Home 2023 BOE April 2023 Leading an Industry it Exemplifies

Leading an Industry it Exemplifies

Terry Anderson of ARC Resources Ltd. on His Company’s Success in Alberta Oil and Gas

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Terry Anderson of ARC Resources Ltd. Photo by Riverwood Photography.

In Alberta’s energy industry, adaptability is key to business survival. Change – in commodity cycles, technological advancements, regulatory requirements, geopolitical realities – is inevitable, and those companies who transform along with that change are not only more likely to survive, they also often thrive. By turning apparent challenges into opportunities, they grow and evolve, not without struggle and setback, to become seasoned and stronger.

Just ask ARC Resources Ltd. president and CEO Terry Anderson. His company’s 26-year history spans a timeframe that saw every change imaginable, from major tax law changes that forced a transformation of the business structure (from trust to corporation), to revolutionary technological advancements (horizontal drilling and multi-stage frac), to commodity prices sliding and bottoming out (during the COVID-19 pandemic).

Through it all, a disciplined approach has underpinned ARC’s success. “When we talk about discipline, we mean making risk managed decisions all the time,” Anderson offers. “We have always focused on having a strong balance sheet and profitability. We never want to put the company in a position to be jeopardized when the downturn hits. It’s about managing risk to create value.”

Anderson, a petroleum engineer, started with ARC 23 years ago. At that time, the company’s production was around 20,000 BOE per day. Today, it’s 350,000 BOE per day. “Back then we had 50 employees,” he recalls. “Now we’re closer to 725 employees. The company has obviously changed considerably over that time.”

ARC was formed as an energy trust in 1996. When the federal government changed the tax rules, the company became an oil and gas exploration company. “That was a big switch for us at that time,” says Anderson. “It meant that if we wanted to survive and thrive, we needed to divest out of our old conventional assets and get into the new, big resource plays.”

And that is exactly what ARC did when, in 2005, it drilled the first horizontal well in the Montney. The team was led by Anderson. “That kicked off the whole Montney boom,” he recalls. “We acquired significant acreage in the Montney and continue to drill and explore there, while at the same time divesting out of our old conventional assets. We became experts in the Montney and that’s where we continue to focus the company and grow our production today.” Currently, ARC has assets in both northeast B.C. and Alberta.

ARC’s merger with Seven Generations Energy Ltd. (a Montney player as well) in 2021 means that today the combined company is the largest Montney producer, the largest condensate producer and the third largest natural gas producer in Canada. “The merger was the largest and most transformational deal in ARC’s history, doubling our production and making us a larger, more efficient and profitable company,” Anderson notes.

Backed by this scale, strong ESG performance and a balanced production profile that includes 60 per cent natural gas, ARC is well positioned to be an LNG partner of choice. It currently has two natural gas supply deals (one on the U.S. Gulf Coast with Cheniere Energy, Inc. and one with an LNG Canada proponent).

“We believe in the energy diversification happening around the world,” Anderson offers. “It’s our role, as a Canadian energy producer, to play a part. With LNG, we’re actually helping to lower emissions globally. It’s the reliable, affordable and secure energy that the world is looking for. We believe that the LNG business is going to continue to grow significantly.”

He notes global LNG demand is expected to grow from the current 50 BCF per day to 100 BCF per day by 2040.

“Canada’s oil and gas industry is the most responsibly produced oil and gas in the world,” he continues. “We have strong regulations in place. We have been focused on emissions for decades already. We have an abundance of resource that the world is asking for.”

He notes countries like China, with the greatest emissions globally (largely due to burning coal), could really benefit from Canada’s LNG: “We’ve been trying to educate on this fact, and I think we’ll get there as a country, but it’s just taking longer with the federal government. Because although renewables are important, they cannot just replace oil and gas overnight.”

Over the last decade, he points out, there has been $3.8 trillion invested in renewables, yet oil and gas, as a proportion of the world’s energy consumption, has only moved from 82 to 81 per cent.

ARC has been focused on environmental excellence for many years, in particular on keeping its own emissions low. “From 2016 to 2020 we grew our production by 26 per cent,” Anderson says, “and over that same time period, we reduced our greenhouse gas emissions by 27 per cent.”

While that might not seem logical at first blush, Anderson explains it’s due to the company’s dual focus on growing production and on electrifying its facilities (owned and operated by ARC) through BC Hydro to reduce emissions.

Electrification was possible because, in addition to holding over 1 million acres of contiguous land holdings, ARC also owns and operates a large network of infrastructure. “We’ve always talked about controlling our destiny,” Anderson explains. “That’s why we want to build and operate our own facilities, always with ESG in mind. We electrify our facilities in BC in partnership with BC Hydro in order to have lower emissions.”

Today, 100 per cent of ARC’s producing assets are certified under the Equitable Origin’s EO100™ Standard for Responsible Energy Development, making it the largest certified production base in Canada.

“In addition to managing the emissions profile, owning and operating our own infrastructure gives us better operational control, higher reliability and contributes to our low cost structure,” Anderson adds. “This cost structure has also been supported by our relentless pursuit of efficiency across all aspects of our business which has been a true passion of mine.”

Another benefit to owning and operating its own infrastructure is flexibility. “If natural gas prices are weaker we can actually cool down our facilities and extract more liquids,” he says, “and if prices are stronger, we can warm up the facilities and produce natural gas for more value. It’s all about control to maximize profitability.”

Notwithstanding its success in creating shareholder value, safety is the first priority at ARC. “Nothing else matters,” Anderson says. “If we hurt somebody, it doesn’t matter how successful from an operational or financial perspective we are, it’s a failure on our part. We make sure all our staff are engaged in our safety programs and involved in continuous improvements. We are very proud of our strong safety culture and our historic performance of eight years without an employee lost-time incident.”

Also important are the communities in which ARC operates. Since inception, the company has donated approximately $40 million to various community needs and initiatives. “It’s always been part of ARC’s culture,” Anderson says. “We talk about our values of trust, integrity, respect and community, and our culture of caring. We’ve always been focused on being a responsible energy producer. Being responsible also means giving back to the community, whether that’s Calgary, Grande Prairie, Dawson Creek or out in our field operations. We want  communities to thrive.”

Firmly in control of its own destiny, ARC epitomizes all that is great about Alberta’s oil and gas industry. It deserves all the recognition – and success – it can get.

 

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