ARC Resources Ltd. (ARX) Earnings Call Transcript

Good morning, everyone, and welcome to ARC's 2020 Investor and Analyst Day. I'm Kris Bibby, Senior Vice President and Chief Financial Officer recently, and I will be overseeing our activities today. I'd like to take a moment and just kind of explain the logistics and the agenda and how we're going to be approaching today. I would also like to now join -- welcome everyone who's joining via the webcast. So there will be listening in on from that front as well. Overall, today, we're planning on having a series of short presentations from various executives up at the front. And then followed by that, we'll have a question-and-answer period, which is probably the more exciting piece of it, but you never know. Also at the question-and-answer period, we will be accepting questions from the webcast. So please submit them throughout the presentation, and we'll get those addressed as well. We're targeting roughly an hour of a presentation, followed by the Q&A period. So just to try to shorten it from previous years probably. The themes or the format for today in terms of what we're trying to address is, we're trying to address the overall themes and questions and topics that we've been receiving from the broader investment community over the past several months. So it's -- we divided it up into 8 kind of short segments in terms of topics and questions and answers. And the goal is to kind of let you know how ARC is approaching each one of these topics and give you our views on how we want to see that. If you could save all questions until the end, that would be great. It's a little bit easier just to consolidate them all, and then we'll deal with them one at a time. And then obviously, I want to recognize a great amount of effort that has went into today's presentation from all the teams at ARC, all my fellow executives as well as specifically 2 individuals at the back, Martha and Kayzra, I'm sure you know, run a lot of our Capital Markets activity. So just want to give them a special shoutout for all the time, effort and work that's went into today for everyone up here. The -- I think that's the end of the opening piece. So that's pretty short and sweet. At this time, I would like to bring up Myron Stadnyk, our Chief Executive Officer, to kind of set the stage and give an intro as to what we're going to be addressing. And then you'll see a bunch of us coming up, and then I'll come back up at the end, and we'll deal with some questions then. So Myron?

Great. Thank you very much, Kris, for the introduction. And just to reiterate Kris's thank you to our whole team and our Capital Markets group for hosting the day, and I want to sincerely welcome everybody, and thank you for taking the time to be here. I look forward to sharing this time with you, and I think it'll be really interesting to kind of get into these top questions and talk about our results and our strategic thinking. But I'd like to start with our team -- our officer team, and often I kind of gloss over this slide, and -- but I think it's important to really just to pause here for a minute and explain the depth of experience that we have on our team at ARC. And you'll see a handsome and beautiful group of mid-40s executives. And there's actually over 120 years of ARC experience on this slide. So all of us have been committed to ARC for a significant amount of time. Surprisingly, it might not jump off the page, but over half of our group has international experience, a very broad perspective. And when you -- we've all -- if you look at the prior companies that we worked at, between Devon, and Shell, and Imperial, Encana and CNRL, Pan-Canadian, and also service sector experience, with some of our officers having worked for Sperry, so on directional drilling, Frontier Well Service and Schlumberger. This gives you a sense of the expertise that we're blessed with at ARC, both technically and commercially. Of course, the man of the hour is Kris Bibby, with his recent promotion to CFO. So we're really pleased to welcome Kris. Kris has worked in South America as well as he was at Western Canada Sedimentary Basin. He looks like he's 21, but he's actually 45, and a very strong strategic thinker, clear communicator at our Capital Markets. If you -- I think many of you have met him over the past couple of years during Capital Markets, and also a chartered accountant. He's supported by our controller, Kathy Gomes, who is a fantastic controller and ARC has been awarded a few times now some of the best reporting -- financial reporting in the sector. So that's just a little bit more depth about the quality of our team. And as we look at our directors, we're very fortunate to have our strong Board of Directors. Hal Kvisle is our Chairman, and many of you know him, still very active in the industry and lots of CEO positions throughout, on both midstream and production side of the business. So unique and a wonderful thoughtful person to work with. Dave Collyer is the Head of our HRC. He used to be the Country Chair of Shell in Canada. Kathleen O'Neill chairs Audit. Kathleen lives in Toronto and is doing a fantastic job with our finance group on audit. Herb Pinder chairs Governance for us; and JD or John Dielwart, does reserves, which his strong background from working at GLJ prior, many years ago, in Operational Excellence; and Nancy Smith chairs our Risk Committee. A recent appointment is Mr. Ahrabi, Farhad. Farhad is an active CEO with Cameron LNG. We've had lots of questions about LNG and what does that mean, but just think of Farhad as an energy expert, 35 years of global experience and strong Canadian experience. He understands markets and the upstream. So we're -- it's wonderful that Farhad has joined our Board. So to help set the stage for the speakers that will speak about our -- the topics that Kris talked about, our top 8 questions that we received, I just want to quickly highlight some of the significant accomplishments because it's been a pretty exciting past 4 years. It's been very productive in the complete transformation of the company. So you go just 1 year prior here, we started up Dawson III in 2017, and 2018 and '19 brought Sunrise with company-owned infrastructure to 240 million a day. Dawson IV will be starting up midyear. So think of another 20,000 BOE adds, strong liquid component from the Lower Montney. That gets Sunrise at a quarter B and Dawson by midyear here will be strong liquids producer and over 300 million a day. And just to pause on our accomplishments for 2019, because you're really seeing the efficiency of this new business just come out in the numbers, and I'm going to go through some of the netbacks in a couple of slides and tie this to profitability and where we see our company moving. So our cash flow per share, $1.97 in 2019; the dividend, $0.60. So 30% payout. Through this whole transformation of spending over $800 million on infrastructure, our balance sheet remains among the strongest, debt to trailing at 1.2. And what's really important is that development plan that we visioned a few years ago has been executed flawlessly, and we once again did what we said we would do. That's a lot of wells, a lot of infrastructure construction, a lot of community consultation, and our team's done a wonderful job of allowing me to speak about that 3 or 4 years ago with the confidence to execute, and here we are at the cusp of Dawson IV. So that's a lot of hard work. You're seeing the positives in our reserves. This is our 12th year where the Montney has provided 150% to 300% reserve replacement. This year, 200% replacement of the oil and liquids, and 150% on gas. So you're seeing that shift to those more liquids-rich plays show up in the numbers, and that's what's important. Our 2P, our 1 year with FDC was under $5 a BOE, $4.82. 3 years is probably a better way to look at that, with future development capital at 8 57, and I'll talk about that 8 57 number when I get to the netbacks in a moment. But what's impressive about that, if you think that last year we spent $692 million, actually $254 million of that was invested on infrastructure. And even with that big sort of onetime investment on infrastructure, the F&D numbers were still very, very strong. So it just highlights that we really have some fantastic geology and -- thanks, Kris. It's good. It's 6 years now without a lost time accident for staff. I always think of safety as a bit of a litmus test to being organized, and our team is doing a great job of that. Also, the lowest recordable incidents in years for our contractors, and both contractors and staff are important to us. And I'd also just talk about our long history of ESG. It's actually 20 years ago, I was in Ottawa receiving a leadership award for ARC, that back then was called the voluntary Climate Registry. And why I point out the Voluntary part is we were there when you didn't have to be, and it was voluntary, and we were still reporting our carbon. So this is 20 years. I think what's really important is that's in our culture and it's authentic, and that's why you continue to see the great results that's been in our company for a long time, thinking ahead about leadership and community involvement and ESG. Some of the results you'll see today, we're AAA rating on MSCI. And on both water and air, in 2019 we were B in both of those for carbon disclosure, which is the same as Suncor. So we're doing really well. There's about just under 200 companies in Sustainalytics, which is analyzed out of the Netherlands, and we're, I think, #11 out of that large group on global reporters. So some really great things happening and independent people are reporting on it. We also think about our strategic capital invested in ESG. Harman is going to show a couple of examples. I would just highlight the water ponds, for example. We've invested $55 million in all the ponds. That water will be piped for decades now through the Montney. We won't have to truck water, and that'll reduce scope 2 emissions. So that's just 1 example, and that's in our culture, and it's going really well, getting our projects approved, strong safety, strong ESG leads to good relationships with our employees and our communities. So all in all, fantastic year. I really feel like we've just hit a super turning point, all this low-cost production and strength of cash flow. We really look forward to 2020, where we're going to see continued results. We think about how do we give double-digit returns. And right now, with our yield at 8.5%, there's almost double-digit returns. We know we don't set the yield that we pay our $0.60, but we're offering 14% production growth in 2020, which is the Dawson IV plant, and that will continue into 2021, and I'll illustrate that for you. There is a quick snapshot of where we're at, where we're going. So just to quickly bring some numbers to what I just discussed. 2020, we're looking to produce on that 158. So that 139 to 158. Our Q4 was 148 in 2019, but you're seeing that strong move of 20,000 BOEs. What that is, is Dawson starting up halfway through the year, and then that Sunrise production that came on in Q4. So you've got that nice bump. So that's 14% production increase. What's super exciting is actually almost 30% drop in capital to achieve that. And you can see into 2021 our production-based capability, think about Dawson running the entire year that year, instead of half a year. So there's an extra 10,000 BOEs for the corporate average, and our capital can continue to be more and more efficient. So bigger ARC, less capital, very efficient company. And Armin will talk a bit about technology and innovation that gets us there. So one thing about corporate strategy, at ARC we really work hard to connect our strategic thinking with our Board and with our officer team and our staff to get alignment. So I've shown you this wagon wheel before. But just to quickly kind of make the link from people to what we measure to quadrants of the strategy. So if you look at financial sustainability and our internal scorecard and our communication with our Board, we talk about balance sheet, 1 to 1.5x. The connection to the people would be Kris Bibby's team around finance and all of us having discipline on our expenditures. Think about our 3-year return on average capital employed. Looking back, it's about 7%. And paying that dividend, $212 million. So that's what that quadrant means. And as you move down to the high-quality assets and operational excellence, think about Terry's team and Armin and Lara and Chris Baldwin and Sean Calder managing the business, meeting or exceeding all the 2019 guidance. The safety performance I talked about, operating costs being under $5 for the first time in 20 years. Think of the capital discipline of that team. And ultimately, the netbacks that we derive from the business because of that. We look at the bottom right, commercial activities. We think about risk management, the hedging and the diversification, which added $170 million to our cash flow last year. Think of the connection to Ryan Berrett's marketing and Kris Bibby, and Lara with the long-term development plans. We really -- I talked about doing what we said we would do. A lot of our success comes out of creating 5- and 10-year plans and working those plans to achieve results. And high-performance people. Think about Lisa in HR and the commitment of all the executives, tangible things where we measure the strength of our workplace, which we received a score of 92% from our staff last year, and our visioning and our creating a culture around ESG and safety and leadership and respect and community involvement, and our commitment to performance and accountability. So that brings that to life a little bit. And here is a 10-year snapshot, just to start to dive a little bit more into the numbers. So what's really important to consider here is, in the last 10 years our production's come from about 60,000 and will be kind of that 150-plus. So we're 2.5x bigger, and the sustaining capital is less than it was when we were 2.5x smaller. The well count's 57% less. We're just more efficient. The F&D costs are less. Operating expenses are less. All these things are contributing to our economic performance. And think about during this 10-year period, we actually paid out $3.3 billion of dividends and completed this transformation. That's the management of the technical and the commercial aspects of our business. So I just would say that ARC is better on all fronts. And what I think is really important, that sometimes get just oversimplified, is the assets that make up ARC now, we have a real clear defined inventory of how we're going to keep those assets full for the next 10, 20 years and maybe those assets 10 years ago didn't. They were kind of on their last legs. So think about that as a lot brighter setup for the future in addition to the transformation. Now the -- we talked a lot about ESG. Terry is going to do a full section on ESG. When I look at this graph, I've been just pointing out that Canada, it's interesting because when you look across Norway and Denmark and Canada, we all have great marks. But when you think that Norway sort of peaked their production at what, 3 million barrels and they're down to 1 million something, they've just added a 50% bump up. But Denmark, I think, is kind of 100,000, but the actual reserves associated with those countries and the way we're producing so ethically in Canada and the large reserve base, we should be the first barrel to market in Canada, and we'll provide some insights into what we're doing at ARC around that. But when you look at our lands and you think about the combination of our leadership in ESG, our leadership in technology and innovation, we believe this will continue to create profitable investment opportunities in the Montney, and we're super well-positioned. Being an early mover allowed us to mask the third largest land base in the Montney. And just to give you some numbers, in Northeast BC, we have over 100 trillion cubic feet of gas in place. Our 2P reserves are booked at 4 right now. So that's just BC. I'm not counting Ante Creek and Pembina when I gave you those numbers. And our liquids, just in that BC kind of ellipse there's over 14 billion barrels of light oil and condensate. Corporately, we're booked at 200 million, just to give you a sense of the journey. You see the well counts in the thousands. Next year, we're actually growing ARC 14%. Peaked to our efficiencies by drilling 65 wells. So lots to do at ARC. All of these things I'm talking about, try to focus us on creating a profitable company. And that transition that we started many years ago was so, so important as we saw banded oil and gas prices, which has completely come true, and we've built the company to make money around that. We really think about our full-cycle margins and our profitability, 20-year average return on average capital employed at 10%, but I just wanted to quickly just point out the margins because we talk about a lot internally, and I haven't done it on the podium for you at Investor Day. But if you look at that mix of our oil at $66 in Condi, last year, $67 AECO at $2. When you 6:1 that, you get 23, 42 per BOE. That's kind of our sort of gross revenue. We need to make a margin on that. So how we -- starting to net back, you subtract your royalties which were $1.39, operating costs which were $4.97. And then the transportation, which is $2.94. We mitigated our transportation cost by $1.57 by all the good things Ryan's team has done to enhance our revenue. So our netback -- our field netback is $15.69. But to really run a company, you need to look at the full-cycle margin. So you start at that $15.69, and then you have to pay for the interest, which in our case is $0.81. So there's a kind of a hidden advantage of low debt. So if you take $15.69, subtract $0.81. Our G&A last quarter had a big mark-to-market in it because of the long term, but let's use it anyway, $1.66. And then our F&D, with future development capital at 2P, was $4.82. If you actually do that, you end up with a margin of over $8 on 23. It's over 30%. But we probably could agree it's better to use a 3-year F&D. That's why I tried to point out that $8 57 to you. So if we use -- subtract $8 57, our full-cycle margins are still 20% in these prices. If you want to use [ crude ] develop producing, which a lot of people do and that's analogous to DD&A, you still come up with 10% margin. So it helps give insights into the profitability of the business, despite reading an e-mail every morning about all the headwinds in our industry. So that's how we think at ARC, audacious and positive, and our business is going to continue to shine through. And then when you think about the long-term profitability, and this is an interesting way to think about our business. As you build up the infrastructure in the liquids-rich areas, you're burdened with that cost temporarily. And as you produce out, these are our expectations at $55 oil and $1.90 AECO on the profitability in these areas that we've constructed. So I hope that sets the stage on how we think about our business. And with that, maybe I'll just -- I guess I don't need to read these questions, so you can see them. I'll just invite Kris to speak to the capital allocation.

Thanks, Myron, for that great introduction, and we thought the first topic we'd deal with is how ARC approaches capital allocation and the use of surplus funds from operations. And really, we're trying to kind of enlighten, how do we allocate these funds and all of our capital to achieve those returns that Myron was just speaking to. So when it boils down to it, the first -- at the highest level, there's really 2 options when you're allocating capital in an organization. You can either return that capital to shareholders or you can invest it in your business. And some combination thereof is what each company kind of needs to decide on how they're going to allocate it. ARC, for us, when returning capital to shareholders, we currently do it via dividend. That's $212 million a year. And then we're also sustaining production and actually growing production. So our allocation is in both buckets at this point in time. If you look on the right side and kind of how we are faring against the industry that we're in, you can see that we are growing production per share. You heard Myron mention 14% production per share growth for a lower relative percentage of the capital than many other companies. And that's what allows us to also make sure that we can distribute that dividend from that excess funds flow. And then let's dive in a little bit deeper on how we actually do that from a within ARC standpoint. So on the left side, you'll see funds from operations kind of as the inflows in any given year. The first thing we want to do is pay our dividend and sustain the business. So $212 million of a dividend and about $400 million for sustaining capital. So $612 million to kind of stay flat, pay the dividend and run that business. And we can do that, and this is the updated number that we've highlighted at the bottom of the page as well. We're fully funded at about USD 45 WTI and USD 2 NYMEX. So really if you're trying to back into an AECO number, that's probably around $1.50 AECO. So something that we think is very, very low and reasonable pricing. So first of all, it's about dividend sustainability and sustaining the business, which we think we can do at a very, very low-cost structure, which is also why you hear us talk about our cost structure so often, making sure that we're focusing in on it so we can keep those margins that Myron was referring to. After we've sustained the business and paid the dividend, we'll get into some of the more exciting options that you see in the green on the left there, and that's stuff like debt reduction, long-term development investments, share buybacks and even dividend increases, which the rest of this section is kind of dedicated to kind of how we weigh the pros and cons of a lot of those, and how do we structurally make sure that we're approaching that. The right side are some principles that, these are long-standing and have not changed over time. Debt, we always want to have a strong balance sheet. We believe 1 to 1.5x on a trailing net debt to fund full basis is appropriate for our business. Pay that meaningful dividend and grow our funds from operations per share, maintain that low-cost structure as well as developing profitable projects over the longer term and growing our business. When we're allocating capital, now let's look at how we've actually done that over the past several years. So we've spent a lot of time marketing over the last several years, explaining kind of why we're [ out ]spending in any 1 individual year. The reality is the projects that we're developing these days take longer than a magic 12-month cycle of January 1 to December 31. When we disposed of Saskatchewan in 2016, we said it's going to take us several years to redeploy those proceeds. And now that we're coming through the other side, [ we got ] through this infrastructure development phase, so it's worthwhile just checking back in on how we've actually done. So the left side of the page, inflows are in the dark gray, and then those proceeds of disposition are in the pink. And then the right side of that chart, total dividends paid over that period is just under $1 billion, at about $0.9 billion. The sustaining capital over those 4 years is about $1.6 billion. And then development investments, including our infrastructure, is about $1.1 billion. So really very well-balanced over those 4 years. Now if we contrast that with the right side of the page, this is our 2020 outlook, where we see our funds from operations being in excess of dividends, sustaining capital, and actually including our growth capital. So this year, we've made that shift, where now we are in the surplus funds flow after reinvesting all of that capital over the past several years and putting us at a new production base and cash flow level. When we look at the broader industry now, now so we obviously compete for capital from a much broader standpoint. Left side, you'll see the TSX sector yield across all of the industries in the TSX sector. It does also have valuation on the chart. And you can see that on the left side, E&P is far and away the highest yield, and we're defining yield as dividend yield, plus your free cash flow yield. So within that, you can see that despite having the lowest valuations, that the E&P sector overall is generating the highest yield. Now if you dig in a little deeper, on the right side of the page, E&P yield overall within the sector is there, and that's our E&Ps in there. You can see that ARC is amongst the leaders on the yellow lines there. So very happy with how the business is performing and generating those yields. You'll see that the bulk of our return to shareholders is generated from yield. So why don't we approach kind of how we're approaching the dividends? ARC's paid dividends or distributions when we were a trust, since 1996. So we've been doing it ever since day 1. The chart on the left kind of shows our payout ratio coming down over time, which was a deliberate focus to try to get it kind of down into the range where it is today. The black area going up to the right is the cumulative distributions and dividends paid. And we've recently surpassed $6.5 billion of distributions and dividends, starting from an IPO in 1996 of $180 million. So we've been paying a lot of dividends for a long time. It is a core fundamental piece of who we are, and part of our value proposition to all investors and shareholders. So when we are looking at dividends, we are looking at dividend sustainability, making sure that any time we put in dividend, it is sustainable, and we have to do that in the context of our current balance sheet and how we're approaching it. And then I'd just remind you, again, current dividend is fully funded at $45 WTI and $2 NYMEX. So very well set up to do that going forward. Two things that help ensure that dividend sustainability and help de-risk the dividend: capital efficiencies, which you're going to hear a lot about from a lot of my fellow executives today, just kind of how we focus in on that capital efficiency; and then our corporate decline rate. The decline rate, really one of the things that we do is we have a very measured pace of development and that helps us control that decline rate. As your decline rate goes up, you find you're spending more and more time, effort and money focusing on trying to stand still. So a little bit lower decline rate [ now but we just ] focus on the capital efficiency, measured pace of development helps that decline rate overall. And then another thing that we will always talk about and what helps de-risk that dividend is balance sheet strength. Mentioned that we believe in an appropriate amount of leverage, is that 1 to 1.5x of net debt to fund flow on a trailing basis, and you see historically, we have managed our balance sheet to that. Last year, we adjusted our growth program to make sure that we were going to stay and live within our means in that 1 to 1.5x. It barely shows up there, but you can see, we have been increasing as we've been redeploying those proceeds that I was speaking of. But you can see on 2020, we are forecast to kind of level out well within our band, and that's also by design as we come to the end of this infrastructure build-out. Might as well look -- so relative to other people, how does our balance sheet also look. I don't think this slide has surprised anyone, but Canadian and U.S. benchmarking, we will have a top quartile balance sheet at the end of 2020 on these forecasts. So it is something that we focus on and are very, very aware of and cognizant that, that is one of our competitive advantages. And if you're going to manage a business for a long term as a dividend-paying organization, you have to focus on that balance sheet. And then there's a very, very topical, and this will be the last slide in this section, share buybacks. Some of the feedback we get is, why don't you use that strong balance sheet and go buy back shares? And we do believe that share buybacks have a place in capital allocation and in capital structures. For us, it's going to show up when we're at the lower end of that debt to fund flow range, so lower the -- near the 1x range. We're probably at the higher end of our decline rate, where we would -- are comfortable and that's in 30-ish percent, we'll say, as well as we're in a stable environment from an E&P perspective, stable pricing, where we can actually get with some confidence what our fund flow, what our business is going to look like. So when we're in that scenario, the way that we look at share buybacks is really -- there's a whole host and multiple ways you can approach them. And really, at any one point in time, one might be more popular. But we'll look at a range of outcomes that you see on the left side, whether it's long-term development, how is your reserves valuations relative to where your share price is trading. In the context of the items on the right side of the page, where scarcity of capital comes into a big effect when you're looking at share repurchases, what are the actual returns. And conveniently at the bottom of the page, we've put our conclusion, and that is, in this environment the capital investment returns have exceeded what we [ can ] anticipate from share buybacks, which is why you see us committing to develop our projects and our assets as we go forward. And with that, I'm going to end that and I'm going to hand it over to our Chief Operating Officer and Senior Vice President Terry Anderson, who's going to walk through kind of 2020.

Okay. Thanks, Kris. So what does 2020 hold for ARC? Well, it's all about operational efficiency, and you heard Myron speak about efficiency. So the last couple of years, our capital program has been really focused on infrastructure investments, on water handling facility, major access roads and building out our facility capacities at Dawson III, Sunrise and Dawson IV. Now with the majority of that infrastructure investment behind us -- maybe I should flip the slide -- behind us, we can switch our investment focus to drilling wells and growing our profitable production. The 2020 budget gets to reap the benefit of those past investments in infrastructure to deliver significantly improved capital efficiencies. In 2019, our capital efficiency was around $15,000 per flowing BOE a day. And in 2020, we expect that to drop in half to $7,500. These infrastructure investments not only improve our capital efficiency, but it makes our overall base operations more efficient in driving down our operating costs. And another key objective in this budget is about advancing our Attachie pad design. The new Attachie pad design for our recent 4 wells is delivering very encouraging well performance, and you'll hear Lara speak to that in the next section, and she's pretty excited about the results coming out of Attachie. The guidance numbers can be summed up quite simple in that our capital investments are down 28% from $691 million to $500 million, due mainly to that reduced investment in infrastructure. In 2019, as Myron mentioned, we spent actually $250 million on infrastructure compared to 2020. We expect that to drop to $60 million. So a significant drop coming. Volumes are up that 14% as a result of Sunrise at full capacity, Dawson IV and Ante Creek coming on midstream. And operating costs will drop by 5% as we grow that low-cost Montney production. And finally, with that strong capital efficiency and moderate decline rates that Kris was just speaking about, our overall business isn't that much more efficient. And this is reflected in the fact that we only need 65 wells to deliver production in that range of 155,000 to 161,000 BOE a day. That's pretty efficient. This slide shows the details on the capital budget. So the Dawson property will see the largest capital investment, with 39 wells drilled -- to be drilled, focused on, obviously, the liquid-rich Montney wells, and that's going to fill our Dawson IV, but also maintain production at Dawson I, II and III. Parkland investments are also focused on drilling lower Montney wells and converting the sweet facility to a sour facility to accommodate future lower Montney wells. At Ante Creek, which has a low-decline predictable light oil production, we'll see 12 wells drilled and to help fill that expansion project in Ante Creek. And in Attachie, the plan is to complete the 6 standing wells that we drilled last year and bring those wells on production when we have the capacity available. So it's not all about capital efficiency. There's an operating cost efficiency also that is just as important. Throughout ARC's history, we have focused on being that low-cost producer, and it's even more important in today's lower commodity price environment. We started our portfolio transition 10 years ago realizing that we needed to move away from that old conventional higher-operating cost properties to the lower-cost Montney. And the graph shows we've dropped our operating costs in half and more than doubled production in the last decade. Myron mentioned, the last time our operating costs were below $5 a BOE was like 20 years ago, which coincidentally is when I started at ARC 20 years ago. Not sure what that means, if we're both old and cheap, and possibly. But anyways the point I want to make is that lower operating cost is, obviously, a key element in driving our profitability. The Lower Montney. So the capital investments were focused on the lower Montney development in Dawson and Parkland, which represents 65% of our budget. Because of the strong profitability we're seeing out of the Lower Montney wells, they typically pay out in a year and with greater than 100% rate of return. We have significant condensate reserves in the Parkland/Tower area of 34 million barrels of condensate, and we have the contingent resource, that's recoverable contingent resource, of about 70 million barrels. So that's a lot of condensate resource in the area. That would -- kind of put that into context, you could produce 30,000 barrels per day for 10 years to chew up that amount of condensate, resource and reserves. The condensate to gas ratio vary across Dawson, at 40 barrels a million in the core of Dawson. Up to the North, we go -- North Dawson and Parkland, it increases up to that 150 barrels per million, and that's what the map is showing. So at the very bottom of Dawson, we have 10 barrels a million, the core is about 40. And then as we move north, we get more liquids rich. Based on the knowledge of developing that Upper Montney over the last decade, we now know the best integrated approach to developing that Lower Montney resource in the most efficient way, addressing things like inter-frac spacing, inter-well spacing, frac intensity, pad design and the parent-child issues. This graph here shows the range of cume condensate production across the area of Parkland, Dawson, and there's a big difference between the Upper Montney wells and the Lower Montney wells. And after 18 months, a typical Lower Montney well will have produced between 50,000 barrels of condensate to 100,000 barrels of condensate. So strong condensate production out of a typical well. This is why we've upgraded our Dawson I and II liquids handling facility, to capture the liquids-rich Lower Montney wells. That's why underneath all the existing pipelines and infrastructure which makes that Lower Montney development that much more profitable on a full-cycle basis, as we already can use the existing facilities. We still like the Upper Montney wells and they have decent condensate production also. However, the Lower Montney wells definitely have a higher CGR and therefore we're focused on drilling those Lower Montney wells. And Dawson III and Dawson IV are designed to handle that liquids-rich Lower Montney. And speaking of Dawson IV, construction is progressing as planned. Our safety performance has been perfect with 0 incidents. And so proud of our team on that significant accomplishment. The project's on budget. We have great project management on this project, and we are on schedule. So we're excited to complete Dawson IV and bring that production on in late Q2 time frame. Now I'll turn it over to Lara to update us on how the Attachie development is progressing.

Thanks, Terry. A question we get frequently is, how is ARC's Attachie development progressing? I'm going to review ARC's recent results at Attachie West, which as Terry mentioned, I'm pretty excited about, as is our entire leadership team. We've got all of our managers in the room, many of whom have been working hard on the Attachie development. We're very impressed with the results they've delivered. I also want to talk to the status of the progress of this development from a commercial and funding standpoint. I want to emphasize the value of Attachie and how it ties into our long-term strategy. There are numerous factors that come together at Attachie to position it as a premier Montney asset. ARC realized the potential of this area very early on, allowing us to pull together a large contiguous land base. ARC has 308 net sections of Montney acreage at Attachie, which represents about 30% of our total Montney acreage. We've been aware of the resource potential of these lands for some time. The Total Petroleum Initially-In-Place, or TPIIP, has been assessed at 8.9 billion barrels of liquids and 32 Tcf of gas. This represents 30% of our gas TPIIP on ARC's Montney lands and over 60% of our liquids. To create value for our shareholders, it is not enough to have a large resource in place. A play also needs to demonstrate strong well deliverability in order to meet our investment hurdles. At Attachie, the reservoir is overpressured, up to 16 KPA per meter in the lower Montney as opposed to a normally pressured reservoir, which sits at around 10 KPA per meter. This increased pressure increases the well deliverability and hence sets Attachie area up for strong well economics. Our current assessment of those well economics is around 85% rate of return on a half-cycle basis in Attachie West. With such a large land base, we also see potential for over 2,000 locations. So although we're talking about Phase 1 of Attachie West, there will be multiple phases to come. Shown on the map on the slide, you can also see how well-situated these lands are from an Egress standpoint, with the North Montney mainline shown in red to the west, which just commenced operations earlier this month, and with Pembina Pipeline Corporation's liquids pipelines shown in green. They're actually to the east, north and west of our Attachie acreage. This proximity to egress sets Attachie up for strong full cycle economics. ARC pulled together our land base starting in 2010. Some patience is required in amassing a large land base such as what we have at Attachie, to enable purchasing these lands at a reasonable price, both at Crown lands sales as well as from competitors. With our first-mover advantage, ARC's overall average price for Attachie lands purchased at Crown lands sales is under $3,000 per hectare, which is a very competitive price. As lands are being amassed, ARC's teams moved into the appraisal phase, drilling wells to test deliverability as well as to delineate the play. We have a battery at Attachie West, which has liquids handling capabilities of about 3,500 barrels a day, and our gas is tied into third-party infrastructure. This allows us to test various well and pad designs at Attachie West to ensure that as we move into development mode, we do so with the most capitally efficient designs. It is critically important for the overall returns of the play that we optimize our well designs early on, thereby reducing the amount of investment into Attachie. This is a very typical life cycle, which we've worked through previously in our Dawson, Parkland/Tower and Sunrise fields. We are transferring all of our operating practices and design processes to our development at Attachie to enable a swift and efficient transition into manufacturing mode. The Attachie area has become a focus not only for ARC, but also for industry. Numerous competitors have been posting strong liquids rates from wells in the area. While ARC has primarily been focused on design optimization of our upper Montney horizons, the competitors have been highlighting multiple landing horizons, drilling wells in the Upper, Middle and Lower Montney. We expect these horizons to be as productive on ARC's lands, as Attachie is situated within the core of the high-pressure liquids fairway for all Montney horizons. As you can see on the map, wells in the area are producing up to 600 barrels a day of condensate as the average of the first 3 months of production. And this includes ARC's 2 of 27 pad, which was recently brought on production. The strong liquids rate set the area up for strong returns. I'm now going to walk through the evolution of ARC's Attachie pad and well designs through time. Terry talked to the Lower Montney and how important it is to get all of our design parameters correct, and we're working through the same at Attachie. We brought our first wells on production as early as 2014. Our initial wells proved that the Montney has strong productivity in Attachie, with early wells at 16 of 16, shown in green, and 13 of 26 shown in purple. In 2017, B13 of 26, which is shown in gray on the slide, was brought on production and has flowed consistently for just under 2 years. To date, this well has produced 260,000 barrels of condensate and 3/4 of a Bcf of gas. 13 of 14, which is shown in yellow, was our first pad in Attachie, where we were looking to determine what a well could produce when developed as a full pad to better determine the economics of full-scale development. This pad was brought on production in 2018. Results were encouraging. We're showing you here the average of all the wells on the pad, but the results did indicate that the wells were communicating too much with one another, meaning that the optimum inter-well spacing to maximize our capital efficiency needed to be wider apart. We drilled the 2 of 27 pad in 2019 and have just recently brought the North side of this pad on production. These wells are drilled at double the spacing of the 13 of 14 pad with a redesigned completion and the results of these are shown in red. 3 of the 4 wells on the pad have been on production for 3 months and have averaged approximately 600 barrels a day of condensate per well for their first 3 months of production. These wells are proving out the economics of the play and development mode, demonstrating that 85% rate of returns on a half-cycle basis are achievable in Attachie West in the Upper Montney. This is actually a significant improvement over our views from last year due to the new designs, making Attachie much more resilient at lower prices. As Terry mentioned, we have $30 million budgeted for Attachie West in 2020 as we are currently completing the South half of the 2-27 pad. We expect further enhancements in our capital efficiencies as we continue to optimize our frac design. ARC has 3 main categories of criteria that an area must meet in order to move into commercial development. From a technical standpoint, we have brought wells on production, proving strong liquids deliverability. We've designed the overall pad to deliver strong capital efficiencies. We have a deep well inventory, and we're seeing positive results from competitors, proving the extent of strong liquids production across ARC's land as well as in multiple Montney horizons. From a commercial standpoint, we've applied for and received regulatory approval for multiple phases of development. We've determined the methodology for moving our products to market and have regulatory approval for our natural gas sales line, and we have developed support infrastructure with a major access road constructed in this past year. Additionally, the North Montney mainline, which ARC will be delivering into, became operational this month, and we continue to evaluate our liquids egress strategy to ensure we're implementing the most cost-effective solution. From a funding standpoint, ARC is currently reviewing our balance sheet to determine the optimal timing to bring on Attachie West Phase 1, and we're analyzing our pace of development to maximize profitability. ARC's progressing the technical, commercial and funding aspects of Attachie West Phase 1 to have the project shelf-ready. I will now turn it over to Myron to discuss ARC's infrastructure approach.

Yes. So on infrastructure, we've put the title. We get a lot of questions, what are the advantages of owning infrastructure? And I think the team picked me to talk about it because I've sort of seen all the deals since we bought Ante Creek, which was in 2000, and I can describe a little bit of the history about how we think about it. But in a nutshell, this is going to be the anchor of the company for a long time to come. We've got about 650 million a day of company-owned infrastructure that you can see. All of this has been built out on the page. And the processing capacity on the liquids side of over 30,000 barrels per day of oil, condensate and NGLs. So all these new plants have refrigeration units and will be able to process. So that's why we can move so seamlessly from the upper to the lower on Dawson III, for example. We have the right infrastructure to process liquids and enhance the profitability. So if you think of the punchline of this, there's too many plants there to sort of context all the dates. But if you think of the Sunrise in the West, so that first plant came on in '12, and then we actually used a industry partner, a midstreamer, to test the reservoir. We kindly finally bring on other plants in '18, '19, but there was activities, commercial construction going on in 1 geographic area while we were piloting and testing in another area. So I think it's important to tell you that we actually have used midstreamers to de-risk Ante Creek. When we bought it, it was a midstreamer. They actually bought the plant from us. And a few years later, we bought it back from them. So we're always looking on profitability. We actually right now are testing Septimus through an industry partner. It's a third-party processing arrangement, we're actually testing Attachie through a third party. We tested Sunrise through an industry partner and some of our gas from Dawson, 40 million a day has actually been going for about 15 years to a midstreamer. So we're fully aware of the midstream and the company-owned opportunities. What's really important to us is the cost structure, but understanding not only midstream, but also transportation terms on pipeline systems, and each area has their own recipe for making money. But why, in general, do we feel that we -- owning our infrastructure creates long-term value? Because I think you can clearly see how our cost structure is driving down where Sean's team is doing a great job of operating the infrastructure at a very competitive rate. And you can see our cost structure of all our new businesses are very impressive. And when you think that Pembina is still sort of a $20 oil field, and we're coming in at 4 something on OpEx, gives you a sense of the quality of our operations. So we're controlling our cost structure. And we can manage our production levels based on commodity prices. I think one really interesting thing, Terry and Lara both talked about the optionality in the infrastructure. So Parkland/Tower, for example right now, that lower, we used the word sour, but the Lower Montney is very liquids rich, but has a little bit of H2S, it's not very sour. But it's sour enough that we need to take that H2S to sell the gas. So we pack on a self-aiming unit onto the plant, pretty reasonable capital investment. And suddenly, we can bring on all the lower wells that are right underneath the plant. So those kind of efficiencies. Dawson I and II last year, we started with the Upper Montney in Dawson. We built that liquids refridge last year for $54 million. That allows us to produce the Lower Montney and Dawson right under the plant and is enhancing the revenues. Those sort of secondary projects are generally 40%, 50% rate of return with a lot lower risk because the gas is already feeding the plant en masse. So it offers you those type of opportunities. And I think this kind of infrastructure contributes to our margins. Now there's a lot more than the metal. We're always talking about the pipes, but think about building all of this infrastructure in a very competitive area. All the people that Sean's team and our team in Northeast BC were partnered with Northern Lights College in Dawson, and a real connection to the community on the education front, and we're taking people that live in that area, training them to become experts in our industry and the real societal benefit. So that's just one very strong relationship that we have. And how we think about this from an economic point of view, you'll hear us use language around project economics. Some of the slides so far have showed 85% or 100% well economics and a project is the aggregate of the infrastructure at the front, which we show in blue here with the black outline. This is an example of building Dawson IV. So that gas plant there costs $163 million. So that's encapsulated in that black outline. And then the wells to fill it and other infrastructure. It's about a $300 million journey to create the Dawson IV business. Then once it's up and running, you can see the gross revenue at the netback, we call it at the field level, the red, the capital we expect to take to keep that flow. And then essentially, the gray is the free cash flow from that area. So that's how we're thinking about that business, owning that infrastructure allows us to control this entire investment base and create long-term profits for the company. So that's a quick snapshot of infrastructure. And I'll pass the podium over to Armin, who will talk about technology and innovation.

I'll look like Armin for a second here. So I really appreciate the overview Myron just gave on our infrastructure. Our team runs all the commercial aspects of moving ARC's product to market. And one of the key pillars of our business is the infrastructure that we own. And from a commercial standpoint, it gives us the flexibility to be able to move our product, optimize our product mix and ensure that we have the right commercial terms on all of our sales going forward. So the question that I am focused on is, how does ARC approach commercial diversification and price risk management. Now I know I've met a lot of you, and we've spent a lot of time talking about our diversification strategy and -- on the natural gas side, as well as our financial risk management program has been a pillar to ARC over time. So today, I've got a few slides just to build out on our thinking on how we think about moving our product to market and protecting our business from market risk. ARC's commercial functions are focused on optimizing our asset base, which we call our upstream commercial activities, and moving our product to diversified markets, which we call downstream. Focusing specifically on our downstream commercial activities, we have a very deliberate strategy to ensure market access and diversify our revenue exposure to avoid single-hub risk and reduce our volatility. We layer on financial risk management strategies to help protect ARC's capital program and cash flow. This integrated approach allows ARC to proactively plan our business, reduce risk and protect returns. So I put up one of our favorite slides here, which really allows our teams to frame the opportunities available in the market. It's a very simple slide but shows how production moves from wellhead to end-use markets. So if you focus on the left unshaded area. This is the area of the business that producers generally do very well. We produce oil and gas, we find reserves, and we are able to sell our product into a market. As you look into the right side of the slide, this infrastructure is typically not owned by producers. It's owned by larger midstream and end-use companies. So our challenge is how do we increase our top line revenue by moving from the left side of the slide to the right side of the slide. One of the key elements, as I mentioned, is our infrastructure. And this is pivotal in being able to control the markets that we deliver our products into. We do recognize the need to move further down the value chain to ensure market access and diversify our commodity exposure. And again, as I said, we need to increase our top line revenues through value capture. Doing so requires scale and an increased understanding of downstream markets. We continue to build out our commercial expertise. Over the past couple of years, we've formulated an internal team that works parallel with our fundamentals team to evaluate all opportunities of diversification. Now the one good thing of low prices is low prices breeds investment into the sector. And you're seeing a lot of infrastructure players coming into Western Canada with new projects across the value chain: LNG, polypropylene, propane exports, methanol facilities. And as we think about these opportunities, I want to just make sure that everyone understands, we're looking across all of our product mix. Not just our gas, not just our liquids, across our NGLs as well. So we continue to build our commercial expertise in looking at these opportunities. And our advantages are very fundamental. We have an unencumbered resource. We own 100% of our own facilities. Our proximity to infrastructure in BC, especially related to LNG pipelines, is paramount. And what Terry will talk about in a few sections there are environmental sustainability, which we know gas buyers are changing the way they purchase product. And we feel we have an advantage into the future with our sustainability practices. We are steadfast in our approach to market access and diversification as we grow into the future and we think about diversification across all of our products. How am I doing here? So as everyone knows, ARC has taken a very proactive approach to our natural gas sales and risk management strategies. And we foresaw a lot of the price weakness that has been witnessed in Western Canada over the past few years. We have long-term egress to North American consuming regions, and we use our financial hedging program to manage our short and medium-term price risk. As Myron talked about, this strategy has been very effective over the past few years with the weakness that we've seen. Myron talked about $170 million of price risk management and diversification gains last year. That equates to $0.84 per Mcf added to the ARC's netback. So it was very successful. As we've seen in the market over the past few months, we have seen some relative strength in Western Canada. Actually is positive that AECO is trading as one of ARC -- as one of Western Canada's best netbacks right now for a producer. So there's a lot of very positive things here and constructive coming with some of the demand growth. But I want to make sure to highlight that this is why we are diversified. Even though we have gas moving into various regions across North America, we are still able to participate when prices strengthen in any given region. Looking forward beyond some of the short-term system optimization changes that are happening this summer, we do see a structural build-out in Western Canada, egress and demand. Starting later this year, we see about 5 Bcf a day of demand growth by 2024. So putting that into perspective on a 16 Bcf a day production base, it's a very significant change. In 2021, you'll still see us move out to about 50% of our exposure being Western Canadian based. And our marketing strategy will enable us to execute on our long-term plans because of that. Moving to crude oil. So it's a short section on crude oil, but it's important to note that around 60% to 70% of our revenue does come from crude oil. So we spend a lot of time focused on, how do we manage our products. ARC's crude oil is primarily made up of condensate and light oil. Approximately 40% of our liquids production is condensate. It's higher value and it trades tighter to WTI than heavy and light production does. We do see continued local demand growth because of requirements for diluent for blending purposes. And we think that condensate will continue to trade at a premium relative to Western Canadian lighter grades -- or light grades for conventional crude, sorry -- which is about 40% of our production as well. This is a really light oil product, it's a light sour oil that we trade. And that trades relatively in tight proximity to WTI as well. We're not subject to the same local blowouts that the heavy producers have seen over the past few years. We think that going forward, the market is roughly trading right now around $7 below WTI. We think that this will continue going forward, as this is the price that tariffs to get to the Gulf Coast roughly trade at. Again, owning our own infrastructure, directly marketing our products, and the crude mix we have in our portfolio, allows us to direct our crude into the most optimal markets. That being said, we do protect our price differentials financially to protect ourselves against basis blowouts. And we're also happy with our outright crude oil hedges to WTI for 2020, where we have roughly 50% of our production hedged to protect us against the volatility that we're seeing in the current markets. With that, I will pass it to Armin to talk about technology.

Thanks, Ryan. So one question that we are often asked is how successful is ARC in leveraging new technology. And this is a very hard question to answer in a very short period of time because to showcase all the new technologies and innovations that the company has applied in over the last 23 years of our history and even of the last 3 to 5 years, requires a lot more time. So I thought I should probably focus more on ARC's relative performance when it comes to operational efficiency of execution to our industry peers. I think that would be a good measure to demonstrate how effective the team is in applying the technology because ultimately, adopting the new technology is going to lead to the performance that we hope to achieve from having access to new technology. So our approach to technology and innovation is really focusing on demonstrating value. We just don't want to apply new technology for the sake of trying something new. It doesn't make sense. We need to make sure that the application of the new technology leads to reduction in pricing, improving efficiency of execution or improving the productivity of the dollar in general, capital efficiency. That is what we are chasing, and that is what we are hoping to achieve from application of the technology. Our team is really actively also evaluating various technology that is available out there for sustainability aspects. So I'm going to show you an example of that also as part of my presentation. But at the forefront of technology application, I think it is important to acknowledge the team that is behind the application. I think we are fortunate to have access to great engineers, geoscientists, technical staff in the office who are at the forefront of applying and identifying and applying this new technology and innovations. And it's also very important to acknowledge the service sector that we are working with. We are fortunate to work with a group of really good service companies that, these guys are the people who are actually investing in identifying, inventing new techniques and technology, and we are basically actively evaluating and adopting them. Our mandate as the ARC operation team is to deliver best-in-class performance. And in order to do that, our team works really hard to identify all the gaps that we may have relative to the other industry peers. And identification of those gaps really help us to understand and identify the opportunities that we need to focus on. So this graph shows an example of the benchmarking exercise that our team does fairly regularly. So this benchmarks our efficiency of execution against other E&P companies in the Montney. So we look at various metrics. In this example, we are looking at the meter drilled per day and the proppant pumped per day, as 2 metrics of -- that illustrates efficiency of execution. I want to again highlight that these are only 2 of the many metrics that our team evaluates and benchmark against. These 2 graphs really illustrate how good the team at ARC performs relative to industry peers. It is also important to highlight the fact that these are average numbers. You see a lot of companies highlight their pacesetter, one-off wells in terms of cost or efficiency of the execution. Those don't really mean anything if you're not able to get sustainable, repeatable performance. So when we look at a period of time, for 12 months or so, and everything that we have done, and average that out, that really truly shows how we perform relative to everybody else. So just looking at the drilling performance as an example, you can see that ARC, by far, has had the most efficient drilling performance, thanks to [ Armin ] and his team of engineers in town. And the numbers, the performance we see here is about 50% better than the average of all the other Montney producers in terms of drilling efficiency. Similarly, on the completions front, our team is providing or delivering a top quartile performance. Again, we're 40% higher or better than the average of all the other Montney producers. So this is a strong performance, combined with the low cost of service, which we know we do have access to, has really resulted in the capital efficiency numbers that you've seen throughout this presentation so far. The other piece to application of the technology is attention to continuous improvement. So it's good to benchmark and perform better than everybody else, but it's also important to continuously improve year-over-year. And to illustrate that, these graphs on this page shows our history on the drilling side of the business over the last few years. We've had outstanding improvement in terms of our drilling, operational performance. This exceptional performance you see here, especially in 2 areas, 2 of our most challenging drilling areas in Sunrise and Ante Creek, really shows how the team was effective in terms of shifting that performance over the last 3 years in delivering repeatable and consistent operational execution. So again, these examples hopefully illustrate the fact that we must be doing something really good on the technology and innovation front to be able to deliver these results because without technology and innovation, you won't be able to deliver such a strong best-in-class performance. Terry also mentioned that Lower Montney has been 1 of our focus areas. So -- and obviously you've heard Terry speak about the liquid content of those wells. But as soon as that became a focus for us on operational front, a key focus has been to truly improve the capital efficiency of the Lower Montney. So this graph really shows the performance in Dawson. Over the last 3 years, we've seen significant reduction in terms of cost of these wells, combined with the increased productivity, which has resulted in the improved capital efficiency that you see on this graph, and this is really encouraging because as we speak to you the Dawson IV facility is being constructed and should be up and running pretty soon. And it's going to have access to an extremely efficient operation at the upstream side to fill up that facility. And also on ESG front, Terry is going to speak to ARC's performance in a lot more detail, but there is one example that I wanted to highlight because our team is very actively looks at various technology available to us to reduce our emission intensity. This -- in this example, the installation of waste heat recovery at Dawson is a good example of showing some of those opportunities that our industry has in terms of reducing emission, but at the same time also showing profitability and saving money. So on that, I would like to hand it over to Terry Anderson again, who is going to speak to our ESG performance.

Okay. Thanks, Armin. So ESG performance. I want to start off at a high level and just talk a little bit about our ESG and sustainability first at that higher level. ARC takes an integrated approach to sustainability, meaning that we're trying to balance all aspects of our business to be successful and hence sustainable over the long term. We need to conduct our business in an ethical manner and be environmentally focused. We need to ensure safe operations, and we need to be profitable. And that is what we refer to as that integrated approach to responsible development, which leads to sustainability. We need it all to be sustainable, not just 1 piece of the puzzle. We -- risk management is a key component of our decision-making process. ARC's Board of Directors provides oversight through the 5 committees to ensure that we are addressing all aspects of risk within the business. And responsible development has always been ingrained in our strategy. Earlier, Myron showed the graph on the left, which highlights how Canada ranks on ESG performance compared to the world. If you drill down deeper and look at how ARC's ESG performance compares to the global oil and gas companies, the graph on the right shows the benchmark and that we are very -- we benchmark very well on the world stage. And so we're very proud of our ESG performance here at home. But even on a global basis, we are doing very well. Emissions performance and strategy. We've been focused on emissions management for over a decade. When we first electrified our Dawson I facility back in -- through BC Hydro back in 2009, Armin just showed the technology of using that waste heat recovery units on Dawson III and IV. So we're always thinking about, proactively thinking about how are we managing emissions in our planning. The graph on the right shows our great performance in reducing greenhouse gas emissions intensity for total ARC. And for Sunrise property, we'll exceed our 2018 corporate reduction target of 25% by 2021. Our Sunrise property emissions were very low before we electrified, and now with electrification of our gas plants through BC Hydro, the property is nearly at 0 emissions. There's a lot of talk you hear about net 0 by 2050. That's a great aspiration, but we're really focused on significantly reducing our emissions today. Not 2050, but today. The graph on the left shows our 2018 emissions intensity benchmarking, which shows ARC as a leader already. The emissions intensity in Sunrise, I don't even think you can see the green on there, it's so low. It's like 0.0002 tonnes of CO2 equivalent per BOE. So it's so small in Sunrise. And we're currently preparing our next sustainability report, which will show even better performance on emissions reduction. So Ryan had a favorite slide. This is my favorite slide because this slide speaks all about improved efficiency in all aspects of our business, from Capital to OpEx to manpower to liability management, et cetera, et cetera. We've talked a lot about our portfolio transition over the last few years. And this slide is just a great picture of how significant that change has been. So on the left at 2014, that map was taken from our 2014 strategy session. So back then, 6 years ago, we were already identifying, which properties do we need to divest because of them being less efficient, which properties do we need to hold and see the -- find the right timing to divest. And then you fast-forward the 6 years, and we have fewer properties, larger, more concentrated assets and that's what truly drives the efficiency in all aspects of our business, especially our surface footprint and the liability management. And so to help context that liability management surface footprint, in 2014 we had over 18,000 gross wellbores in our company, which was just about over 6,000 net wells. We had numerous partners. We had non-operated positions, a lot of that equates to inefficiency. You fast forward today, we have 3,000 net wells. The gross is about the same because we're substantially 100% working interest. So this is a drastic change on our improved efficiency. And that's why we talked about the transition so much over the past. And the result of that portfolio transition is shown in this graph to the right. So our production is more than doubled and with half the wells. And that's just all about the efficiency of our business. From a land management perspective, we've also been proactively prioritizing our abandonment reclamation activities each year. In 2019, we spent close to $18 million on abandoning 42 wells, suspending 10 wells and decommissioning 75 sites. In 2020, we have $25 million budgeted for abandonment and reclamation activities. And the 65 wells that we are drilling this year, that's only on 8 pads, so we're moving the drilling rig 8x to these pad locations. And then, you obviously move within the pad onto each of those wells. So it's very efficient in how we're managing our business. And this really speaks to the beauty of the Montney and the thickness of that Montney, that you're able to pump your drilling rig on 1 pad and drill that many wells. It's a way more efficient operation. Water management is a very important part of our long-term sustainability. Responsible use of water is paramount to our operational excellence, it reduces our freshwater usage and improves our profitability. Myron mentioned, we invested $55 million in water infrastructure from 2017 to 2019 to secure water capacity of 700,000 cubic meters. So if you look at the Sunrise, Ante Creek and Dawson, each of those reservoirs or ponds, they hold 200,000 cubic meters each. These ponds have helped us reduce our water cost by 65%, so about $200,000 of savings per well. So that's significant on a per well basis. And so we'll have saved $25 million in savings from -- in 2019 and 2020 from these reservoirs that we've created. The Parkland pond is able to handle produced water, and we expect to reuse 100% of the produced water from our Parkland operations for fracking operations. So these ponds provide improved efficiency for the whole life now going forward, of development in these fields. Safety is our #1 priority. Nothing else really matters unless we're safe, bottom line. Our employee performance has been exceptional. We have 6 years without lost time incident on employees, our contractor performance is great on our TRIF numbers, being the lowest that we've seen in ARC in recent memory. And they're world-class numbers. And it's all about our commitment to continuous improvement in safety and the safety leadership, why our numbers are so strong. And finally, ARC has been formally reporting our sustainability performance for over 10 years now. So it's not something new to us. We've been doing that, and Myron alluded to that. We paid over $3 billion in royalties, also significant corporate and municipal taxes, payroll taxes, along with local hiring and community investments. We abide by our code of business conduct and ethics. And our strategy really revolves around managing risk. And our executive pay is designed with the focus of pay for performance. So it's all about ESG transparency for us. I'll turn it back over to Myron to finish us off for the day.

So thank you, Terry. Yes. So 1 slide to just finish up and then Terry, Kris and I will just take some questions here, if you'd like to ask a few questions. So the -- I think you've seen the integration of our people and our technology and our team. And I hope you can see we're really proud of our company, and thank you for supporting ARC, to the analysts and the investors that are here and on the webcast. And highlighted our good governance, strong governance. I think we won the Golden Gavel Award for governance, our board did, the commitment of our team. I think through these past 3 years, really sticking to those principles around balance sheet, and about investing when it's profitable. We talked about growth today a bit, of 14%. That's actually an outcome of strong, profitable investments. That wasn't design. That's an outcome. We paid our dividend. We invested in these profitable projects, and that's -- see a couple of years of growth in the bag now because of infrastructure that's behind us. It's all predicated on our business approach. But I hope it's shone through for you that we're a low-cost producer. We're very efficient. We're very acutely aware that we're competing not only with the Montney but with the Marcellus and with the Permian for -- on productivity and efficiency, and we're thinking big. And as a team, I really feel proud to show you how we've built a leading, sustainable Canadian energy company. So thank you for that. And the 3 of us will entertain a few questions. If there are any.

If there are any. We do have some mics floating around. So if there's any questions, please raise your hand.

Terry and I have special haircuts for when there's no light, so you can still see us. Yes, sorry about...

Jeremy, go ahead.

I'll have to speak loud.

Yes. I can hear you, Jeremy. We can hear you.

[indiscernible]

I can start, and Lara, you can jump in if there's anything more detailed.

Repeat the question, if you don't mind, for the people on the webcast.

Okay. So the question was the type curve on Attachie, is that comparable to the 2018 type curve that we had put out? And that actually is -- we're actually looking at a better type curve than we were talking about last year. So the cume production, probably the easiest way, Jeremy, is that we believe the cume production on the condensate on these wells are going to be over 400,000 barrels. So that's more than what we were originally expecting. And 85% is related to that 400,000 cumulative production.

And then just to add to that, the rate at which they're producing, I think you can see the difference of the old type curve and the new one, the opportunity for that quicker payout which reduces the risk. So we're pretty excited about those IPs, Jeremy.

[indiscernible] Yes. So there -- Terry doesn't know it, but I was in the frac room last night on my way home.

Oh, gosh.

But we're fracking some Attachie. So there -- we spent $80 million last year on Attachie, and we're actually -- there was $30 million on the slide that Terry showed. So this expenditure is continuing to [ yield for us ]. So that pad that we drilled last year, Lara spoke about those 4 wells. There's still a number of wells that we're actually fracking now. And we're looking at how to bring those on and get more tests. And then those type curves will help us decide on -- be integral in those 3 components that Lara talked about, the technical, the infrastructure and the funding to keep moving ahead to commercialize Attachie. It's a huge prize. So it's forefront for all of us.

Yes. And just for clarity on, when you're looking at those -- the production that Lara had shown, the early production on IP 30, those wells are all being choked back because of facility constraint. So they could have been significantly higher, but we need to choke those back to manage the production going through that facility. So the wells are very strong.

Marthe, I think there's a question up here when you get a moment.

Adam, we can -- we're good here.

Some people are on the webcast.

Oh, okay. Thanks.

Couple of questions for me. Just first, you talked about electrification, improving the carbon output. How much more progress do you expect to make on this? Are you going to look at electrifying some of your older facilities or is electrification kind of the thing that you're going to be doing going forward?

So we are actually, been chatting with the BC government on potential electrification of our Dawson III and IV facilities. With the low gas prices, it's hard to make the economics go around. So we need some support from the federal and the provincial side to help with that electrification. So we're definitely doing all the homework, and we would like to, but it has to make sense from a profitability perspective on it. So we're not -- bottom line is we're working on it. We're not sure if we'll get there, but it's something that we would like to do if it makes sense for our profitability.