Buy Arc Resources for growth and income from its oil and gas

Royalty trust ARC Resources Ltd. (TSX—ARX) got off to a strong start this year. With record first-quarter production and funds from operations (FFO), the company says it’s well on its way to achieving its 2014 targets.

ARC Resources is one of Canada’s leading conventional oil and gas companies. Its operations are focused in five core areas across western Canada, providing it with an extensive resource base of high-quality oil and natural gas development opportunities.

For the three months ended March 31, 2014, ARC’s FFO were $292.3 million, or $0.93 a share, compared with $202.4 million, or $0.65 a share, in the same period of 2013. Revenues rose 46 per cent to $551.4 million.

The results reflected higher realized commodity prices as well as increased crude oil and liquids and natural gas production. Production of 105,699 barrels of oil equivalent, or boe, per day, was 11 per cent higher than the prior period. This increase was primarily attributed to production from new wells at Parkland/Tower, a Montney Formation liquids-rich natural gas play in B.C., and Ante Creek, another Montney Formation oil and gas play in northern Alberta.

This year, ARC expects to deliver a 15 per cent increase in annual production to greater than 110,000 boe per day. The company is well into the execution of a $915 million capital budget in 2014, with a continued focus on oil and liquids-rich gas development to capitalize on the strength of crude oil prices and natural gas development spending in low cost, high rate of return natural gas projects.

ARC should earn $3.70 per share in 2014. ARC is a buy for growth and income.

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