ARC RESOURCES $22.70 - Toronto symbol ARX

ARC RESOURCES $22.70 (Toronto symbol ARX; Shares outstanding: 290.5 million; Market cap: $6.6 billion; TSINetwork Rating: Speculative; Dividend yield: 5.3%; www.arcresources.com) produces oil and natural gas in western Canada. Its average daily production of 94,970 barrels of oil equivalent is weighted 62% to gas and 38% to oil.

In the three months ended March 31, 2012, ARC’s cash flow per share fell 8.8%, to $0.62 from $0.68. Production rose 28.5%, but that was more than offset by 34.1% lower gas prices.

The company’s long-term debt is $838.8 million, or a low 12.7% of its market cap. ARC trades at 9.2 times its forecast 2012 cash flow of $2.46 a share.

ARC has cut its 2012 exploration and development budget by 21.1%, to $600 million from $760 million. That’s down from the $726 million it spent in 2011.

The lower spending will help ARC maintain its dividend, which now appears safe. However, that’s not guaranteed, especially if gas prices remain low for some time.

ARC Resources is still a buy.

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