ARC RESOURCES $25.52 - Toronto symbol ARX

ARC RESOURCES $25.52 (Toronto symbol ARX; Shares outstanding: 287.6 million; Market cap: $7.3 billion; TSINetwork Rating: Speculative; Dividend yield: 4.7%; www.arcresources.com) produces oil and gas in western Canada. Its average daily production of 85,178 barrels of oil equivalent is weighted 67% to gas and 33% to oil.

In the three months ended September 30, 2011, ARC’s cash flow per share rose 17.5%, to $0.74 from $0.63. That’s because the company raised its production. It also benefited from higher oil prices.

ARC converted from a trust to a corporation on January 1, 2011, in response to Ottawa’s income-trust tax. However, ARC has $2.2 billion of tax pools that are letting it offset the tax and maintain its $0.10 monthly payout (it now yields 4.7%).

ARC’s long-term debt is $649.9 million, or a low 8.9% of its market cap. The shares trade at 8.1 times ARC’s forecast 2012 cash flow of $3.15 a share.

The company plans to spend $760 million on exploration and development this year, up 4.1% from 2011. It has identified 8,000 potential drilling sites.

ARC Resources is still a buy.

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