Annual Report - 2001 - ARC Resources Ltd.

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PAGE 69 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
PAGE 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In addition to the contracts described on the preceding page, the following contracts, with a liability book value of $13.1 million, were outstanding as at December 31, 2001. These contracts were acquired in conjunction with the Startech acquisition at which time the market value of the contracts was a net liability of $33.1 million. Settlement of these contracts would have resulted in a net receipt by the Trust of $6.5 million as at December 31, 2001. Average Daily Contract Price Commodity Contracts Quantity Prices ($) (1) Index Term Crude oil fixed price contracts 5,000 bbls 37.53 WTI January 2002 – December 2002 Natural gas fixed price contracts 20,750 GJ 4.92 AECO January 2002 – October 2002 4,000 GJ 2.71 AECO November 2002 – October 2004 750 GJ 3.49 San Juan January 2002 – October 2002 1,500 GJ 3.79 Ventura January 2002 – October 2002 Natural gas collared contracts 2,000 GJ 2.30 – 3.10 AECO January 2002 – October 2002 Monthly Contract Average Foreign Currency Contracts Amount (US$000) Contract Rate Term Fixed rate foreign exchange contracts (sell) 2,000 1.4335 January 2002 – December 2002 1,500 1.4106 January 2003 – December 2003 (1) Commodity contracts denominated in US$ have been converted to CDN$ at the year end exchange rate. (2) Counterparty may exercise a put option if index falls below the specified price (as denoted in brackets) on a monthly settlement basis. (3) Counterparty may exercise a put option if index falls below the specified price (as denoted in brackets) on a monthly settlement basis. The put option is exercisable at $0.02/bbl for each $0.01/bbl that the index price falls below the specified price. (4) Contract is neutral if index falls below the “cancel level” price on a daily settlement basis. (5) Counterparty may exercise a put option at $3.50/GJ on 20 per cent of the contract volume if index is above the specified price on monthly settlement basis. (6) Counterparty may exercise a put option at $2.50/GJ if index falls below specified price on a monthly settlement basis. 8. UNITHOLDERS’ CAPITAL On January 31, 2001, the Trust issued 22.5 million trust units and 7.4 million exchangeable shares of ARC Resources Ltd. at $11.36 per unit/exchangeable share for a total of $341 million as consideration for the Startech acquisition. The exchangeable shares can be converted (at the option of the holder) into trust units at any time on or after January 31, 2001. The number of trust units issuable upon conversion is based upon the exchange ratio in effect at the conversion date. The exchange ratio is calculated monthly based on the cash distribution paid divided by the ten day weighted average unit price preceding the record date. The exchangeable shares are not eligible for distributions and, in the event that they are not converted, any outstanding shares are redeemable by the Trust on or after February 1, 2004 until February 1, 2010. During the year, 6,523,354 exchangeable shares were converted to trust units at an average exchange ratio of 1.05277 trust units for each exchangeable share. At December 31, 2001, the exchange ratio was 1.18422 to 1. ARC ENERGY TRUST AR 2001
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AR 2001 ARC ENERGY TRUST ANNUAL REP
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Photo: Drilling in the Drayton Vall
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OPERATING HIGHLIGHTS Years ended De
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AT THE TIME OF OUR INITIAL PUBLIC O
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PAGE 4 FEATURE: MANAGEMENT EXPERTIS
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John P. Dielwart Director, Presiden
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PAGE 8 MESSAGE TO UNITHOLDERS We ha
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PAGE 10 MESSAGE TO UNITHOLDERS envi
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PAGE 12 MESSAGE TO UNITHOLDERS We r
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PAGE 14 FEATURE: QUALITY ASSETS A C
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Top: Deanna Kalenchuk, Wayne Lentz,
Page 23 and 24: PAGE 18 OPERATIONS REVIEW DEVELOPME
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Page 27 and 28: PAGE 22 MAJOR PROPERTIES PEMBINA PE
Page 29 and 30: PAGE 24 MAJOR PROPERTIES CENTRAL AL
Page 31 and 32: PAGE 26 MAJOR PROPERTIES SOUTHEAST
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Page 35 and 36: PAGE 30 MAJOR PROPERTIES WEYBURN UN
Page 37 and 38: PAGE 32 ACQUISITIONS AND DIVESTMENT
Page 39 and 40: PAGE 34 RESERVES RESERVES Based on
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Page 43 and 44: PAGE 38 ENVIRONMENT, HEALTH AND SAF
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Page 47 and 48: PAGE 42 FEATURE: COMMITMENT DEFININ
Page 49 and 50: MANAGEMENT’S DISCUSSION AND ANALY
Page 51 and 52: PAGE 46 MANAGEMENT’S DISCUSSION A
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Page 67 and 68: PAGE 62 CONSOLIDATED FINANCIAL STAT
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Page 71 and 72: PAGE 66 NOTES TO CONSOLIDATED FINAN
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Page 83 and 84: PAGE 78 QUARTERLY REVIEW QUARTERLY
Page 85 and 86: PAGE 80 DIRECTORS AND OFFICERS John
Page 87 and 88: PAGE 82 CORPORATE GOVERNANCE CORPOR
Page 89 and 90: PAGE 84 CORPORATE AND UNITHOLDER IN
Page 91: ANNUAL REPORT 2001 AR 2001 ARC ENER
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Annual Report - 2001 - ARC Resources Ltd.

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