So we had the space to be able to absorb this. But beyond that, we've been actually looking at a capital reallocation approach. That's exactly what we've been doing.

And hence, you've seen some of the divestments that come through as well. So back to that point, I think I made in the prepared remarks earlier on, we've been both careful in terms of how we spend our CapEx, but we've also been thoughtful in terms of actually effectively recycling capital from those transactions, which we're divesting in Downstream. So you can see that reallocation from our Downstream portfolio into our Upstream and Integrated Gas portfolio giving us sufficient space to be able to absorb this quite easily.

Our next caller is Matt Lofting from JPMorgan.

I'll ask you 2. First, actually was just a follow-up on the capital allocation or reallocation point. I guess going back to CMD '25 Shell's framed reallocation of capital employed as being a key enabler of future upstream investment. If you consolidate the points that you've made over the last sort of 20 minutes, how would you recommend that investors sort of see that reallocation piece, in particular, I think the point that Sinead made around there being more to come from that perspective as we look forward?

And then second, I just wanted to ask you about Canada as a heartland from a big picture perspective. Have events of recent months in the Middle East, but also developments policy-wise in Canada, incrementally shaped Shell's thinking from that perspective in terms of the perceived relative attractiveness of Canada and of a second phase of LNG Canada in terms of meeting future Asia gas demand?

Thanks for that, Matt. Let me take the second question first, and then Sinead may leave you the first. As I said earlier, I think the important point here is the attraction of ARC for us predated the current events in the Middle East. We have always believed in a diversified portfolio, even more so for our LNG footprint because it affords us the opportunity to meet our multiple different customer geographic points with multiple different supply points.

Now LNG Canada, of course, has been LNG Canada Phase 1, we have been watching how the venture is delivering and so far, very pleased with the momentum we have. And of course, we keep a very close eye on the regulatory environment and the government signals. I have to say we've been growing in confidence in the posture that the Canadian government has been taking, and we see it directly through the actions in our interactions with them both at the provincial and the federal level when it comes to enabling LNG Canada Phase 2.

This has been a significantly forward in terms of their conviction around LNG projects. And that has, of course, raised the likelihood of a potential opportunity moving forward. I think what -- when we look at Canada more holistically, we, of course, have a history of over 100 years in Canada. And what's particularly attractive about ARC and the position in Canada is it is not just a question of the LNG value chain, though that is a critical part of it. It's an understanding of the landscape in Canada. It is the adjacency to Groundbirch and Gold Creek, which allows us to unlock more value. And it's the fact that this is a consolidated focused set of assets in a very well-defined space in the Montney. You put all that together, plus the nontechnical tailwinds that we have been seeing and that undoubtedly helps as we take a decision like what we announced yesterday. Sinead?

And thanks, Matt. I absolutely love the question because it's just exciting to talk about the journey that we've been on. In Capital Markets Day, we were really clear as you say about the fact that we are going to be doing a capital reallocation journey throughout the next couple of years.

We talked then about the fact that we had 45 billion of underperforming assets, largely in downstream renewables, which we're working hard to improve the performance of. But we also said to you that we would also look to unlock value where assets are not core to us. And we've talked about some of the ones, whether it was Colonial and Jiffy that Jiffy Lubes that I brought up earlier, which are not core, but that we were able to transact at very high multiples for us and then be able to put into other businesses.

So what you're seeing us doing is being able to get price realization on some noncore assets, but also look to improve the $45 billion, and that's allowing us to really unlock opportunities such as this transaction and be able to improve the strength of interestingly, not just one, but 2 of the pillars of our core strategy. If you remember in Capital Markets Day, we said we wanted to be the leading integrated gas player. We also -- and LNG. We also talked about sustaining our material liquids position as well as improving our customer focus and trading aspects of it. It's really rare that you get the opportunity with a transaction such as this to be able to hit on 2 pillars of your strategy, and this does exactly that.

So as an investor, you ask me what I think investors should be looking at. I think they should be excited about the fact that we're reallocating from parts of the business where we are either not the natural owner or where we need to improve to areas where we are leaders in them, and that looks pretty good in terms of the future performance of this company.

Our next caller is Doug Leggate from Wolfe Research.

Wael, this gives you significant resource depth potentially to commit to long-term offtake agreements. I'm just wondering, strategically, how -- what does this do to your appetite to sell down your working interest potentially in Canada LNG. I think you did say we could have 1 or 2 questions. So if I could bolt on a quick one for Sinead. You're using flat real gas prices, which I think gets you to $4.50 and $5 in 2030, 2035, respectively. Strip is quite a bit lower than that. What does the value look like at strip gas prices on your estimates?

Doug, thanks for those questions. Let me take the first and Sinead can take the second. I think on the resource depth and the LNG Canada sort of potential equity ownership. We are very comfortable with 40% equity interest in LNG Canada. We like that because of the unique nature of that location. We like the fact that you are 10 days sale away from Asia of course, with the challenges at the moment in the Middle East. Many of our customers are looking for diversified supplies and Canada is top of their list. And so it gives us a great opportunity to be able to hit Western Canadian gas into Asia, not to mention the low-cost nature of AECO and the ability to be able to create more value.

So we're not necessarily looking at reducing our equity interest. What we are looking at is in part of that value chain where we are either not the natural owner or we see a lower return, such as, for example, in the midstream we will look at opportunities to decapitalize some of that and to recycle that capital back to Sinead's earlier point around prudent capital reallocation, we will look to redirect that capital into higher-return areas.

Now we needed to invest at the time in that part of the value chain to enable the full value chain. But part of the muscle we are trying to build more and more in the organization is then to make sure that once we've enabled the project, we reallocate that capital towards higher value opportunities such as the cash that goes into an acquisition like this with the double-digit returns that an acquisition like this affords us. Sinead?

Yes. And thanks for the question, Doug. So indeed, when we talk about the fact that this company can deliver, we believe this acquisition will deliver some $1.5 billion of free cash flow per year. We're doing that based on the fact of what we're saying is $1.5 billion and more based on our CMD assumptions, which, as you know, were $70 real term, et cetera.

Now we're not pricing this, of course, with some heroic assumptions. And frankly, this has not been priced off Henry Hub or anything else either. Our belief is that we will be able to deliver, of course, not at AECO prices, but actually at international prices as well. I'm well aware of AECO where it sits, and we're priced it with AECO as a significant discount to Henry Hub as well. But we're actually -- when we close the transaction, what you'll see us do is to start outlining our next CMD, all of the different price lines for this because Canada is becoming very material for us in the heartland, as Wael spoke to earlier.

Our next caller is Fergus Neve from Rothschild & Co Redburn.

I just hope you might be able to outline the opportunities that ARC's resource base has for growth in production. And maybe talk a little bit about how these opportunities compare with the existing opportunities that you have in your portfolio today?

Fergus, I think I heard because it's sort of cracked a couple of times. It's outlining the opportunities that ARC affords and how do they compare against organic opportunities in our funnel. Is that right?

Yes. That's right.

Sinead if you want to go ahead with that.

Okay. Perfectly. So in terms of that, what has been really interesting to watch Terry and the team, what they've created here is they've created an amazing portfolio, which is very much about delivery on the existing assets, and we talked about Kakwa being the core of this earlier. But they've also created an amazing runway of future portfolio options.

And I alluded to earlier the fact that Attachie is, of course, just one of those to unlock. There's actually many of those that are in there as well. And they've got a great runway of different wells and strength that will need to be drilled as well coming through. They're very thoughtful in what they do, and that's part of what we're really excited to work with them on. It's just a great bunch of people who think through exactly how they do a measured derisking for each part of this portfolio. What we're seeing is that future runway is really exciting.

When you combine that with our own options with Gold Creek and with Groundbirch together, there's a huge ability to optimize between the 2 and actually getting both sets of technical capability together to be able to unlock them is quite exciting.

And that's actually what builds into our synergies that you see coming through. So that's a very exciting opportunity for us, and we've got a lot of parts of the synergies, which I'm sure we'll talk about later which has allowed us to avail of that. Of course, beyond that, we will also have a big decision coming up on Phase 2 and how that will look like combined with ARC is something that we do consider, of course, in terms of our hurdle rates. We're very thoughtful by every decision that we make. But what they're offering to us and what we hope to be able to work together on is exciting.

Our next caller is Lydia Rainforth from Barclays.

The whole [indiscernible] which always feels appropriate for an acquisition. But 2 questions, if I could. Firstly, does this still leave you with a hole to fill post 2030? I think in the past, we've talked about it being about 350,000 barrels a day. I think when you look at the growth, it's 100,000 barrels a day growth I think about you just lifted the base? Or are we now kind of going that hole is now filled. So just clarify that for me.

And then while you talked in your speech about there being $1 billion of upside. Can I just ask you -- I live it when you're talking billions of dollars. So can we just expand on that a little bit for me?

Yes, I'll start off and please Sinead add to both questions as you see fit. I think, firstly, it's important to recognize we weren't doing this transaction on the basis of just filling a gap. We were doing this transaction. We've been -- the team knows I've been chomping at the bit on this particular company for a couple of years now, but we were only going to do it if we could potentially demonstrate that we are able to unlock the value.

In essence, to bank the value of the transaction and then create the upside that we needed to be able to make this a compelling investment opportunity, which is where we got to in the end. As I look into 2030, of course, we had already derisked our liquids volumes at the 2030. So this is now an additional amount that comes on top of that for 2030. If you look at 2035, we've typically talked about 350,000 barrels per day. And we said we had 10 years to continue to look at the right value accretive opportunities to be able to go there.

Now I started off by talking about the strategic interest in ARC. First and foremost, is the liquid-rich nature of the resource base, the 40% of the production, that is liquid, which is delivering 70% of the value. That grows to 150,000 barrels per day in 2035. So in essence, more than 35% of that gap that we had referenced at the moment is filled through that transaction. And that's a big step that we have taken. But we continue to, of course, look at what more we can do organically within our own portfolio. This doesn't include yet opportunities that we are pursuing in places like Venezuela, our exploration options that we are developing, some of the discussions that we have had in places like Libya and elsewhere in the Middle East and so on and so forth.

And so this is an important contributor, but we continue to look, as Sinead said, to allocate capital for more growth both in our existing asset base and new opportunities as they emerge. On where is the upside, we've talked about LNG Canada Phase 2, I think, already a few times in this discussion that creates real value for it. Important to recognize from a trading perspective, the only synergies we have banked as part of the $250 million are liquid-related synergies, right? So we haven't -- and this is very much driven by our fundamental belief that Canada will continue to be short, condensate for a long, long time. It's importing it at the moment from the U.S. We think that will continue for a very long time.

Our traders have been operating in both Canada and in the U.S., and they are prime to be able to take advantage of some of those barrels and unlock more value out of them. But there is more trading and optimization opportunities to go. And that's what we will be looking at. There are integration opportunities with Groundbirch as we share infrastructure and start to look at opportunities there. And there are toll savings as well as part of that.

Similarly, in Gold Creek, what can we slow down, what can we accelerate and how do we use some of that infrastructure together. And Sinead rightly said, we haven't banked a lot of the Attachie upside because we still need to derisk it, but that is all to play for going forward to be able to unlock what could be in itself a couple of billion dollars of more synergies.

There is Kakwa upside, that sits within there and so on and so forth. So when you pull all of that together, and of course, I'm not touching on potential SG&A synergies, which we see to be relatively small in the bigger context of things. but there are multiple plays within that. And I think that is what the team will be very much focused on. We've identified those upsides. And in the performance contracts with Cedric and the team as they look to deliver it, the delivery objective is the upside, not the base. The $250 million per annum in my mind, is in line with what we have tried to do over the last few years. When we have it, we have total line of sight to deliver on it. But then we play for the upside. We play to win, and that's where the few more billion dollars that we expect to unlock from this opportunity will play out. Sinead, anything that I've missed you wanted to raise?

I think you said it very well. Just to remind you, Lydia, this is pretty exciting. It's only 13% of the overall deal size, which we banked in terms of the synergies that you can hear. So it's not, in any way, particularly large put the 2 companies together, you get the best of both, and you get our commercial expertise in there as well. And for your point, Wael, we look forward to seeing exactly how much value we can deliver on this above what we've already stated.

Our next caller is Jason Gabelman from TD Cowen.

Yes. Congrats on the deal. I first wanted to go back to the free cash flow number, $1.5 billion. Two questions on that. Shell typically doesn't include interest or leases in their free cash flow number. So wondering if that's included in the $1.5 million? And if not, what that amount will be? And then there's -- I believe, with ARC some pricing exposure to TTF. So wondering what you're assuming from that standpoint in the free cash flow number? And I have a follow-up just on the liquids growth, which is obviously a focus of this deal I know you talk about 100,000 barrels of oil equivalent a day growth to 2035. How much of that is liquids versus gas? And should we think about that really layering into the portfolio from 2030 to 2035?

Thanks, Jason. Just to knock off the last one quickly. So we've talked about 130,000 barrels per day of liquids by 2030, and we've talked about 150,000 barrels per day of liquids by 2035. So the increment that 20,000 barrels is indeed the growth in liquids we see between 2030 and 2035. But maybe give Sinead the opportunity to talk about some of the free cash flow numbers.

Yes. And I can only talk about it a little bit. So first point would be indeed on the free cash flow number, the $1.5 billion that we've given is one that we've priced out. I think it's fair to say, Jason, at our $70 CMD assumption. So you can see it's not actually linked to where we are today. So I would start on premise it, first of all, like that. You're right. It doesn't include the interest element of it, but it's very small in the relative scheme of things that is there. So I'm pretty comfortable that the $1.5 billion is certainly something that we can deliver on.

I suggest you have a look at ARC and as Wael suggested, later on, they'll announce their results and talk through some of their results later on. I would say on the pricing exposure to TTF, I can't really say anything about that. That's up to them to talk about their pricing exposure. If we close the deal, very happy to talk about the different exposures, specifically around some of the commercial agreements, but I wouldn't opine on that at this point. I hope you understand.

Our next caller is Mark Wilson from Jefferies.

I think you've clearly outlined the ARC opportunity. Could I first just give us a reminder of the variables in a potential LNG calendar Phase 2 FID. That's the first point. And then secondly, I'd like to ask, it's over a month -- just over a month since you published your LNG report 2026. It outlined variables on longer-term demand curves given Asian market renewables take-up or coal switching. And I'm just wondering if you see this conflict is significantly affecting industry long-term LNG demand assumptions either way.

Good. And I just want to make sure I picked up the first part of your question. It's the condition -- what are the conditions precedent for Phase 2 on LNG Canada because it broke up.

Roughly, what was the calendar for Phase 2.

Calendar, sorry. Okay. Okay. Yes, let me touch on both those. So the team has been very focused on both the safety and the continued ramp-up of LNG Canada Phase 1. And we are very pleased with the performance that they have shown to continue to demonstrate actually one of the strongest commissioning and start-ups that we have seen compared to peers.

So very pleasing to see that. They are also working heavily on creating the option for a final investment decision later this year, so towards end of this year. They've been working, of course, with the EPC contractors to be able to get a decent price line. They have been working with the Canadian Federal and provincial governments to be able to create the environment that is conducive for the investment. And so far, we continue to see good momentum. I suspect in the coming months, we will be at a point where the joint venture partners will be able to take a decision on that. So expect that towards -- or later in 2026.

I would say it is too soon to start to opine on what the long term for LNG is. But I'll give a couple of comments. What is clear is that for the short to medium term, we are going to continue to see tightness in the LNG markets. So we will have spoken about supply-demand balances for the last 3 to 4 years. And I think some of the prevailing logic out there was that we were going to be long supply. I think that has consistently been pushed out and likely to push -- to be pushed out even further right now.

If you also look at the longer term, the key elements that underpin our confidence in LNG are unchanged. The world continues to demand more and more energy. LNG continues to be one of the most versatile, flexible opportunities to be able to fulfill that demand and at a lower carbon footprint than many of the alternatives.

And so what we continue to see is that the long-term dimensions of LNG are very, very attractive in multiple sectors, by the way. People talk about power, but a lot of the attraction is in transport and in industry. You put all of that together, the dynamics around the LNG market are going to continue to be positive.

Maybe the final point I'll make is, not all LNG is born equal. Canadian LNG is, of course, advantaged by the feedstock by the AECO Index Gas, which we see will continue to be at a discount to Henry Hub for a long period of time, given the amount of LNG being developed in the U.S. and some of the demands from a power perspective for AI growth. And so we do think AECO is at a unique advantage. And we do think that the distance -- the shipping distance means that it allows us to deliver that LNG at a lower cost.

Add to it the fact that more and more of the Asian customers, given recent events are interested in diversification of their supplies and willing to pay a premium for that. We think that certain LNG -- LNG Canada Phase 2 is particularly well positioned to be able to meet some of those interesting demand points. And so that's where we stand at the moment, Mark.

Our next caller is Christopher Kuplent from Bank of America.

And can I just raise the question or ask you for your rationale of using equity versus cash. Maybe you can put that into context with the attractiveness of maintaining your buybacks at the rate that you're now issuing equity versus perhaps increasing your DPS beyond the 4% rule that you've stuck to? And maybe that's the same question or the second question, what your thoughts are regarding protecting the balance sheet. Where did you land in terms of using cash rather than equity? I presume it wasn't a request of many ARC shareholders, but you tell me if that's wrong.

Christopher, thank you for that. Let me maybe -- I think you've touched on a quite a few points there. So maybe give Sinead the opportunity to frame the financial framework thinking and specifically the currency for this deal, and then I can supplement this if needed.

Absolutely. No, thanks for the question, Chris. Look, we've talked about capital allocation, how we think about it. So I appreciate the opportunity just to walk through what our thinking was in this case. First, let me just start with value. We have worked really hard, as you know, to be able to increase the value of our currency, increase the value of our shares to be able to actually use it in a transaction.

Frankly, it's gone from being egregiously undervalued in my case to still undervalued, but not egregiously anymore, but still incredibly undervalued. But we've seen more and more of that hard work in terms of performance actually being converted into the share price, which has been helpful. So this is our opportunity to put it into something where we believe we can create even more value. And that's really what it comes down to. We're seeing that we, as Wael talked about the fact that we can buy long life, low cost, very attractive assets which we don't believe that longevity was actually priced into the terminal value for those shares as well.

We're purchasing something that, frankly, was underappreciated and that we could do something special with and that's what the thought process was. But this is, of course, about an opportunity cost as you look through it. When you come down to it, your point of, is this about an acquisition or about share buybacks? I'd say no, it's an and it's about acquisition and share buybacks.

But it is true to say that the returns on our shares now because of where we've got the share price, nowhere near where it needs to be a lot more to go, I would say, does begin to compete with the returns of some of our segments. So it gives us a good discussion and a difficult conversation to have each time, but a great opportunity.

The buybacks have enabled us to be able to do this transaction. They've enabled us to get our share price closer to where it should be, not where it should be in totality, but that asymmetry still exists. We're not going to give up on share buybacks now and not use them as a tool to create value. We now have more tools in our toolbox, which is wonderful because it means we have a choice to make each and every time. At the same time, of course, that decision of whether you use equity or cash. Well, hey, we're using the opportunity to strengthen the balance sheet, quite frankly. And we do that during good times, not just bad times. So we're doing it during a good time of being able to use it to create some form of predictability in Shell and in terms of the actions we take through the bad times. And that's something that's been very important to us.

So you made the comment at the end of that as to -- so that explains why, frankly, we chose to use equity in this case rather than just simply use cash. But you also said you frankly didn't assume that it was the ARC shareholders who want to sell shares. Well, they get a great opportunity to be able to actually play a role in Shell going forward in terms of a great returning stock with an awful lot more to go. And that's part of the attraction of this transaction as well.

If I could, then, Sinead, maybe just add a couple of points. I think we have been -- we have said time and time again that we are playing the long game here. We want to make sure that we are creating long-term shareholder value, and we have said that when oil prices drop or when they go up, creates unique opportunities to be able to create that long-term value. Rewind back 4 years since Sinead came into seat, we have, in essence, bought back 1/4 of the company. I think we bought back around $60-plus billion worth of our shares.

We bought that at an average price, if you convert from pounds to dollars of just over $30. And today, we are sitting at somewhere in the middle $40 range. So 50% or so just under 50% escalation in that. And that is the currency that we are partially using to acquire ARC. Do I believe our shares are undervalued? Absolutely. And this is why buybacks will continue to be a core part of our capital allocation thinking, preferentially continuing to make sure that some of those dollars go to buybacks. But as Sinead said, it's lovely that we are in a healthy position today where we are having competitive dynamic as to where best to contribute or where best to allocate that dollar of capital. And so that's one of the things we will continue to do time and time again, try to do the best that we can in allocating that capital for our shareholders.

And as I said, that buyback continues to be a core part of our investment thesis going forward given the conviction that we see an attractive return to our shareholders as we do some of those buybacks.

Our final caller today is Lucas Herrmann from BNP.

Sinead, Wael, you saved actually because Chris just asked it, but if I could add a tag, competition issues. I presume there are no competition issues. Competition issues this transaction, but there's nothing you need to go through in terms of approval of significance .

There's regulatory approvals to go through Lucas, but we do not see showstoppers in the current context. And we think we are in a good position to be able to do what we need to do. Was that your only question, Lucas?

The allocation question of Chris, was well.

Thank you. Thanks for the question, Lucas. Well, I guess that gets us to the end. Thank you for your questions and for joining today's call. We appreciate the interest and are excited about this next phase of our journey.

To summarize, this acquisition is firmly aligned with our long-standing strategy and it's underpinned by strong industrial logic and enhances our ability to deliver sustainable long-term value for our shareholders, which has been at the core of what we've been trying to do.

We wish everyone a pleasant rest of the week and look forward to connecting again in just another week with our Q1 results. Thanks, everyone.

Good morning, ladies and gentlemen, and welcome to the ARC Resources Limited Q4 2025 Earnings Conference Call. [Operator Instructions] Also note that this call is being recorded on Friday, February 6, 2026. At this time, I would like to turn the conference over to Dale Lewko. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for our fourth quarter earnings conference call. Joining me today are Terry Anderson, President and Chief Executive Officer; Kris Bibby, Chief Financial Officer; and Ryan Berrett, Senior Vice President, Marketing.

Before I turn it over to Terry and Kris to take you through our fourth quarter results and 2025 reserves, I'll remind everyone that this conference call includes forward-looking statements and non-GAAP measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated. Finally, the press release, financial statements and MD&A are available on our website as well as SEDAR. Following our prepared remarks, we'll open the line to questions.

With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead.

Good morning, everyone, and thank you for joining us today. This morning, I'll speak to our fourth quarter results, 2025 reserves and provide an update on our plans for 2026. After that, I'll hand it over to Kris to discuss our financial results.

Before I dive into the quarter, I want to take a moment to recognize our team's exceptional safety performance with 2025 coming in as one of the strongest in our history. As you've heard me say before, safety is our #1 priority. Our people did an incredible job outperforming all of our key safety metrics, which is notable given the high levels of activity and degree of complexity we worked through this year. On behalf of our leadership team, thank you to our employees and contractors for your ongoing commitment to safety.

Fourth quarter results were exceptional. We delivered operational and financial results above expectations. Production in the fourth quarter was a record 408,000 BOE per day, representing 7% growth year-over-year and 10% on a per share basis. Condensate and oil production was very strong in the quarter at 119,000 barrels per day. Kakwa was supported by strong well performance and the acquisition in July. In Q4, Kakwa production of 215,000 BOE per day was up 10,000 BOE per day quarter-over-quarter and included record high condensate production.

With natural gas prices strengthening towards the end of the year, we restored production at Sunrise that was previously curtailed. In combination with our low-cost transport to U.S. markets, ARC realized a natural gas price of $3.77 per Mcf, which was nearly $1.50 per Mcf above AECO. In 2025, we curtailed nearly 400 million cubic feet a day of natural gas at Sunrise during periods when natural gas prices were low. This highlights our disciplined approach of focusing on profitability over BOEs, allowing us to defer roughly $50 million of capital while preserving resource.

As we look ahead, AECO prices are constructive. We have commenced deliveries to the LNG Canada project through our agreement with Shell. This is an important project and one of several future LNG developments in Canada that will represent a meaningful increase in natural gas demand and bolster long-term profitability. In addition, we are approximately 1 year away from shipping a portion of our natural gas to international markets through our LNG supply agreements, which will add exposure to global LNG prices.

Moving on to Attachie. We completed our first year of operations since commissioning the asset in late 2024. Production in the fourth quarter averaged 28,000 BOE per day and included approximately 13,000 barrels per day of condensate. At over 360 net sections, Attachie is a large condensate-rich asset in its early stages of development. Our main goal was to prove up and deliver predictable results in the Upper Montney and second, to assess the Lower Montney potential.

Attachie well performance varied over the past year. We've had some really strong wells and some weaker ones. While current production is 30,000 BOE per day with 14,000 barrels per day of condensate, early results from our most recent Upper Montney pads in late 2025 and early 2026 are not meeting our expectations. Therefore, we've chosen to adjust our development schedule to allow our technical teams more time to analyze the results. This will allow us to determine the optimal development plan moving forward.

In terms of the Lower Montney, with our first trial pad just about to come on stream, it is still too early to assess the opportunity here. ARC will continue to take a disciplined approach towards allocating capital at Attachie to maximize asset learnings. This will lay the foundation for future development activity focusing on long-term profitability over BOEs.

Attachie remains a high-quality development opportunity, and we remain confident in its long-term resource potential. Today, we are working on just 10% of the 360 net sections we've accumulated in the area. It's an important asset for us, and we will take the time to ensure we get it right. And while we do, we'll lean on the strength of our base business, which provides decades of high-quality development opportunities.

In terms of guidance, 2026 corporate production guidance remains unchanged at 405,000 to 420,000 BOE per day and capital stays at $1.8 billion to $1.9 billion. With the adjustments we are making at Attachie, capital activities and timing may shift across our asset base throughout the year. Our primary focus is to maximize our learnings from this asset and improve capital efficiency. We will remain nimble as our learnings evolve, so too will our plan.

Finally, before I turn it over to Kris, I'd like to speak briefly to our reserves. There are a couple of things I'd like to highlight this year. First, reserves were a record across all 3 categories, increasing by 15% on a PDP basis and about 10% on a proved plus probable basis. And second, we reported a before-tax NPV of 2P reserves of $39 per share, which is based on roughly 1/4 of our internally identified inventory. This highlights both the value embedded in our business and the inventory runway to continue to grow reserves in the future.

So to sum up 2025, we advanced our strategic priorities by profitably growing our business on a per share basis. Notable achievements include: first, we delivered record average annual production of 374,000 BOE per day, which increased our profitability and improved our per share metrics.

Production and reserves per share increased by approximately 10%, while free cash flow per share doubled to $2.20 per share. This allowed us to sustainably grow our dividend for the fifth consecutive year, increasing it by 11%. And second, we executed 2 strategic opportunities that will improve long-term profitability. First, we consolidated Montney Resource countercyclically, directly adjacent to our existing assets at Kakwa. And second, we added 36 sections of land at Attachie through a unique agreement with TDZE, further extending the asset duration.

With that, I'll turn it over to Kris.

Thanks, Terry, and good morning, everyone. Fourth quarter itself was ahead of expectations. Production of 408,000 BOEs a day was 4% of forecast, while funds from operations of $874 million was 11% above. Fourth quarter production was a record despite the curtailment of natural gas production at Sunrise due to low Western Canadian gas prices. Volume gains were mainly driven by Kakwa through organic production growth and the acquisition that closed in July.

Full year production was at the top end of guidance and was a record in terms of both natural gas and condensate production. Free cash flow was $415 million for the quarter, which represents a 47% increase compared to the third quarter and is 40% above analyst expectations. Full year 2025 free funds flow totaled $1.3 billion and was roughly double the free funds flow we generated in 2024.

In terms of capital returns, ARC returned 75% of free funds flow to shareholders during the year. We repurchased just under 20 million common shares for $514 million and declared dividends of $452 million. The remainder was used to reduce debt and maintain our financial strength. ARC exited the year with roughly $2.9 billion of net debt, approximately 0.9x 2025 cash flow, which was a decrease of approximately $200 million compared to the prior quarter.

Balance sheet is strong. We plan to continue to return essentially all free funds flow to shareholders in 2026. ARC invested roughly $460 million in the fourth quarter for a total of $1.9 billion of capital expenditures for the year, which is within company guidance. Full year operating expenses per BOE was within company guidance, while transportation expense per BOE was at the low end of our guidance range. Looking ahead, our 2026 guidance remains unchanged despite the changes we are making at Attachie.

Our priorities are to sustain corporate production between 405,000 and 420,000 BOEs per day, investing between $1.8 billion and $1.9 billion. As Terry mentioned, asset level allocations for production and capital may shift over the course of the year as we work through what our next steps at Attachie look like. In our current price environment, we expect to generate approximately $1.2 billion of free funds flow this year, highlighting the profitability of our business under a low commodity price environment. Once again, we plan to return essentially all free cash flow to shareholders through a combination of a growing base dividend and share buybacks.

With that, I'll pass it back to Terry for closing remarks, and then we'll open up for questions.

Thanks, Kris. As we enter into our 30th year of business, I am confident in what lies ahead. This year, annual average production is set to surpass the 400,000 BOE per day mark. And at current strip prices, we expect to generate approximately $1.2 billion in free cash flow. We're also about a year away from shipping first volumes of natural gas to international markets via the Gulf Coast, marking a significant milestone in ARC's natural gas diversification strategy. The competitive strengths we've developed over the past few decades will serve us well as we work through Attachie and continue to execute our strategy moving forward.

We have amassed a large inventory in a world-class asset in the Montney resource play and have a strong technical team to develop it. Owning our infrastructure and securing long-term takeaway capacity should allow us to consistently achieve above-average returns and maintain high margins as we grow our business. We will remain committed to our core principles of risk management and capital discipline, which are central to delivering on our strategy and providing sustainable value to our shareholders. We appreciate the support from our shareholders in making prudent decisions today that support our long-term focus on profitability. Thank you.

With that, I'll open the line up for questions.

[Operator Instructions] first will be Michael Harvey at RBC Capital Markets.

Yes, sure. So a couple of questions for me. First, if you were to reallocate some of the capital from Attachie this year to other properties, which I think was around $250 million or so. Maybe just give us a sense for where you would allocate that to? And just kind of remind us how you're thinking about the other growth properties just because Attachie has been a focus for a while.

And then second, you're at the low end of your debt target range. Would you consider taking on some incremental debt or just cutting CapEx to buy back more stock? Just kind of trying to get a sense for how aggressive you could be with the buyback at these levels.

Thanks, Michael. It's Terry here. So yes, as for where we reallocate that capital, the teams are working on that right now. We think there's opportunities probably in Kakwa and we see other good potential there, especially in relation to with what we acquired last year, and the teams have been looking at that already.

There's still going to be -- we're still looking at if there's opportunity within Attachie, that time, depending on the results that we see going forward here on some of the wells that are coming on here, there still will be opportunities to spend dollars in Attachie, too. But the Kakwa is probably one of the spots. The teams are still working on some of those details.

And Mike, I'll jump in on the balance sheet. So balance sheet is where we want it. So what that means is it's unlikely we would put permanent capital towards the buyback. But what you have seen us do in the past is we certainly have the flexibility to steal from the latter part of the year and use that free cash flow earlier on to do the buyback. We've taken a pretty conservative approach here over the last while. So we'll see how things go, but certainly, you can expect us to be in the market.

Next question is from Sam Burwell at Jefferies.

Just curious if you could add any color on just the nature of the underperformance and inconsistency from the latest Attachie wells. I mean, did these incorporate any new techniques that ultimately didn't pan out? And are there any learnings to date that you can share from this batch of wells? Or is it really still too early to call?

Yes, there's nothing -- it's Terry here. There's nothing significant that we changed on the completion design here. And it is really too early. Like we're talking in the Upper Montney, most recent Upper Montney pad has only been on production here for 5, 6 weeks. So we need time for this to truly clean up. And so that's what we're looking for is just time to truly evaluate it. And the whole point of that is to make sure that before we spend more capital, we've got the information from this pad. That's why we're making the change to slow down.

Typically, we'd be drilling and completing next pads already while we're waiting for results. We're not doing that. We're making sure that we're making the best decisions based on the information, and now we need to wait for that information first to make the best decisions going forward here on capital activity.

Okay. Understood. And then shifting over to Kakwa, looks very solid in 4Q. And I think the tuck-in acquisition makes a lot of sense. But I mean, any way to quantify what the bolt-on does for inventory depth? And are there any levers you can pull to either run Kakwa at a higher production rate or extends the inventory life further?

Yes. This is Ryan. I think when you think about that, obviously, this is just consistent with our strategy of bolting on contiguous acreage where we can. So teams are looking at that right now and evaluating and that will be incorporated into our development plan going forward.

Next question from Patrick O'Rourke at ATB Capital Markets.

Just going back to Attachie and sort of the learnings you're doing here, 3-12 pad. It sounds like you don't -- you sort of want a little bit more time there. But just wondering going forward in terms of the development, it's been a pretty tight development sort of scheme that you've used to date. Any thought to a program here that spreads the wells out a little bit more going forward?

Patrick, it's Terry. The short answer is yes. I think that's the things that we are looking at here. We want to get the learnings where we're at. Like I said earlier, like we're on just the first 10% of 360 sections. So the whole point here is slow things down and start looking at the opportunities on the whole asset base. So that might be an option that we would be looking at here and extending out further from where we're at, at the moment. So yes, that is one of the things that we're looking at.

Okay. Great. And then just thinking about the reserve report and reserve performance here, positive technical revisions. Can you sort of give us any color? I know you're lightly booked at Attachie, how reserve evaluators approach that? And then at Kakwa, where you've had some outstanding performance, sort of what level of inventory is formally booked in the reserve report today?

Patrick, it's Kris here. We don't disclose asset level reserve stuff. What I can say is there was minor adjustments made at the Attachie level. And then obviously, at Kakwa, the main change was the booking of the acquisition that we closed in July was the main change, but good strong corporate reserve performance across all categories, obviously.

Next question will be from Aaron Bilkoski at TD Cowen.

Terry, as you alluded to, the latest pad had only been on for 5 or 6 weeks. Can you talk a little bit about what you saw or didn't see at that most recent pad or maybe the most recent pads that prompted you to pull the asset-specific guide?

Well, it's extremely early, I guess, from the perspective that we haven't cleaned up the wells yet. And I guess from that perspective, we were expecting a little more hydrocarbon. And right now, we're seeing it, but we're not seeing to the degree that we want. But we realize also we are so early on this. So it's too soon to actually make that call, but it's not too soon to say, well, we want to wait to see the results so that we can efficiently spend capital on the next pads. So really, there's not a lot there. It's more of kind of just gut feel looking at it right now than anything.

And as far as the asset level guide goes, the reason that we're removing it is because we're -- we've made a change on the operational side where we're now slowing down and interpreting the data, as Terry mentioned, before we move on. So any time you do that, it impacts obviously your TILs or your wells coming on. And therefore, we're going to read and react and just wanted to get away from, frankly, month-to-month explanations.

Okay. That's fair. Just another quick question. Have you guys made any midstream commitments for Phase 2 that you may not realize?

Everything is already on our commitment schedule, and we're in -- we have what we need to go forward eventually.

Next question will be from Kalei Akamine at Bank of America.

This one is also on Attachie. Just kind of wondering if you can provide some color on where exactly the underperforming Upper Montney wells are located to the extent that this reflects a geologic trend, is it water content? And if it is, how should we think about the aerial extent and the implications for the broader development footprint?

Well, it's not water content. We're looking for the production here out of 3-12, and that's what we're focused on and what's driving the decision today. So we just -- and I keep coming back to say we just need more time to see this production and to allow it to clean up. But the 3-12 pad is the one that we're actually focused on. We have good wells right on both sides -- good pads and wells on both sides of 3-12 too. So it's not like it's an aerial thing. There's just some inconsistencies and variability that we're trying to figure out here.

Understood. Second question is on Kakwa. So as Kakwa is positioned to carry more of the load this year, what can you share about the 2026 drilling program? Specifically, should we expect activity to remain focused on the most productive condensate yields in your acreage? And can you remind us what the ultimate productive capacity is at that asset?

[indiscernible] I mean, yes, so Kakwa, there's no physical change that we are booking into Kakwa right now. So we're just highlighting that if we need, we might reallocate capital. You saw Q4 performance well ahead of expectations. And that's obviously just carried over a slight bit into the Q1 area, and that's what gave us the confidence to -- there's no adjustment to the corporate guide despite removing Attachie guidance. So pretty comfortable there.

In terms of areas of development, no material change from what we've done over the past couple of years. So a really good part of the field that's got good yields, but very consistent overall is what we would say.

And I would just add, just to be clear, we said we're evaluating where to reallocate this capital. So we just need some time on that, too, and Kakwa is an option for sure.

Next question will be from Luke Davis at Raymond James.

Just a couple for me. So first, just wondering if you can kind of frame out how much technical work went into the initial sanctioning decision at Attachie? And just further to that, I guess, what gives you such a high degree of confidence that you'll crack the nut here, particularly across the broader base? Is this just like the large land overlay? Or is there something technically that you can point us to today?

Well, from a technical basis, we drilled a number of pads and a number of wells on that east side, and we had great results coming out of that. So that, from a technical perspective, gave us the confidence to move forward. We have 9 horizontal wells across the east side of the river. So we've got -- and we've got results from that, that show condensate production, gas production from all of that. You have ConocoPhillips to the north. But we do have a lot of data across that land base to give us the confidence that it's -- the resource is there. We're not questioning that. We're just questioning trying to figure out the completion design or how to effectively stimulate it because we have some great wells, and we have some wells that are not so great. So it's like, okay, what's going on there, and that's what we're trying to figure out.

Yes, that's helpful. Appreciate it. Last one for me. You also tweaked around messaging just around kind of growth potential across the portfolio. Can you just give us a sense for how much depth is left, specifically on the condensate-rich side and ex Attachie, what the longer-term growth profile could look for?

Well, we have lots of opportunity, obviously, in Kakwa with 15-plus years of development there. And then we just did this new little acquisition. There's Parkland that has lots of liquids opportunity. Even the north part of Septimus, in Dawson, the Lower Montney and Dawson has some good liquids in it, too. So there's definitely some more liquids growth. And then obviously, we have a lot of gas growth also.

Next question from Josh Silverstein at UBS.

So you still are spending around $250 million at Attachie this year. I don't know if you could break this down at all, but I was looking to see is this is all for Phase 1 drilling, how many pads you may be bringing on relative to what you did last year? And you have been doing a little bit of CapEx work for Phase 2. So I was wondering if there's still a little bit of that going on as well.

Josh, it's Kris here. Yes, we've still held the placeholder for $250 million at Attachie. As we've mentioned, we'll consider reallocating it if we choose to. It's just a little bit undetermined at this time. The point of removing asset level guidance was we're going to read and react. So I can't really comment on the pads going forward. As we said, overall corporate guide still $1.8 billion to $1.9 billion, and we'll reallocate as we see fit throughout the year.

Got you. And then you guys had been active in M&A over the past year, adding into Kakwa. I was curious just to get your updates on that front this year. Are there still some opportunities that may be out there? And especially given that you guys are still in a very strong balance sheet position, is there an opportunity to grow inorganically?

Yes, Josh, it's Ryan. Yes, I think it's something, obviously, we're always looking at and has to be very consistent with our M&A strategy of high-quality assets, large inventory, contiguous asset base. I can't comment on any specific processes at this time. But yes, of course, we're open to it.

[Operator Instructions] Next will be Travis Wood at National Bank Capital Markets.

Terry, you kind of touched on this. I think Attachie was unveiled nearly 15 years ago or so at an Investor Day, and you ran the pilots, you've drilled many wells kind of across the broader land base. So what exactly is showing up in the recent data versus the pilots and the pads kind of leading into Phase 1 that now kind of causes you guys pause? And so what exactly changed over the last couple of years? And then what is it that you're looking for on the data side to get comfort again in terms of reiterating guidance at Attachie and push towards Phase 2?

Well, I think the big thing that we've realized is actually the casing deformation that we didn't see on the other pads. So that was one of the things that was different from the original number of wells and everything we've seen. And so that means we're just trying to make sure that we can effectively stimulate the reservoir like we've seen on the first number of wells and pads.

Really, the -- I keep coming back to the resources there. We just need to tweak designs and to be able to effectively stimulate the reservoir to access that resource that's there. So that's -- and sometimes these things take a little time to figure out. And this isn't the first time we've actually seen this. In Dawson and in Parkland, we've seen similar events where we couldn't effectively stimulate the full lateral length. We figured those out. This one, we've gone so fast at it in such a confined area that we just need a little more time with it.

Okay. And I mean, I think going back to even the wells. In front of the pilot or some of the older legacy wells even around 2015, will you test what you're doing in this more concentrated area on the west side and try to identify the resource is open to these completion techniques to the Northwest? Or how are you thinking about kind of derisking the completion side?

So that's what the teams are looking at right now is to look at expanding, like I mentioned, we're only on the first 10%. So there's a lot of acreage. Some of the plans will evolve into going further out from our existing area that we've been drilling and assessing that a little bit more. So that's -- but our teams are looking at all of those details right now. But that is something that we are going to definitely pursue is moving over and testing more of the acreage beyond the 10% that we're on right now.

And at this time, we have no other questions registered. I would like to turn the call back to Terry Anderson.

Okay. Thank you. Like, I guess my final comment would be, I realize that sometimes the right business decisions are not necessarily the most popular decisions from a market perspective, but we are here to manage risk while we create long-term value for our shareholders. So we will make the right decision. And that's what we're doing here today, slowing things down, making sure that we are focused on delivering long-term value to our shareholders. We appreciate your patience. So thank you, everyone. Have a good day.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Have a good weekend.

Good morning, ladies and gentlemen, and welcome to ARC Resources Q3 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Friday, November 7, 2025.

I would now like to turn the conference over to Taryn Bolder. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for our third quarter earnings conference call. Joining me today are Terry Anderson, President and Chief Executive Officer; Kris Bibby, Chief Financial Officer; Armin Jahangiri, Chief Operating Officer; Ryan Berrett, Senior Vice President, Marketing.

Before I turn it over to Terry and Kris to take you through our third quarter results, I'll remind everyone that this conference call includes forward-looking statements and non-GAAP measures with the associated risks outlined in the earnings release and our MD&A.

All dollar amounts discussed today are in Canadian dollars unless otherwise stated. Finally, the press release, financial statements and MD&A are available on our website as well as SEDAR. Following our prepared remarks, we'll open the line to questions.

With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead.

Good morning, everyone, and thank you for joining us today. This morning, we'll discuss our third quarter results and the 2026 budget. After that, I'll hand it over to Kris to review our financial results and provide a little more color on our plans for next year.

Beginning with the quarter, overall, we executed a safe, efficient capital program and remain focused on profitability over BOEs, delivering solid operational and financial results.

Third quarter production averaged approximately 360,000 BOE per day, which represents a 10% increase year-over-year and a 13% increase on a per share basis. This included a record high 114,000 barrels per day of condensate and oil, driven primarily from Kakwa and Attachie. In the quarter, we generated $283 million of free cash flow and returned it all to shareholders. This is a result of our low-cost structure and a balanced commodity mix that includes a high proportion of condensate.

At Kakwa, which is our largest condensate asset, production averaged 206,000 BOE per day. This was above expectations due to better-than-anticipated performance from the assets we acquired in July. With the integration complete, we have now identified and advanced optimization opportunities to further enhance profitability on those assets and the overall property.

Moving on to Attachie. Third quarter production averaged approximately 27,000 BOE per day, which was below our expectations. However, condensate production was 13,000 barrels per day, which is a relatively strong number that drives the returns on this asset.

Our recent focus has been on optimizing our well design based on what we have learned to date, to improve predictability and performance. We are seeing evidence of our optimization initiatives on the most recent pads that were successfully drilled and completed as planned and will be on production in Q4. For 2026, we expect condensate production to increase to 15,000 barrels per day, which is in line with our original plan and total production between 30,000 and 35,000 BOE per day.

At Sunrise, our low-cost natural gas asset, we curtailed approximately 360 million cubic feet per day or 60,000 BOE per day during the quarter, when Western Canadian natural gas prices were weak. This allowed us to preserve resource and defer capital.

In the backdrop of strengthening fundamentals and higher natural gas prices, we resumed production in late October. A core part of our natural gas business is our transportation portfolio. Having long-term, low-cost access to key demand markets in the U.S. has been instrumental in allowing us to maintain high natural gas margins when AECO prices are low.

During the third quarter, we realized a natural gas price of $2.75 per Mcf compared to the AECO monthly index of $1 per Mcf. As an extension to our natural gas marketing, our long-term LNG agreements will take effect in late 2026 or 2027. ARC will deliver approximately 140 million cubic feet per day of natural gas to Cheniere's Corpus Christi Stage 3 project and in return receive JKM pricing less about $5.50 per Mcf. Our strategy is to diversify our natural gas sales over the long term by accessing global natural gas prices.

Moving on to next year's budget and our strategic priorities. The 2026 budget will deliver higher production, lower capital and higher free cash flow compared to 2025 and aligns with our long-term strategy to grow free funds flow per share. Our budget of $1.8 billion to $1.9 billion will generate annual production between 405,000 and 420,000 BOE per day and condensate production of approximately 110,000 barrels per day.

Operationally, the focus will be, first, to continue to deliver consistent results and capture cost-reduction opportunities to achieve a best-in-class cost structure; and second, to apply the learnings we've gained from our first full year of production at Attachie to improve capital efficiencies and profitability. These results will inform the optimal development plan to maximize profits for Attachie Phase 2.

At the current forward prices, ARC expects to generate approximately $1.5 billion in free cash flow. With this balance sheet strong, we once again intend to return essentially all free cash flow to shareholders. As evidence of this, we are pleased to announce an 11% increase in our base dividend this quarter, alongside a significant step-up in share repurchases. We continue to believe that the combination of growing base dividend and share buybacks is the optimal way to return capital to shareholders.

With that, I'll hand it over to Kris.

Thanks, Terry. Good morning, everyone. First, I'll discuss our quarterly results, followed by an overview of our 2026 budget and resulting guidance.

Quarter itself was ahead of expectations. Relative to analyst estimates, production was in line, while funds from operations was 10% above and free cash flow of $283 million was 80% above expectations. As mentioned, we returned all of that free cash flow to shareholders during the quarter. We were particularly active and opportunistic on our share buyback, investing $170 million to purchase 6.5 million shares. Since we introduced the NCIB in 2021, we've repurchased and retired a total of 155 million common shares, reducing the share count by roughly 21%.

Moving on to production. ARC delivered average production of 360,000 BOEs per day, which represents a 10% increase year-over-year, 13% increase on a per share basis. Record condensate and oil production of 114,000 barrels per day represents a 30% increase from the prior year, driven by Attachie and the Kakwa acquisition that closed in July.

Production from our newly acquired capital assets delivered at the higher end of our internal expectations, averaging around 40,000 BOEs per day in the quarter, which included roughly 13,000 barrels a day of condensate.

We invested approximately $500 million this quarter drilling 50 wells and conceding 36. Activity focused primarily in our condensate-rich assets at Kakwa, Greater Dawson and Attachie.

With the closing of the Kakwa acquisition from Strathcona in July, we ended the quarter with net debt of approximately $3.1 billion, implying a debt to cash flow ratio of approximately 1x. We view this as an appropriate amount of leverage for our business, given our low-cost structure and deep drilling inventory.

The 2026 budget, we plan to invest $1.8 billion to $1.9 billion, which represents approximately $100 million decrease from 2025. Capital program is expected to generate 11% production growth with average production between 405,000 and 420,000 BOEs per day, of which 40% is liquids.

In 2026, year-over-year growth will be driven by our 2 biggest condensate assets: First, at Attachie, where we expect stronger organic volumes; and second, at Kakwa, where we will have a full year with the recently acquired assets.

We plan to allocate 80% of the capital towards well-related activities. The remainder is earmarked for facilities and maintenance, a nominal amount towards Phase 2 at Attachie and certain margin expansion initiatives. As one example, we are investing about $40 million towards water infrastructure and disposal at Kakwa. This investment will pay out in less than a year by lowering operating costs, while improving safety by reducing our reliance on trucking.

As mentioned at current strip pricing, we will generate approximately $1.5 billion of free cash flow or roughly 10% of our market cap. For the fourth consecutive year, essentially all free cash flow will be returned to shareholders through our growing base dividend and continued share repurchases.

With that, I'll pass it back to Terry for closing remarks.

Thanks, Kris. In 2026, ARC will celebrate 30 years of being a proud responsible Canadian energy producer. We created a budget that supports our long-term strategy of investing in our assets to grow free cash flow while returning a meaningful amount of capital to our shareholders, providing an attractive and sustainable return.

Our outlook is strong. We're fortunate to have amassed long-duration top-tier Montney assets. We've built a large network of company-owned infrastructure, and we have the best people to execute on our plan to deliver sustainable value to our shareholders.

With that, we can open the line to questions.

[Operator Instructions] With that, our first question comes from the line of Michael Harvey with RBC Capital Markets.

So just a couple of questions. I guess the first one, maybe just walk us through some of the key learnings you've taken from Attachie Phase 1 and kind of how those would be applied to Phase 2? What changes would be applied just given the passage of time and kind of how would that affect cost, productivity, et cetera?

And then the second one is just a little broader. How do you compare the 2 options, the first being going ahead with Phase 2, the second being just deferring for a longer period and just kind of buying back $1 billion or so in stock per year and staying flat. A lots of moving parts. I suspect that's the hot topic in the boardroom. I'd just love to get a bit of color on how you folks would kind of think through that complex topic.

Michael, it's Terry. Why don't I start with your second question. So we've always stated that we are focused on improving our per share metrics. And so obviously, and Armin will touch on some of the learnings here for Phase 2 because we want to make sure that we are going to be the most capital efficient when we move into that second phase. So we're focused on the profitability side.

But for us, where our shares are trading today, it's a good use of capital to be buying back our shares. And there's going to be times where it makes more sense to buy back our shares, and there's going to be times where we're going to invest more. And that's exactly what we had laid out in our long-term plan. When we're not investing in our assets, we're going to be buying back the shares. So it all ends up at the same spot of improving our per share metrics and in particular, the free cash flow per share.

Yes. Michael, on your first question, most of our focus in terms of learnings are going to be on subsurface optimization of our well and frac design. Some of the activities already started, as Terry mentioned in his remarks that we are going to see the results of them in the next few months. That is going to really help us better understand the capital efficiency.

What we are trying to do is to find that balance between recovery factor and capital efficiency and make sure not only Phase 2, but also the remainder of Phase 1 development activity set up for success. So in terms of cost, obviously, with improvement in capital efficiency, we have to look at exactly what the cost numbers are going to be. But what we are trying to achieve, as Terry mentioned, is profitability.

Got you. And just to close it out, do you have an updated breakeven WTI number of where you think the Phase 2 project would give you your specified hurdle rate? Has that kind of changed and maybe just so folks can come with benchmark where it looks good and where it looks kind of less good? I'm not sure if you've updated that number or not.

Mike, it's Kris here. I mean I'm not sure we've given a specific number previously, but based on what Armin and Terry are saying like we don't see the future go-forward cost changing. So I think we've previously talked about in the 60s range, we'd be comfortable driving ahead. The reality is oil macro backdrop right now is quite weak. We do want to take the time, get the learnings in-house. And in the meantime, buy back the shares, but the reality is, even absent the learnings, there's no growth capital really being deployed into our sector right now. So I'm not sure now would be the right time to really be deploying a lot of growth capital. So we'll take that into account. I mean, if it's well above 60, obviously, we'd be very comfortable. If it's below 60, it's still probably economic. I'm just -- it's going to depend on where the shares are trading at the time, trying to make sure we are achieving the best rate of return on the capital we are deploying.

And the next question comes from Kale Akamine with Bank of America.

I'm going to start with Attachie on the well cost. So total spend in full year '26 is [ $275 million ], you're bringing on 14 wells. The simple A divided by B math points to pretty costly wells but this is not a normal year. Can you kind of talk to us about the path towards a maintenance capital number? And remind us what that is? The number that I have in my head is about $150 million.

Yes. So some of the numbers you see in terms of the capital for next year includes additional capital beyond drilling and completions activity. We have some Phase 2 pre-spend included in that number in addition to that seismic and some water-related infrastructure. So the per well cost is not exactly a straight calculation of the numbers, as you mentioned.

As far as your overall capital cost estimate for sustaining is concerned, your numbers are relatively accurate. But remember that this is the second year, so we still are dealing with higher declines in the assets. So as we get into the subsequent years, we have to see those numbers are going to come down.

I appreciate that. My second question relates to Phase number 2. Now in '26, you're doing work to finalize the development pattern before taking that FID. Can you kind of talk about what a success case will look like, how are you scoring things like per well productivity or maybe that's measured on a per pad level? Are you pushing productivity to the edge with your completion intensity? Is there kind of an element in there of defining what the arrow extent is to which these best practices are applicable? Just trying to understand what the targets are that will allow you to move forward.

We definitely see an opportunity to improve the profitability and capital efficiency based on some of the early production results that we have seen from Phase 1. So the objective here, as I said earlier, is that we want to make sure we find that right balance between recovering resource and making sure that we can recover it at a decent capital efficiency. So that's going to really inform our plan moving into Phase 2.

[Operator Instructions] Your next question comes from the line of Jamie Kubik with CIBC.

Just wanted to ask a little bit more on Attachie. Can you talk a bit more on the underperformance seen in 2025? What led to the underperformance versus your second half guidance of 35,000 to 40,000 BOEs a day that was issued with Q2 results? And I guess how much services have you baked into the 2026 guide for Attachie, just things like that would be great to understand.

Jamie, it's Terry here. So the change in forecast is a result of the lower-than-expected production from one pad that came on stream in July here, which has impacted Q3 and Q4 production. And the pad at the 71 is just showing higher water production and it's taking a longer time to clean up. Some wells take longer, some to clean up on the water, some are quicker. We still expect a stabilized water cut around that 50% to 60%, which is very similar to Kakwa and our wells are coming down to this. This one -- this well is just that -- closer to that 70%, 75%. So we just need a little more time for it to clean up here.

And Jamie, I can handle the guidance side. What we focused on is we want to make sure we're setting out realistic guidance that we know we have a good shot at achieving, hence, a little bit wider range, both at the corporate and then specifically at Attachie, where if we're at the high end of the guidance, we're right where we should be. And if we're at the lower end, then we're going to have to do some explaining for that asset. But corporately at [ 405 to 420 ]. That should be rate where everyone is kind of expecting us to be. So pretty happy with how the budget came together and the overall guidance levels.

[Operator Instructions] And I'm showing no further questions at this time. I would like to turn it back to Taryn Bolder for closing remarks.

Thanks, everyone. Have a great day.

Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.