ARC Resources Ltd reports 159% Net Income growth while 6.7% Revenue decline
08.02.2017 • About ARC Resources Ltd (
$ARX) • By InTwits
ARC Resources Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- ARC Resources Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 50.9%. At the same time it's in pair with industry average of 45.3%.
- CAPEX is quite volatile: 1,981 in 2016, 1,543 in 2015, 2,064 in 2014, 1,393 in 2013, 754 in 2012
- The company has potentially unprofitable business model: ROIC is at 5.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
ARC Resources Ltd ($ARX) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 1,194 | 1,401 | 2,406 | 1,276 | 1,191 | -6.7% |
| Gross Profit | 257 | 450 | 1,191 | -184 | 375 | |
| SG&A | 97 | 97 | 84 | 69 | 99 | 44.8% |
| EBITDA | 718 | 932 | 1,811 | 753 | 694 | -7.8% |
| Net Income | 139 | 241 | 937 | -343 | 201 | |
Balance Sheet
|
|---|
| Cash | 195 | 0 | 7 | 167 | 222 | 32.8% |
| Short Term Debt | 40 | 42 | 50 | 58 | 52 | -11.1% |
| Long Term Debt | 748 | 859 | 1,025 | 1,056 | 975 | -7.8% |
Cash flow
|
|---|
| Capex | 641 | 911 | 1,079 | 528 | 591 | 11.8% |
Ratios
|
|---|
| Revenue growth | -2.1% | 17.4% | 71.7% | -46.9% | -6.7% | |
| EBITDA growth | -9.5% | 29.7% | 94.4% | -58.5% | -7.8% | |
| Gross Margin | 21.5% | 32.1% | 49.5% | -14.4% | 31.5% | 45.9% |
| EBITDA Margin | 60.2% | 66.5% | 75.3% | 59.0% | 58.2% | -0.7% |
| Net Income Margin | 11.7% | 17.2% | 39.0% | -26.8% | 16.9% | 43.8% |
| SG&A, % of revenue | 8.1% | 6.9% | 3.5% | 5.4% | 8.3% | 3.0% |
| CAPEX, % of revenue | 53.7% | 65.0% | 44.9% | 41.4% | 49.6% | 8.2% |
| ROIC | 3.2% | 7.9% | 20.7% | -6.0% | 5.1% | 11.1% |
| ROE | 4.2% | 7.1% | 27.0% | -9.9% | 5.9% | 15.7% |
| Net Debt/EBITDA | 0.8x | 1.0x | 0.6x | 1.3x | 1.2x | -0.1x |
ARC Resources Ltd ($ARX) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 281 | 279 | 292 | 338 | -12.3% | -19.7% | -0.1% | 7.3% |
| EBITDA | 151 | 156 | 165 | 222 | -25.5% | -28.1% | -5.2% | 7.7% |
| Net Income | 64 | -58 | 28 | 167 | | | | |
Balance Sheet
|
|---|
| Cash | 166 | 59 | 44 | 222 | -13.2% | -73.6% | -78.4% | 32.8% |
| Short Term Debt | 55 | 34 | 50 | 52 | 2.1% | -35.0% | -10.7% | -11.1% |
| Long Term Debt | 980 | 973 | 965 | 975 | -3.2% | 0.6% | -6.9% | -7.8% |
Ratios
|
|---|
| Gross Margin | 18.9% | 21.9% | 23.3% | 56.9% | 7.0% | -4.8% | 117.4% | 69.5% |
| EBITDA Margin | 53.6% | 56.0% | 56.3% | 65.5% | -9.5% | -6.6% | -3.0% | 0.3% |
| Net Income Margin | 22.8% | -20.8% | 9.7% | 49.3% | 23.3% | -6.1% | 90.0% | 66.8% |
Revenue and profitability
ARC Resources Ltd's Revenue decreased on 6.7%. Annual revenue decline showed slowdown in 16Q4 - revenue increased on 7.3%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 0.73 pp from 59.0% to 58.2% in 2016.
Gross Margin jumped on 45.9 pp from -14.4% to 31.5% in 2016. SG&A as a % of Revenue increased on 3.0 pp from 5.4% to 8.3% in 2016.
Net Income marign jumped on 43.8 pp from -26.8% to 16.9% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 49.6% in 2016. CAPEX/Revenue dropped on 15.4 pp from 65.0% in 2013 to 49.6% in 2016. It's average CAPEX/Revenue for the last three years was 45.3%.Battling declining revenue the company invested a large share of EBITDA (85.1%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (5.06%) and ROE (5.86%). ROIC surged on 11.1 pp from -6.0% to 5.1% in 2016. ROE jumped on 15.7 pp from -9.9% to 5.9% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.2x and Debt / EBITDA is 1.5x. Net Debt / EBITDA decreased on 0.1x from 1.3x to 1.2x in 2016. Debt decreased on 7.9% while cash surged on 32.8%.
Management team
Myron M Stadnyk is a ARC Resources Ltd's CEO. Myron M Stadnyk is a founder and has spent 5 years at the company. The company's CFO is P Van R Dafoe. P Van R Dafoe has 4 years tenure at the company.
Appendix 1: Peers in Energy
Below we provide ARC Resources Ltd benchmarking against other companies in Energy industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | | -18.4% | 141.2% |
| Seven Generations Energy Ltd ($VII) | | 115.7% | 340.2% | 39.0% | 94.4% |
| Athabasca Oil Corp ($ATH) | | 342.7% | 5.5% | -22.9% | 73.1% |
| Painted Pony Petroleum Ltd ($PPY) | | 41.3% | 56.0% | -42.5% | 60.7% |
| ONEnergy Inc ($OEG) | | | 6,002.6% | 231.5% | 57.4% |
| |
|---|
| Median (116 companies) | | 15.4% | 16.9% | -27.7% | -19.1% |
|---|
| ARC Resources Ltd ($ARX) | | 17.4% | 71.7% | -46.9% | -6.7% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Americas Petrogas Inc ($BOE) | 77.1% | 43.3% | -34.3% | 121.1% | |
| TransAlta Renewables Inc ($RNW) | | 94.4% | 94.5% | 94.5% | 91.1% |
| Serinus Energy Inc ($SEN) | 80.5% | 76.5% | 86.8% | 88.5% | |
| Advantage Oil & Gas Ltd ($AAV) | 62.0% | 84.5% | 92.5% | 88.5% | 90.3% |
| Polaris Infrastructure Inc ($PIF) | 39.9% | 33.6% | 32.0% | 86.7% | 88.6% |
| |
|---|
| Median (114 companies) | 32.0% | 32.2% | 32.2% | 33.9% | 32.5% |
|---|
| ARC Resources Ltd ($ARX) | 21.5% | 32.1% | 49.5% | -14.4% | 31.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Granite Oil Corp ($GXO) | 59.4% | 64.5% | 70.8% | 201.9% | |
| Perpetual Energy Inc ($PMT) | 35.5% | 70.7% | 58.0% | 110.3% | |
| Petro Rio SA ($PRJ) | -4,809.7% | -6,899.7% | 28.2% | 90.7% | |
| Peyto Exploration & Development Corp ($PEY) | 86.1% | 83.2% | 86.3% | 84.6% | 80.7% |
| Innergex Renewable Energy Inc ($INE) | 111.8% | 110.0% | 82.9% | 83.4% | 83.5% |
| |
|---|
| Median (128 companies) | 25.3% | 34.1% | 28.9% | 8.1% | 27.3% |
|---|
| ARC Resources Ltd ($ARX) | 60.2% | 66.5% | 75.3% | 59.0% | 58.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | 1,997.8% | 712.8% | |
| WesternZagros Resources Ltd ($WZR) | | | | 385.6% | |
| Athabasca Oil Corp ($ATH) | 2,426.4% | 596.6% | 504.7% | 315.2% | 83.7% |
| TORC Oil & Gas Ltd ($TOG) | 453.8% | 466.9% | 104.5% | 229.4% | 76.3% |
| Seven Generations Energy Ltd ($VII) | 452.8% | 513.1% | 227.4% | 191.2% | 73.5% |
| |
|---|
| Median (129 companies) | 42.3% | 39.0% | 45.6% | 27.6% | 22.9% |
|---|
| ARC Resources Ltd ($ARX) | 53.7% | 65.0% | 44.9% | 41.4% | 49.6% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Enerplus Corp ($ERF) | -17.3% | 10.2% | 11.5% | -55.5% | 16.3% |
| Whitecap Resources Inc ($WCP) | 7.1% | 8.1% | 9.6% | -10.6% | 10.1% |
| Ecopetrol SA ($ECP) | 29.3% | 24.4% | 16.5% | 3.0% | 9.6% |
| Parkland Fuel Corp ($PKI) | 22.3% | 23.3% | 9.9% | 7.8% | 8.6% |
| Inter Pipeline Ltd ($IPL) | 9.5% | 8.0% | 7.5% | 9.6% | 8.5% |
| |
|---|
| Median (128 companies) | 3.9% | 5.4% | 5.5% | -8.5% | -1.9% |
|---|
| ARC Resources Ltd ($ARX) | 3.2% | 7.9% | 20.7% | -6.0% | 5.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| BlackPearl Resources Inc ($PXX) | -0.2x | -0.1x | 0.2x | 3,726.1x | -0.2x |
| Paramount Resources Ltd ($POU) | 14.6x | 23.9x | 8.9x | 421.5x | -5.8x |
| Precision Drilling Corp ($PD) | 2.2x | 1.9x | 2.0x | 68.4x | 7.6x |
| Trican Well Service Ltd ($TCW) | 2.5x | 3.4x | 2.9x | 31.4x | |
| Trilogy Energy Corp ($TET) | 2.6x | 1.8x | 2.3x | 25.5x | 7.3x |
| |
|---|
| Median (78 companies) | 1.6x | 1.5x | 1.4x | 2.7x | 2.7x |
|---|
| ARC Resources Ltd ($ARX) | 0.8x | 1.0x | 0.6x | 1.3x | 1.2x |
