A Member of Pat McKeough’s Inner Circle recently asked for his advice on ARC Resources, a leading Canadian Montney-focused oil and gas producer with a large, liquids-rich asset base in Alberta and British Columbia.
Pat likes the company’s combination of scale, low costs from a liquids‑rich Montney footprint that generates robust cash flow. Thislets management return essentially all free funds to shareholders. However, Pat notes the firm remains a hydrocarbon producer exposed to volatile oil and gas prices.
ARC RESOURCES (Toronto symbol ARX; www.arcresources.com) produces natural gas as well as oil. Its average output of 408,382 barrels of oil equivalent per day is 58% natural gas and 42% oil.
Cash flow per share in the quarter ended December 31, 2025, rose 16.9%, to $1.52 from $1.30 a year earlier. Higher realized gas prices and 6.8% higher output led to the gain.
Long-term debt stands at $2.4 billion, or a low 16% of ARC’s market cap.
In October 2024, the company started up its Attachie Phase I processing facility in the Montney area of Northeast B.C. and Northwest Alberta. The $740-million plant is now expected to produce roughly 30,000 to 35,000 barrels of oil equivalent per day in 2026 (including natural gas); that will eventually rise to 40,000 barrels per day.
Then in July 2025, ARC closed a $1.6 billion all‑cash acquisition of condensate‑rich Montney assets in the Kakwa area from Strathcona Resources. This deal significantly expanded ARC’s presence in one of its most profitable core regions.
The assets added approximately 35,000 to 40,000 barrels of oil equivalent per day. This increased ARC’s total Kakwa production by roughly 24%.
Notably, the new land is directly contiguous to ARC’s existing Kakwa operations, allowing for immediate operational synergies in drilling, completion, and supply chain management.
In the transaction, ARC also acquired 100% ownership of two natural gas processing facilities and condensate handling infrastructure, plus a 19% interest in a third-party facility.
The deal is expected to contribute an additional $200 million in cash flow for ARC in 2026.
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Meanwhile, ARC plans to keep buying back its shares.
Note—since launching its initial buyback program in September 2021, the company has repurchased roughly 24.5% of its total outstanding shares
Those kinds of massive stock buybacks reduce the total number of shares outstanding. That boosts earnings per share since profit is divided among fewer shares.
In turn, the higher per-share earnings make the stock more attractive to investors. That then spurs the stock price.
ARC’s cheap shares offer a solid dividend yield
We still like the long-term prospects for ARC and its investors.
Your shares trade at just 4.9 times the 2026 forecast cash flow per share of $5.29.
Meanwhile, with the January 2026 payment, ARC increased its quarterly dividend by 10.5%, to $0.19 from $0.17. The stock yields 3.2%.
Recommendation in Pat’s Inner Circle: ARC Resources is a buy.
