Annual Report - 2001 - ARC Resources Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS
Financial instruments of the Trust carried on the balance sheet consist mainly of current assets, reclamation fund
investments, current liabilities and long-term debt. As at December 31, 2001 and 2000, there were no significant
differences between the carrying value of these financial instruments and their estimated fair value.
Substantially all of the Trust’s accounts receivable are due from customers in the oil and gas industry and are
subject to the normal industry credit risks. The carrying value of accounts receivable reflects management’s
assessment of the associated credit risks.
The Trust utilizes a variety of derivative instruments to reduce its exposure to changes in commodity prices and
foreign exchange rates. The fair values of these derivative instruments are based on an estimate of the amounts
that would have been received or paid to settle these instruments prior to maturity.
The Trust is exposed to losses in the event of default by the counterparties to these derivative instruments. The
Trust manages this risk by diversifying its derivative portfolio amongst a number of financially sound counterparties.
Included in the total market value of all derivative instruments is a net gain of $1.8 million for contracts with one
counterparty for which there is uncertainty with respect to the counterparty’s ability to fulfill the terms of the
contracts.
The following contracts were outstanding as at December 31, 2001. Settlement of these contracts, which have no
book value, would have resulted in a net receipt by the Trust of $13.0 million as at December 31, 2001.
Average
Daily Contract Price
Quantity Prices ($) (1) Index Term
Crude oil fixed price contracts
(embedded put option) (2) 2,000 bbls 42.91 (36.63) (2) WTI January 2002 – March 2002
1,000 bbls 42.12 (35.80) (2) WTI April 2002 – December 2002
Crude oil fixed price contracts
(embedded double put option) (3) 2,000 bbls 41.81 (32.25) (3) WTI January 2002 – December 2002
Crude oil fixed price contracts
(embedded “cancel level”) (4) 10,000 bbls 40.17 (29.38) (4) WTI January 2002 – December 2002
Crude oil call option 5,000 bbls 43.00 WTI January 2002 – December 2002
Natural gas fixed price contracts 12,500 GJ 3.66 AECO January 2002 – March 2002
10,000 GJ 3.62 AECO April 2002 – October 2002
Natural gas collared contracts 5,000 GJ 3.50 – 5.64 AECO April 2002 – October 2002
Natural gas put option
(embedded 80 per cent put option) (5) 5,000 GJ 3.50 (3.50) (5) AECO January 2002 – March 2002
Natural gas collared contract
(embedded put option) (6) 10,000 GJ 3.50 – 4.00 (2.50) (6) AECO January 2002 – December 2002
The Trust entered into a contract to fix the price of electricity on five megawatts per hour (“MW/h”) for the period
April 17, 2001 through December 31, 2010 at a price of $63/MW/h. Settlement of this contract would have required
a net payment by the Trust of $6.7 million as at December 31, 2001.
ARC ENERGY TRUST AR 2001