|   | 1. | Resource Plays – Geological evaluation, acquisition, development and, if economically viable, subsequent production from lands and producing properties with a large resource in place.  In general, these lands are amenable to drilling multi-stage fractured horizontal wells. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Conventional Oil & Natural Gas Production – ARC focuses on maximizing production while controlling operating costs on oil and natural gas wells located within its core producing areas in western Canada.  This may include the periodic acquisition of strategic producing and undeveloped properties to enhance current production and reserves or to provide potential future drilling locations.  This may also include property dispositions.  Current oil production is predominantly light and medium quality. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | 2011   |   |   | 2010   |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Production (boe/d)                             |   |   | 83,416 |   |   |   | 73,954 |   |   |   | 63,538 |   |   |   | 65,126 |   |   |   | 62,723 |   |
| Proved plus probable reserves (mmboe)(1)(2)(3) |   |   | 574.4  |   |   |   | 487.4  |   |   |   | 379.0  |   |   |   | 321.7  |   |   |   | 286.4 |   |

| (1) | As determined by ARC’s independent reserve evaluator solely at year end. |
|-----|--------------------------------------------------------------------------------|

| (2) | ARC has also disclosed contingent resources associated with interest in certain of our properties located in northeastern British Columbia in the company’s Annual Information Form as filed on SEDAR at www.sedar.com. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Company interest reserves. |
|-----|----------------------------|

|   |
|--------|

| Page 2 |
|-------------|

| Total Returns (1)                                                     |   | Trailing One Year |   |   | Trailing Three Year |   |   | Trailing Five Year |   |
|-----------------------------------------------------------------------|--------|-------------------|--------|--------|---------------------|--------|--------|--------------------|--------|
| Dividends per share                                                   |   | $                 | 1.20   |   |                | $      | 3.68   |               |   | $ | 8.75 |   |
| Capital appreciation (depreciation) per share                         |   | $                 | (0.31  | )      |                | $      | 5.00   |               |   | $ | 2.80 |   |
| Total return per share                                                |   |              | 3.7    | %      |                |   | 49.0   | %                  |   |   | 66.9 | % |
| Annualized total return per share                                     |   |              | 3.7    | %      |                |   | 14.2   | %                  |   |   | 10.8 | % |
| S&P/TSX Exploration & Producers Index annualized total return |   |              | (18.0  | )%     |                |   | 9.6    | %                  |   |   | 0.04 | % |

| (1) | Calculated as at December 31, 2011. |
|-----|-------------------------------------|

| Per Share                                                   |   | 2011   |   |   | 2010   |   |   | 2009   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Normalized production, boe per share (1) (2)                |   |   | 0.30   |   |   |   | 0.30   |   |   |   | 0.27 |   |
| Normalized reserves, boe per share (1) (3)                  |   |   | 2.08   |   |   |   | 1.80   |   |   |   | 1.57 |   |
| Dividends/distributions per unit                            |   | $      | 1.20   |   |   | $      | 1.20   |   |   | $ | 1.28 |   |
| Normalized production, dividend adjusted, boe per share (4) |   |   | 0.40   |   |   |   | 0.36   |   |   |   | 0.32 |   |
| Normalized reserves, dividend adjusted, boe per share (4)   |   |   | 2.70   |   |   |   | 2.31   |   |   |   | 1.90 |   |

| (1) | “Normalized” indicates that all periods as presented have been adjusted to reflect a net debt to capitalization of 15 per cent. It is assumed that additional shares were issued (or repurchased) at a period end price for the reserves per share calculation and at an annual average price for the production per share calculation in order to achieve a net debt balance of 15 per cent of total capitalization each year. The normalized amounts are presented to enable comparability of per share values. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Production per share represents annual daily average production (boe) per thousand shares and is calculated based on annual daily average production divided by the normalized weighted average common shares for the year. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Reserves per share is calculated based on proved plus probable reserves (boe), as determined by ARC’s independent reserve evaluator solely at year-end, divided by period end shares outstanding. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The dividend adjustment assumes that historic dividends paid since January 1, 2009 have been reinvested by ARC, resulting in a reduction of the number of shares outstanding and, in turn, higher normalized production per share and normalized reserves per share. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 3 |
|-------------|

|                                                          |   | 2011 Guidance(1) |              |   | 2011 Actual |   |   | % Variance |   |   | 2012 Guidance |   |
|---------------------------------------------------------------|--------|------------------|-------------------|--------|-------------|--------|--------|------------|--------|--------|---------------|--------|
| Production                                                    |   |             |              |   |        |   |   |       |   |   |          |   |
| Oil (bbls/d)                                                  |   |             | 27,500            |   |        |   | 27,158 |       |   |   | (1            | )      |   |   | 31,000 – 32,000 |   |
|        Condensate (bbls/d) |   |             | 1,700             |   |        |   | 2,052  |       |   |   | 21            |   |   |   | 1,700 – 2,100 |   |
| NGLs (bbls/d)                                                 |   |             | 2,500             |   |        |   | 2,444  |       |   |   | (2            | )      |   |   | 2,500 – 3,000 |   |
| Gas (mmcf/d)                                                  |   |             | 305               |   |        |   | 310.6  |       |   |   | 2             |   |   |   | 330 – 350 |   |
| Total (boe/d)                                                 |   |             | 82,000 - 83,000   |   |        |   | 83,416 |       |   |   | 1             |   |   |   | 90,000 – 95,000 |   |
| Expenses ($/boe):                                             |   |             |              |   |        |   |   |       |   |   |          |   |   |   |   |   |
| Operating                                                     |   |             | 9.40 - 9.70       |   |        |   | 9.70   |       |   |   | -             |   |   |   | 9.55 – 9.95 |   |
| Transportation                                                |   |             | 1.10 – 1.20 |   |        |   | 1.18   |       |   |   | -             |   |   |   | 1.00 – 1.10 |   |
| General and administrative(2)                                 |   |             | 2.50 – 2.70 |   |        |   | 2.63   |       |   |   | -             |   |   |   | 2.30 – 2.50 |   |
| Interest                                                      |   |             | 1.25 – 1.40 |   |        |   | 1.28   |       |   |   | -             |   |   |   | 1.10 – 1.20 |   |
|        Income taxes        |   |             | -                 |   |        |   | -      |       |   |   | -             |   |   |   | 1.10 – 1.25 |   |
| Capital expenditures ($ millions)                             |   |             | 730               |   |        |   | 726    |       |   |   | (1            | )      |   |   | 760 |   |
| Diluted shares (millions)                                     |   |             | 286               |   |        |   | 287    |       |   |   | -             |   |   |   | 293 |   |

| (1) | 2011 Guidance presented is as updated in the third quarter of 2011. |
|-----|---------------------------------------------------------------------|

| (2) | The 2011 annual guidance for general and administrative cost per boe is based on a range of $1.90 - $2.05 prior to the recognition of any expense associated with ARC’s Long-term incentive plan, $0.60-$0.65 per boe associated with cash payments under ARC’s Long-term incentive plan and nil per boe associated with accrued compensation under ARC’s Long- term incentive plan.  Actual per boe costs for each of these components for the year ended December 31, 2011 were $1.83 per boe, $0.67 per boe and $0.13 per boe, respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 4 |
|-------------|

|                                              |   | Three months endedDecember 31 |   |   | Twelve months endedDecember 31 |   |
|---------------------------------------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
| (Cdn$ millions, except per share and volume data) |   | 2011                          |   |   | 2010                           |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
|                                              |   |                          |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Funds from operations (1)                         |   |                          | 226.6  |   |                           |   | 180.5 |   |   |   | 26 |   |   |   | 844.3 |   |   |   | 667.0 |   |   |   | 27 |   |
| Funds from operations per share (1) (2)           |   |                          | 0.79   |   |                           |   | 0.64 |   |   |   | 23 |   |   |   | 2.95 |   |   |   | 2.52 |   |   |   | 17 |   |
| Net income (loss) (3)                             |   |                          | (49.0  | )      |                           |   | (86.8 | ) |   |   | 44 |   |   |   | 287.0 |   |   |   | 212.2 |   |   |   | 35 |   |
| Dividends per share (2)                           |   |                          | 0.30   |   |                           |   | 0.30 |   |   |   | - |   |   |   | 1.20 |   |   |   | 1.20 |   |   |   | - |   |
| Average daily production (boe/d) (4)              |   |                          | 92,021 |   |                           |   | 84,686 |   |   |   | 9 |   |   |   | 83,416 |   |   |   | 73,954 |   |   |   | 13 |   |

| (1) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Per share amounts (with the exception of dividends per share which are based on the number of shares outstanding at each dividend record date) are based on weighted average shares. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Amount as determined under International Financial Reporting Standards, restated for the comparative period. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (4) | Reported production amount is based on company interest before royalty burdens. Where applicable in this MD&A natural gas has been converted to barrels of oil equivalent (“boe”) based on 6 mcf:1 bbl. The boe rate is based on an energy equivalent conversion method primarily applicable at the burner tip.  Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different that the energy equivalency of the conversion ratio, utilizing a conversion ratio of 6:1 may be misleading as an indication of value. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 5 |
|-------------|

|                                                                         |   | Three months ended December 31 |   |   | Twelve months ended December 31 |   |
|------------------------------------------------------------------------------|--------|--------------------------------|--------|--------|---------------------------------|--------|
| ($ millions)                                                                 |   | 2011                           |   |   | 2010                            |   |   | 2011 |   |   | 2010 |   |
| Net income (loss)                                                            |   |                           | (49.0  | )      |                            |   | (86.8 | ) |   |   | 287.0 |   |   |   | 212.2 |   |
| Adjusted for the following non-cash items:                                   |   |                           |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Depletion, depreciation, amortization and impairment                         |   |                           | 178.1  |   |                            |   | 137.9 |   |   |   | 509.2 |   |   |   | 408.7 |   |
| Accretion of asset retirement obligation                                     |   |                           | 3.3    |   |                            |   | 3.4 |   |   |   | 13.4 |   |   |   | 12.6 |   |
| Exploration and evaluation expenses                                          |   |                           | -      |   |                            |   | 0.8 |   |   |   | - |   |   |   | 0.8 |   |
| Deferred tax (recovery) expense                                              |   |                           | (17.4  | )      |                            |   | 12.9 |   |   |   | 97.0 |   |   |   | 33.2 |   |
| Unrealized loss (gain) on risk management contracts                          |   |                           | 80.1   |   |                            |   | 85.9 |   |   |   | 16.5 |   |   |   | (28.2 | ) |
| Foreign exchange loss (gain) on revaluation of debt                          |   |                           | (9.4   | )      |                            |   | (14.9 | ) |   |   | 9.7 |   |   |   | (26.8 | ) |
| Loss (gain) on disposal of petroleum and natural gas properties         |   |                           | 3.2    |   |                            |   | - |   |   |   | (89.5 | ) |   |   | - |   |
| Other                                                                        |   |                           | (0.4   | )      |                            |   | 41.3 |   |   |   | 1.0 |   |   |   | 54.5 |   |
| Unrealized losses on risk management contracts related to 2011 production(1) |   |                           | 38.1   |   |                            |   | - |   |   |   | - |   |   |   | - |   |
| Funds from operations                                                        |   |                           | 226.6  |   |                            |   | 180.5 |   |   |   | 844.3 |   |   |   | 667.0 |   |

| (1) | ARC has entered into certain commodity price risk management contracts that pertain to production periods spanning the entire calendar year but that are settled at the end of the year on an annual average benchmark commodity price.  Throughout 2011, ARC has applied the portion of losses associated with these contracts to the funds from operations calculation in the production period to which they relate to more appropriately reflect the funds from operations generated during the period after any effect of contracts used for economic hedging. At December 31, 2011, all gains and losses associated with these contracts have been realized, and in the fourth quarter losses previously applied to prior quarters are reversed. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 6 |
|-------------|

|                                                                              |   | Three months ended December 31 |   |   | Twelve months ended December 31 |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|---------------------------------|--------|
|                                                                              |   | $ millions                          |   |   | $/Share                         |   |   | $ millions |   |   | $/Share |   |
| Funds from operations - 2010(1)                                                   |   |                                | 180.5  |   |                            |   | 0.64 |   |   |   | 667.0 |   |   |   | 2.52 |   |
| Volume variance                                                                   |   |                                |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Crude oil and liquids                                                             |   |                                | 0.2    |   |                            |   | - |   |   |   | 1.8 |   |   |   | 0.01 |   |
| Natural gas                                                                       |   |                                | 15.5   |   |                            |   | 0.06 |   |   |   | 86.8 |   |   |   | 0.33 |   |
| Price variance                                                                    |   |                                |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Crude oil and liquids                                                             |   |                                | 54.9   |   |                            |   | 0.19 |   |   |   | 179.7 |   |   |   | 0.69 |   |
| Natural gas                                                                       |   |                                | (13.1  | )      |                            |   | (0.05 | ) |   |   | (43.8 | ) |   |   | (0.17 | ) |
| Realized (losses) gains on risk management contracts                              |   |                                | (36.0  | )      |                            |   | (0.13 | ) |   |   | 10.4 |   |   |   | 0.04 |   |
| Unrealized losses on risk management contracts related to 2011 production(2) |   |                                | 38.1   |   |                            |   | 0.13 |   |   |   | - |   |   |   | - |   |
| Royalties                                                                         |   |                                | (17.3  | )      |                            |   | (0.05 | ) |   |   | (26.5 | ) |   |   | (0.10 | ) |
| Expenses:                                                                         |   |                                |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Transportation                                                                    |   |                                | (1.3   | )      |                            |   | - |   |   |   | (6.4 | ) |   |   | (0.02 | ) |
| Operating                                                                         |   |                                | (9.4   | )      |                            |   | (0.03 | ) |   |   | (33.4 | ) |   |   | (0.13 | ) |
| General and administrative                                                        |   |                                | 13.9   |   |                            |   | 0.05 |   |   |   | 5.7 |   |   |   | 0.02 |   |
| Interest                                                                          |   |                                | 1.3    |   |                            |   | - |   |   |   | 3.6 |   |   |   | 0.01 |   |
| Cash taxes                                                                        |   |                                | 0.1    |   |                            |   | - |   |   |   | 0.2 |   |   |   | - |   |
| Realized foreign exchange losses                                                  |   |                                | (0.8   | )      |                            |   | - |   |   |   | (0.8 | ) |   |   | - |   |
| Diluted shares                                                                    |   |                                | -      |   |                            |   | (0.02 | ) |   |   | - |   |   |   | (0.25 | ) |
| Funds from operations - 2011(1)                                                   |   |                                | 226.6  |   |                            |   | 0.79 |   |   |   | 844.3 |   |   |   | 2.95 |   |

| (1) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | ARC has entered into certain commodity price risk management contracts that pertain to production periods spanning the entire calendar year but that are settled at the end of the year on an annual average benchmark commodity price.  Throughout 2011, ARC has applied the portion of losses associated with these contracts to the funds from operations calculation in the production period to which they relate to more appropriately reflect the funds from operations generated during the period after any effect of contracts used for economic hedging. At December 31, 2011, all gains and losses associated with these contracts have been realized, and in the fourth quarter losses previously applied to prior quarters are reversed. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                              |   |       |   |   | Impact on AnnualFunds from Operations (5) |   |
|-------------------------------------------------------------------|--------|------------|--------|--------|-------------------------------------------|--------|
|                                                              |   | Assumption |   |   | Change                                    |   |   | $/Share |   |
| Business Environment (1)                                          |   |       |   |   |                                      |   |   |   |   |
|    Oil price (US$ WTI/bbl) (2)(3)                  |   |       | 100.00 |   |                                      |   | 1.00 |   |   |   | 0.036 |   |
|    Natural gas price (Cdn$ AECO/mcf) (2)(3)        |   |       | 2.65   |   |                                      |   | 0.10 |   |   |   | 0.039 |   |
|    Cdn$/US$ exchange rate (2)(3)(4)                |   |       | 1.00   |   |                                      |   | 0.01 |   |   |   | 0.036 |   |
|    Interest rate on debt (2)                       |   |       | 4.0    | %      |                                      |   | 1.0 | % |   |   | 0.016 |   |
| Operational                                                       |   |       |   |   |                                      |   |   |   |   |   |   |   |
|    Liquids production volume (bbl/d)               |   |       | 36,000 |   |                                      |   | 1.0 | % |   |   | 0.035 |   |
|    Gas production volumes (mmcf/d)                 |   |       | 340    |   |                                      |   | 1.0 | % |   |   | 0.010 |   |
|    Operating expenses ($ per boe)                  |   |       | 9.75   |   |                                      |   | 1.0 | % |   |   | 0.011 |   |
|    General and administrative expenses ($ per boe) |   |       | 2.40   |   |                                      |   | 10.0 | % |   |   | 0.027 |   |

| (1) | Calculations are performed independently and may not be indicative of actual results that would occur when multiple variables change at the same time. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Prices and rates are indicative of published forward prices and rates at the time of this MD&A.  The calculated impact on funds from operations would only be applicable within a limited range of these amounts. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Analysis does not include the effect of risk management contracts. |
|-----|--------------------------------------------------------------------|

| (4) | Includes impact of foreign exchange on crude oil prices that are presented in U.S. dollars.  This amount does not include a foreign exchange impact relating to natural gas prices as it is presented in Canadian dollars in this sensitivity. The sensitivity is $0.05/share when natural gas revenue is included. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 7 |
|-------------|

|                                   |   | Three months endedDecember 31 |   |   | Twelve months endedDecember 31 |   |
|----------------------------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
| Production                             |   | 2011                          |   |   | 2010                           |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
| Light and medium crude oil (bbl/d)     |   |                          | 27,627 |   |                           |   | 26,455 |   |   |   | 4 |   |   |   | 26,284 |   |   |   | 26,390 |   |   |   | - |   |
| Heavy oil (bbl/d)                      |   |                          | 843    |   |                           |   | 962 |   |   |   | (12 | ) |   |   | 874 |   |   |   | 951 |   |   |   | (8 | ) |
| Condensate (bbl/d)                     |   |                          | 2,219  |   |                           |   | 2,197 |   |   |   | 1 |   |   |   | 2,052 |   |   |   | 1,617 |   |   |   | 27 |   |
| Natural gas (mmcf/d)                   |   |                          | 355.3  |   |                           |   | 311.5 |   |   |   | 14 |   |   |   | 310.6 |   |   |   | 254.2 |   |   |   | 22 |   |
| Natural gas liquids  (bbl/d) |   |                          | 2,114  |   |                           |   | 3,158 |   |   |   | (33 | ) |   |   | 2,444 |   |   |   | 2,628 |   |   |   | (7 | ) |
| Total production (boe/d) (1)           |   |                          | 92,021 |   |                           |   | 84,686 |   |   |   | 9 |   |   |   | 83,416 |   |   |   | 73,954 |   |   |   | 13 |   |
| % Natural gas production               |   |                          | 64     |   |                           |   | 61 |   |   |   | 5 |   |   |   | 62 |   |   |   | 57 |   |   |   | 9 |   |
| % Crude oil and liquids production     |   |                          | 36     |   |                           |   | 39 |   |   |   | (8 | ) |   |   | 38 |   |   |   | 43 |   |   |   | (12 | ) |

| (1) | Reported production for a period may include minor adjustments from previous production periods. |
|-----|--------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 8 |
|-------------|

|                    |   | Three Months Ended December 31, 2011 |   |
|-------------------------|--------|--------------------------------------|--------|
| Production              |   | Total                                |   |   | Oil |   |   | Condensate |   |   | Gas |   |   | NGL |   |
| Core Area(1)            |   | (boe/d)                              |   |   | (bbl/d) |   |   | (bbl/d) |   |   | (mmcf/d) |   |   | (bbl/d) |   |
| NE BC & NW AB       |   |                                 | 44,977 |   |   |   | 648 |   |   |   | 1,397 |   |   |   | 253.2 |   |   |   | 743 |   |
| Northern AB             |   |                                 | 11,307 |   |   |   | 5,068 |   |   |   | 429 |   |   |   | 31.2 |   |   |   | 604 |   |
| Pembina                 |   |                                 | 10,713 |   |   |   | 6,977 |   |   |   | 261 |   |   |   | 18.7 |   |   |   | 360 |   |
| Redwater                |   |                                 | 4,300  |   |   |   | 3,844 |   |   |   | 2 |   |   |   | 1.7 |   |   |   | 162 |   |
| South AB & SW SK(2) |   |                                 | 10,211 |   |   |   | 1,602 |   |   |   | 113 |   |   |   | 49.9 |   |   |   | 177 |   |
| SE SK & MB          |   |                                 | 10,513 |   |   |   | 10,331 |   |   |   | 17 |   |   |   | 0.6 |   |   |   | 68 |   |
| Total                   |   |                                 | 92,021 |   |   |   | 28,470 |   |   |   | 2,219 |   |   |   | 355.3 |   |   |   | 2,114 |   |

|                    |   | Three Months Ended December 31, 2010 |   |
|-------------------------|--------|--------------------------------------|--------|
| Production              |   | Total                                |   |   | Oil |   |   | Condensate |   |   | Gas |   |   | NGL |   |
| Core Area(1)            |   | (boe/d)                              |   |   | (bbl/d) |   |   | (bbl/d) |   |   | (mmcf/d) |   |   | (bbl/d) |   |
| NE BC & NW AB       |   |                                 | 33,816 |   |   |   | 699 |   |   |   | 1,166 |   |   |   | 185.9 |   |   |   | 980 |   |
| Northern AB             |   |                                 | 12,590 |   |   |   | 4,726 |   |   |   | 450 |   |   |   | 40.4 |   |   |   | 678 |   |
| Pembina                 |   |                                 | 9,619  |   |   |   | 6,237 |   |   |   | 302 |   |   |   | 14.6 |   |   |   | 640 |   |
| Redwater                |   |                                 | 4,194  |   |   |   | 3,826 |   |   |   | - |   |   |   | 1.6 |   |   |   | 107 |   |
| South AB & SW SK(2) |   |                                 | 14,704 |   |   |   | 2,455 |   |   |   | 257 |   |   |   | 67.9 |   |   |   | 672 |   |
| SE SK & MB          |   |                                 | 9,763  |   |   |   | 9,474 |   |   |   | 22 |   |   |   | 1.1 |   |   |   | 81 |   |
| Total                   |   |                                 | 84,686 |   |   |   | 27,417 |   |   |   | 2,197 |   |   |   | 311.5 |   |   |   | 3,158 |   |

| (1) | Provincial and directional references: AB is Alberta, BC is British Columbia, SK is Saskatchewan, MB is Manitoba, NE is northeast, NW is northwest, SE is southeast and SW is southwest. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | In prior years, the volumes produced in central Alberta were reported separately from South AB and SW SK. With the disposition of the majority of the properties within central Alberta in the first quarter of 2011, production from these areas has been consolidated. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    |   | Twelve Months Ended December 31, 2011 |   |
|-------------------------|--------|---------------------------------------|--------|
| Production              |   | Total                                 |   |   | Oil |   |   | Condensate |   |   | Gas |   |   | NGL |   |
| Core Area(1)            |   | (boe/d)                               |   |   | (bbl/d) |   |   | (bbl/d) |   |   | (mmcf/d) |   |   | (bbl/d) |   |
| NE BC & NW AB       |   |                                  | 37,054 |   |   |   | 655 |   |   |   | 1,219 |   |   |   | 205.9 |   |   |   | 880 |   |
| Northern AB             |   |                                  | 11,246 |   |   |   | 4,617 |   |   |   | 388 |   |   |   | 34.0 |   |   |   | 576 |   |
| Pembina                 |   |                                  | 10,409 |   |   |   | 6,630 |   |   |   | 305 |   |   |   | 17.7 |   |   |   | 518 |   |
| Redwater                |   |                                  | 4,177  |   |   |   | 3,840 |   |   |   | - |   |   |   | 1.2 |   |   |   | 130 |   |
| South AB & SW SK(2) |   |                                  | 10,521 |   |   |   | 1,628 |   |   |   | 124 |   |   |   | 51.0 |   |   |   | 271 |   |
| SE SK & MB          |   |                                  | 10,009 |   |   |   | 9,788 |   |   |   | 16 |   |   |   | 0.8 |   |   |   | 69 |   |
| Total                   |   |                                  | 83,416 |   |   |   | 27,158 |   |   |   | 2,052 |   |   |   | 310.6 |   |   |   | 2,444 |   |

|                    |   | Twelve Months Ended December 31, 2010 |   |
|-------------------------|--------|---------------------------------------|--------|
| Production              |   | Total                                 |   |   | Oil |   |   | Condensate |   |   | Gas |   |   | NGL |   |
| Core Area(1)            |   | (boe/d)                               |   |   | (bbl/d) |   |   | (bbl/d) |   |   | (mmcf/d) |   |   | (bbl/d) |   |
| NE BC & NW AB       |   |                                  | 23,656 |   |   |   | 686 |   |   |   | 685 |   |   |   | 130.0 |   |   |   | 612 |   |
| Northern AB             |   |                                  | 11,541 |   |   |   | 4,598 |   |   |   | 369 |   |   |   | 35.9 |   |   |   | 599 |   |
| Pembina                 |   |                                  | 9,143  |   |   |   | 5,706 |   |   |   | 248 |   |   |   | 16.2 |   |   |   | 491 |   |
| Redwater                |   |                                  | 4,179  |   |   |   | 3,823 |   |   |   | 12 |   |   |   | 1.3 |   |   |   | 126 |   |
| South AB & SW SK(2) |   |                                  | 14,969 |   |   |   | 2,409 |   |   |   | 277 |   |   |   | 69.4 |   |   |   | 716 |   |
| SE SK & MB          |   |                                  | 10,466 |   |   |   | 10,119 |   |   |   | 26 |   |   |   | 1.4 |   |   |   | 84 |   |
| Total                   |   |                                  | 73,954 |   |   |   | 27,341 |   |   |   | 1,617 |   |   |   | 254.2 |   |   |   | 2,628 |   |

| (1) | Provincial and directional references: AB is Alberta, BC is British Columbia, SK is Saskatchewan, MB is Manitoba, NE is northeast, NW is northwest, SE is southeast and SW is southwest. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | In prior years, the volumes produced in central Alberta were reported separately from South AB and SW SK.  With the disposition of the majority of the properties within central Alberta in the first quarter of 2011, production from these areas has been consolidated. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 9 |
|-------------|

| Sales by product($ millions)                                  |   | Three months endedDecember 31 |   |   | Twelve months endedDecember 31 |   |
|---------------------------------------------------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
|                                                          |   | 2011                          |   |   | 2010                           |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
| Oil                                                           |   |                          | 243.2  |   |                           |   | 192.0 |   |   |   | 27 |   |   |   | 887.2 |   |   |   | 737.0 |   |   |   | 20 |   |
| Condensate                                                    |   |                          | 20.6   |   |                           |   | 15.8 |   |   |   | 30 |   |   |   | 72.0 |   |   |   | 45.6 |   |   |   | 58 |   |
| Natural gas                                                   |   |                          | 112.2  |   |                           |   | 109.6 |   |   |   | 2 |   |   |   | 434.0 |   |   |   | 391.0 |   |   |   | 11 |   |
| NGL                                                           |   |                          | 9.9    |   |                           |   | 11.3 |   |   |   | (12 | ) |   |   | 42.4 |   |   |   | 38.0 |   |   |   | 12 |   |
| Total sales of crude oil, natural gas and natural gas liquids |   |                          | 385.9  |   |                           |   | 328.7 |   |   |   | 17 |   |   |   | 1,435.6 |   |   |   | 1,211.6 |   |   |   | 18 |   |
| Other                                                         |   |                          | 0.9    |   |                           |   | 0.6 |   |   |   | 50 |   |   |   | 2.6 |   |   |   | 2.1 |   |   |   | 24 |   |
| Total sales                                                   |   |                          | 386.8  |   |                           |   | 329.3 |   |   |   | 17 |   |   |   | 1,438.2 |   |   |   | 1,213.7 |   |   |   | 18 |   |

|                                         |   | Three months endedDecember 31 |   |   | Twelve months endedDecember31 |   |
|----------------------------------------------|--------|-------------------------------|--------|--------|-------------------------------|--------|
|                                         |   | 2011                          |   |   | 2010                          |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
| Average Benchmark Prices                     |   |                          |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| AECO natural gas ($/mcf) (1)                 |   |                          | 3.47   |   |                          |   | 3.58 |   |   |   | (3 | ) |   |   | 3.67 |   |   |   | 4.12 |   |   |   | (11 | ) |
| WTI oil (US$/bbl) (2)                        |   |                          | 94.02  |   |                          |   | 85.18 |   |   |   | 10 |   |   |   | 95.14 |   |   |   | 79.55 |   |   |   | 20 |   |
| Cdn$ / US$ exchange rate                     |   |                          | 1.02   |   |                          |   | 1.01 |   |   |   | 1 |   |   |   | 0.99 |   |   |   | 1.03 |   |   |   | (4 | ) |
| WTI oil (Cdn$/bbl)                           |   |                          | 96.21  |   |                          |   | 86.26 |   |   |   | 12 |   |   |   | 94.04 |   |   |   | 81.87 |   |   |   | 15 |   |
| ARC Realized Prices Prior to Hedging         |   |                          |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil ($/bbl)                                  |   |                          | 92.85  |   |                          |   | 76.08 |   |   |   | 22 |   |   |   | 89.51 |   |   |   | 73.85 |   |   |   | 21 |   |
| Condensate ($/bbl)                           |   |                          | 101.13 |   |                          |   | 78.38 |   |   |   | 29 |   |   |   | 96.07 |   |   |   | 77.40 |   |   |   | 24 |   |
| Natural gas ($/mcf)                          |   |                          | 3.43   |   |                          |   | 3.83 |   |   |   | (10 | ) |   |   | 3.83 |   |   |   | 4.21 |   |   |   | (9 | ) |
| NGL ($/bbl)                                  |   |                          | 51.02  |   |                          |   | 38.89 |   |   |   | 31 |   |   |   | 47.53 |   |   |   | 39.57 |   |   |   | 20 |   |
| Total commodity price before hedging ($/boe) |   |                          | 45.58  |   |                          |   | 42.18 |   |   |   | 8 |   |   |   | 47.15 |   |   |   | 44.88 |   |   |   | 5 |   |
| Other ($/boe)                                |   |                          | 0.11   |   |                          |   | 0.08 |   |   |   | 38 |   |   |   | 0.09 |   |   |   | 0.08 |   |   |   | 13 |   |
| Total sales before hedging ($/boe)      |   |                          | 45.69  |   |                          |   | 42.26 |   |   |   | 8 |   |   |   | 47.24 |   |   |   | 44.96 |   |   |   | 5 |   |

| (1) | Represents the AECO Monthly (7a) index. |
|-----|-----------------------------------------|

| (2) | WTI represents posting price of West Texas Intermediate oil. |
|-----|--------------------------------------------------------------|

|   |
|--------|

| Page 10 |
|--------------|

|   |
|--------|

| Page 11 |
|--------------|

| Risk Management Contracts($ millions)              |   | Crude Oil & Liquids |   |   | Natural Gas |   |   | Foreign Currency |   |   | Power |   |   | Interest |   |   | Q4 2011 Total |   |   | Q4 2010 Total |   |
|----------------------------------------------------|--------|-------------------------|--------|--------|-------------|--------|--------|------------------|--------|--------|-------|--------|--------|----------|--------|--------|---------------|--------|--------|---------------|--------|
| Realized gain (loss) on contracts (1)              |   |                    | (47.9  | )      |        |   | 29.0   |             |   |   | 1.2   |   |   |     | 1.7    |   |          |   | -      |          |   |   | (16.0 | ) |   |   | 20.0 |   |
| Unrealized gain (loss)  on contracts (2) |   |                    | (78.5  | )      |        |   | (2.9   | )                |   |   | (0.5  | )      |   |     | 1.8    |   |          |   | -      |          |   |   | (80.1 | ) |   |   | (85.9 | ) |
| (Loss) gain on risk management contracts           |   |                    | (126.4 | )      |        |   | 26.1   |             |   |   | 0.7   |   |   |     | 3.5    |   |          |   | -      |          |   |   | (96.1 | ) |   |   | (65.9 | ) |

| (1) | Realized cash gains and losses represent actual cash settlements or receipts under the respective contracts. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (2) | The unrealized gain (loss) on contracts represents the change in fair value of the contracts during the period. |
|-----|-----------------------------------------------------------------------------------------------------------------|

| Risk Management Contracts($ millions)              |   | Crude Oil & Liquids |   |   | Natural Gas |   |   | Foreign Currency |   |   | Power |   |   | Interest |   |   | YTD 2011Total |   |   | YTD 2010Total |   |
|----------------------------------------------------|--------|-------------------------|--------|--------|-------------|--------|--------|------------------|--------|--------|-------|--------|--------|----------|--------|--------|---------------|--------|--------|---------------|--------|
| Realized gain (loss) on contracts (1)              |   |                    | (37.2  | )      |        |   | 103.9  |             |   |   | 2.2   |   |   |     | 6.0    |   |          |   | 0.9    |          |   |   | 75.8 |   |   |   | 65.4 |   |
| Unrealized gain (loss)  on contracts (2) |   |                    | 14.1   |   |        |   | (40.4  | )                |   |   | 1.0   |   |   |     | 8.7    |   |          |   | 0.1    |          |   |   | (16.5 | ) |   |   | 28.2 |   |
| (Loss) gain on risk management contracts           |   |                    | (23.1  | )      |        |   | 63.5   |             |   |   | 3.2   |   |   |     | 14.7   |   |          |   | 1.0    |          |   |   | 59.3 |   |   |   | 93.6 |   |

| (1) | Realized cash gains and losses represent actual cash settlements or receipts under the respective contracts. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (2) | The unrealized gain (loss) on contracts represents the change in fair value of the contracts during the period. |
|-----|-----------------------------------------------------------------------------------------------------------------|

| Summary of Hedge Positions (1)As at December 31, 2011 |   |    |   |   |
|-------------------------------------------------------|--------|---------|--------|--------|
|                                                  |   | 2012    |   |   | 2013 |   |
| Crude Oil (2)                                         |   | US$/bbl |   |   | bbl/day |   |   | US$/bbl |   |   | bbl/day |   |
|    Bought Call                         |   |    | 116.25 |   |   |   | 4,000 |   |   |   | - |   |   |   | - |   |
|    Sold Call                           |   |    | 91.11  |   |   |   | 18,000 |   |   |   | 102.51 |   |   |   | 7,984 |   |
|    Bought Put                          |   |    | 90.00  |   |   |   | 18,000 |   |   |   | 92.51 |   |   |   | 7,984 |   |
|    Sold Put                            |   |    | 63.44  |   |   |   | 16,000 |   |   |   | 63.33 |   |   |   | 6,000 |   |
| Natural Gas (3)                                       |   | C$/mcf  |   |   | mcf/day |   |   | C$/mcf |   |   | mcf/day |   |
|    Swap                                |   |    | 3.66   |   |   |   | 123,456 |   |   |   | - |   |   |   | - |   |

| (1) | The prices and volumes noted above represent averages for several contracts and the average price for the portfolio of options listed above does not have the same payoff profile as the individual option contracts. Viewing the average price of a group of options is purely for indicative purposes. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For 2012 and 2013, all put positions settle against the monthly average WTI price, providing protection against monthly volatility.  As disclosed in Note 16 of the Consolidated Financial Statements, calls have been sold against either the monthly average or the annual average WTI price.  In the case of settlements, ARC will only have a negative settlement if prices average above the strike price for an entire year providing ARC with greater potential upside price participation for individual months.  Volumes are based on a full year.  Refer to Note 16 of the Consolidated Financial Statements for a complete list of ARC’s annually settled calls. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The natural gas price shown translates all NYMEX positions to an AECO equivalent price respecting offsetting basis positions and the period end foreign exchange rate.  The equivalent NYMEX price hedged would approximate a fixed sales price of  US$4.20 per mmbtu for 2012. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If the market price is between $90.00 and $91.11 per barrel, ARC will receive the market price on 18,000 barrels per day. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | If the market price is between $90.00 and $63.44 per barrel, ARC will receive the market price on 18,000 barrels per day. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 12 |
|--------------|

|   | · | If the market price is below $63.44 per barrel, ARC will receive $90.00 per barrel less the difference between $63.44 per barrel and the market price on 18,000 barrels per day.  For example, if the market price is at $55 per barrel, ARC will receive $76.56 on 16,000 barrels per day and $90.00 on 2,000 barrels per day. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If the market price is between $91.11 per barrel and $116.25 per barrel, ARC will receive $91.11 per barrel on 18,000 barrels per day. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If the market price is above $116.25 per barrel, ARC will receive the market price less the difference between $116.25 and $91.11 per barrel on 4,000 barrels per day.  For example, if the market price is at $130 per barrel, ARC will receive $104.86 on 4,000 barrels per day and $91.11 on 14,000 barrels per day. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Netbacks($ per boe)      |   | Crude Oil($/bbl) |   |   | Heavy Oil($/bbl) |   |   | Condensate($/bbl) |   |   | Natural Gas($/mcf) |   |   | NGL($/bbl) |   |   | Q4 2011 Total($/boe) |   |   | Q4 2010 Total($/boe) |   |
|--------------------------|--------|------------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|--------------------|--------|--------|------------|--------|--------|----------------------|--------|--------|----------------------|--------|
| Average sales price      |   |             | 93.22  |   |             |   | 80.60  |              |   |   | 101.13             |   |   |       | 3.43   |   |                 |   | 51.02  |                 |   |   | 45.58 |   |   |   | 42.18 |   |
| Other                    |   |             | -      |   |             |   | -      |              |   |   | -                  |   |   |       | -      |   |                 |   | -      |                 |   |   | 0.11 |   |   |   | 0.08 |   |
| Total sales              |   |             | 93.22  |   |             |   | 80.60  |              |   |   | 101.13             |   |   |       | 3.43   |   |                 |   | 51.02  |                 |   |   | 45.69 |   |   |   | 42.26 |   |
| Royalties                |   |             | (16.30 | )      |             |   | (8.17  | )                 |   |   | (30.32             | )      |   |       | (0.41  | )      |                 |   | (14.26 | )                    |   |   | (7.60 | ) |   |   | (6.03 | ) |
| Transportation           |   |             | (0.61  | )      |             |   | (1.74  | )                 |   |   | (0.32              | )      |   |       | (0.24  | )      |                 |   | (0.70  | )                    |   |   | (1.14 | ) |   |   | (1.08 | ) |
| Operating costs (1)      |   |             | (16.13 | )      |             |   | (20.28 | )                 |   |   | (6.67              | )      |   |       | (1.05  | )      |                 |   | (5.88  | )                    |   |   | (9.40 | ) |   |   | (9.01 | ) |
| Netback prior to hedging |   |             | 60.18  |   |             |   | 50.41  |              |   |   | 63.82              |   |   |       | 1.73   |   |                 |   | 30.18  |                 |   |   | 27.55 |   |   |   | 26.14 |   |
| Hedging gain (loss) (2)  |   |             | (3.82  | )      |             |   | -      |              |   |   | -                  |   |   |       | 0.89   |   |                 |   | -      |                 |   |   | 2.28 |   |   |   | 2.50 |   |
| Netback after hedging    |   |             | 56.36  |   |             |   | 50.41  |              |   |   | 63.82              |   |   |       | 2.62   |   |                 |   | 30.18  |                 |   |   | 29.83 |   |   |   | 28.64 |   |
| % of Total               |   |             | 57     | %      |             |   | 2      | %                 |   |   | 5                  | %      |   |       | 34     | %      |                 |   | 2      | %                    |   |   | 100 | % |   |   | 100 | % |

| (1) | Operating expenses are composed of direct costs incurred to operate oil and gas wells. A number of assumptions have been made in allocating these costs between crude oil, heavy oil, condensate, natural gas and natural gas liquids production. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Hedging gain includes realized cash gains on risk management contracts plus a reversal for unrealized losses on risk management contracts that relate to 2011 production that have been recognized in netback calculations in prior quarters. Foreign exchange, power and interest risk management contracts are excluded from the netback calculation. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Netbacks($ per boe)                |   | Crude Oil($/bbl) |   |   | Heavy Oil($/bbl) |   |   | Condensate($/bbl) |   |   | Natural Gas($/mcf) |   |   | NGL($/bbl) |   |   | 2011 Total($/boe) |   |   | 2010 Total($/boe) |   |
|------------------------------------|--------|------------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|--------------------|--------|--------|------------|--------|--------|-------------------|--------|--------|-------------------|--------|
| Average sales price                |   |             | 90.05  |   |             |   | 73.29  |              |   |   | 96.07              |   |   |       | 3.83   |   |              |   | 47.53  |              |   |   | 47.15 |   |   |   | 44.88 |   |
| Other                              |   |             | -      |   |             |   | -      |              |   |   | -                  |   |   |       | -      |   |              |   | -      |              |   |   | 0.09 |   |   |   | 0.08 |   |
| Total sales                        |   |             | 90.05  |   |             |   | 73.29  |              |   |   | 96.07              |   |   |       | 3.83   |   |              |   | 47.53  |              |   |   | 47.24 |   |   |   | 44.96 |   |
| Royalties                          |   |             | (15.67 | )      |             |   | (8.37  | )                 |   |   | (26.72             | )      |   |       | (0.31  | )      |              |   | (12.67 | )                 |   |   | (7.20 | ) |   |   | (7.14 | ) |
| Transportation                     |   |             | (0.57  | )      |             |   | (1.78  | )                 |   |   | (0.29              | )      |   |       | (0.26  | )      |              |   | (0.45  | )                 |   |   | (1.18 | ) |   |   | (1.10 | ) |
| Operating costs (1)                |   |             | (15.98 | )      |             |   | (16.80 | )                 |   |   | (7.36              | )      |   |       | (1.07  | )      |              |   | (10.52 | )                 |   |   | (9.70 | ) |   |   | (9.70 | ) |
| Netback prior to hedging           |   |             | 57.83  |   |             |   | 46.34  |              |   |   | 61.70              |   |   |       | 2.19   |   |              |   | 23.89  |              |   |   | 29.16 |   |   |   | 27.02 |   |
| Hedging gain (loss)  (2) |   |             | (3.87  | )      |             |   | -      |              |   |   | -                  |   |   |       | 0.92   |   |              |   | -      |              |   |   | 2.18 |   |   |   | 2.20 |   |
| Netback after hedging              |   |             | 53.96  |   |             |   | 46.34  |              |   |   | 61.70              |   |   |       | 3.11   |   |              |   | 23.89  |              |   |   | 31.34 |   |   |   | 29.22 |   |
| % of Total                         |   |             | 54     | %      |             |   | 2      | %                 |   |   | 5                  | %      |   |       | 37     | %      |              |   | 2      | %                 |   |   | 100 | % |   |   | 100 | % |

| (1) | Operating expenses are composed of direct costs incurred to operate oil and gas wells. A number of assumptions have been made in allocating these costs between oil, heavy oil, condensate, natural gas and natural gas liquids production. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Foreign exchange, power and interest risk management contracts are excluded from the netback calculation. |
|-----|-----------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 13 |
|--------------|

|   |
|--------|

| Page 14 |
|--------------|

|                               |   | Future Estimated Corporate Royalty Rate |   |
|------------------------------------|--------|-----------------------------------------|--------|
| Edmonton posted oil (Cdn$/bbl) (1) |   | $                                       | 80.00  |   |   | $ | 80.00 |   |   | $ | 90.00 |   |   | $ | 90.00 |   |   | $ | 100.00 |   |   | $ | 100.00 |   |
| AECO natural gas (Cdn$/GJ) (1)     |   | $                                       | 2.50   |   |   | $ | 3.50 |   |   | $ | 2.50 |   |   | $ | 3.50 |   |   | $ | 2.50 |   |   | $ | 3.50 |   |
| Corporate Royalty Rate (2)(3)      |   |                                    | 13.7   | % |   |   | 14.1 | % |   |   | 14.8 | % |   |   | 15.1 | % |   |   | 15.7 | % |   |   | 15.9 | % |

| (1) | Canadian dollar denominated prices before quality differentials. |
|-----|------------------------------------------------------------------|

| (2) | Estimated corporate royalty rates based on guidelines that are subject to change. |
|-----|-----------------------------------------------------------------------------------|

| (3) | Corporate royalty rate includes Crown, Freehold and Gross Override royalties for all of ARC’s operating jurisdictions. |
|-----|------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | Three months endedDecember 31 |   |   | Year endedDecember 31 |   |
|-----------------------------------------------------------------------|--------|-------------------------------|--------|--------|-----------------------|--------|
| G&A and Incentive Compensation Expense($ millions except per boe) |   | 2011                          |   |   | 2010                  |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
| G&A expenses                                                      |   |                          | 22.6   |   |                  |   | 19.2 |   |   |   | 18 |   |   |   | 81.9 |   |   |   | 75.0 |   |   |   | 9 |   |
| Operating recoveries                                                  |   |                          | (8.8   | )      |                  |   | (4.3 | ) |   |   | 105 |   |   |   | (26.1 | ) |   |   | (15.9 | ) |   |   | 64 |   |
| G&A expenses before Long-Term Incentive Plans                     |   |                          | 13.8   |   |                  |   | 14.9 |   |   |   | (7 | ) |   |   | 55.8 |   |   |   | 59.1 |   |   |   | (6 | ) |
| G&A – Long-Term Incentive Plans                             |   |                          | 4.8    |   |                  |   | 19.8 |   |   |   | (76 | ) |   |   | 24.3 |   |   |   | 32.5 |   |   |   | (25 | ) |
| Total G&A and incentive compensation expense                      |   |                          | 18.6   |   |                  |   | 34.7 |   |   |   | (46 | ) |   |   | 80.1 |   |   |   | 91.6 |   |   |   | (13 | ) |
| Total G&A and incentive compensation expense per boe              |   |                          | 2.19   |   |                  |   | 4.45 |   |   |   | (51 | ) |   |   | 2.63 |   |   |   | 3.39 |   |   |   | (22 | ) |

|   |
|--------|

| Page 15 |
|--------------|

| RSU & PSU Plan(number of units, thousands) |   | RSUs   |   |   | PSUs   |   |   | TotalRSUs and PSUs |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------------------|--------|
| Balance, beginning of period                   |   |   | 1,017  |   |   |   | 1,301  |               |   |   | 2,318 |   |
| Granted                                        |   |   | 381    |   |   |   | 522    |               |   |   | 903 |   |
| Distributed                                    |   |   | (474   | )      |   |   | (304   | )                  |   |   | (778 | ) |
| Forfeited                                      |   |   | (72    | )      |   |   | (74    | )                  |   |   | (146 | ) |
| Balance, end of period (1)                     |   |   | 852    |   |   |   | 1,445  |               |   |   | 2,297 |   |

| (1) | Based on underlying units before performance multiplier. |
|-----|----------------------------------------------------------|

| Value of RSU & PSU Plan as atDecember 31, 2011 |   | Performance multiplier |   |
|----------------------------------------------------|--------|------------------------|--------|
| (units thousands and $ millions except per unit)   |   |                   | -      |   |   |   | 1.0 |   |   |   | 2.0 |   |
| Estimated units to vest                            |   |                   |   |   |   |   |   |   |   |   |   |   |
| RSUs                                               |   |                   | 852    |   |   |   | 852 |   |   |   | 852 |   |
| PSUs                                               |   |                   | -      |   |   |   | 1,445 |   |   |   | 2,890 |   |
| Total units (1)                                    |   |                   | 852    |   |   |   | 2,297 |   |   |   | 3,742 |   |
| Share price (2)                                    |   |                   | 25.10  |   |   |   | 25.10 |   |   |   | 25.10 |   |
| Value of RSU & PSU Plan upon vesting(3)        |   |                   | 22.9   |   |   |   | 62.3 |   |   |   | 101.6 |   |
| 2012                                               |   |                   | 12.7   |   |   |   | 27.9 |   |   |   | 43.1 |   |
| 2013                                               |   |                   | 7.1    |   |   |   | 18.3 |   |   |   | 29.4 |   |
| 2014                                               |   |                   | 3.1    |   |   |   | 16.1 |   |   |   | 29.1 |   |

| (1) | Includes additional estimated units to be issued under the RSU & PSU Plan for accrued dividends. |
|-----|------------------------------------------------------------------------------------------------------|

| (2) | Values will fluctuate over the vesting period based on the volatility of the underlying share price. Assumes a future share price of $25.10. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Upon vesting, a cash payment is made for the value of the share units, equivalent to the current market price of the underlying common shares plus accrued dividends. Payments are made on vesting dates in March and September of each year. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 16 |
|--------------|

|                                                |   | Three months endedDecember 31 |   |   | Twelve months endedDecember 31 |   |
|-----------------------------------------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
| Foreign Exchange Gains/Losses($ millions)           |   | 2011                          |   |   | 2010                           |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
| Unrealized (loss) gain on US denominated debt       |   |                          | 8.3    |   |                           |   | 10.3 |   |   |   | (19 | ) |   |   | (13.0 | ) |   |   | (6.0 | ) |   |   | 117 |   |
| Realized gain on US denominated debt                |   |                          | 1.1    |   |                           |   | 4.6 |   |   |   | (76 | ) |   |   | 3.3 |   |   |   | 32.9 |   |   |   | (90 | ) |
| Realized (loss) gain on US denominated transactions |   |                          | (0.6   | )      |                           |   | 0.2 |   |   |   | (400 | ) |   |   | (0.8 | ) |   |   | (0.1 | ) |   |   | 700 |   |
| Total foreign exchange (loss) gain                  |   |                          | 8.8    |   |                           |   | 15.1 |   |   |   | (42 | ) |   |   | (10.5 | ) |   |   | 26.8 |   |   |   | (139 | ) |

|   |
|--------|

| Page 17 |
|--------------|

| Income Tax Pool type($ millions)       | December 31, 2011 |  Annual deductibility                   |
|----------------------------------------|-------------------|----------------------------------------------|
| Canadian Oil and Gas Property Expense  | 876.8             | 10% declining balance                        |
| Canadian Development Expense           | 678.0             | 30% declining balance                        |
| Canadian Exploration Expense           | 103.6             | 100%                                         |
| Undepreciated Capital Cost             | 690.0             | Primarily 25% declining balance              |
| Non-Capital Losses                     | 290.7             | 100%                                         |
| Research and Experimental Expenditures | 28.7              | 100%                                         |
| Other                                  | 19.7              | Various rates, 7% declining balance to 20%   |
| Total Federal Tax Pools                | 2,687.5           |                                         |
| Additional Alberta Tax Pools           | 177.6             | Various rates, 25% declining balance to 100% |

|   |
|--------|

| Page 18 |
|--------------|

|                                             |   | Three months endedDecember 31 |   |   | Twelve months endedDecember 31 |   |
|--------------------------------------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
| DD&A Rate($ millions except per boe amounts) |   | 2011                          |   |   | 2010                           |   |   | % Change |   |   | 2011 |   |   | 2010 |   |   | % Change |   |
| Depletion of oil and gas assets                  |   |                          | 121.3  |   |                           |   | 105.9 |   |   |   | 15 |   |   |   | 431.6 |   |   |   | 374.9 |   |   |   | 15 |   |
| Depreciation of fixed assets                     |   |                          | 1.5    |   |                           |   | 1.3 |   |   |   | 15 |   |   |   | 5.7 |   |   |   | 3.1 |   |   |   | 84 |   |
| Impairment charges (net of recoveries)           |   |                          | 55.3   |   |                           |   | 30.7 |   |   |   | 80 |   |   |   | 71.9 |   |   |   | 30.7 |   |   |   | 134 |   |
| Total DD&A and impairment                    |   |                          | 178.1  |   |                           |   | 137.9 |   |   |   | 29 |   |   |   | 509.2 |   |   |   | 408.7 |   |   |   | 25 |   |
| DD&A rate per boe, before impairment         |   |                          | 14.51  |   |                           |   | 13.76 |   |   |   | 5 |   |   |   | 14.36 |   |   |   | 14.00 |   |   |   | 3 |   |
| DD&A rate per boe                            |   |                          | 21.04  |   |                           |   | 17.70 |   |   |   | 19 |   |   |   | 16.72 |   |   |   | 15.14 |   |   |   | 10 |   |

|                                            |   | Three Months Ended December 31 |   |
|-------------------------------------------------|--------|--------------------------------|--------|
|                                            |   | 2011                           |   |   | 2010 |   |   |   |   |
| Capital Expenditures($ millions)                |   | E&E                        |   |   | PP&E |   |   | Total |   |   | E&E |   |   | PP&E |   |   | Total |   |   | % Change |   |
| Geological and geophysical                      |   |                           | 3.2    |   |   |   | 1.7 |   |   |   | 4.9 |   |   |   | (0.1 | ) |   |   | 5.7 |   |   |   | 5.6 |   |   |   | (13 | ) |
| Drilling and completions                        |   |                           | 21.5   |   |   |   | 126.0 |   |   |   | 147.5 |   |   |   | 1.1 |   |   |   | 99.3 |   |   |   | 100.4 |   |   |   | 47 |   |
| Plant and facilities                            |   |                           | 0.1    |   |   |   | 38.4 |   |   |   | 38.5 |   |   |   | - |   |   |   | 42.9 |   |   |   | 42.9 |   |   |   | (10 | ) |
| Undeveloped land purchased at crown land sales  |   |                           | 0.3    |   |   |   | 3.2 |   |   |   | 3.5 |   |   |   | - |   |   |   | 6.9 |   |   |   | 6.9 |   |   |   | (50 | ) |
| Other                                           |   |                           | -      |   |   |   | 0.6 |   |   |   | 0.6 |   |   |   | - |   |   |   | 3.3 |   |   |   | 3.3 |   |   |   | (82 | ) |
| Total capital expenditures                      |   |                           | 25.1   |   |   |   | 169.9 |   |   |   | 195.0 |   |   |   | 1.0 |   |   |   | 158.1 |   |   |   | 159.1 |   |   |   | 23 |   |
| Acquisitions (1)                                |   |                           | 2.5    |   |   |   | 20.4 |   |   |   | 22.9 |   |   |   | - |   |   |   | 1.2 |   |   |   | 1.2 |   |   |   | 1808 |   |
| Dispositions (2)                                |   |                           | -      |   |   |   | 1.7 |   |   |   | 1.7 |   |   |   | - |   |   |   | (0.4 | ) |   |   | (0.4 | ) |   |   | (525 | ) |
| Corporate acquisition                           |   |                           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total capital expenditures and net acquisitions |   |                           | 27.6   |   |   |   | 192.0 |   |   |   | 219.6 |   |   |   | 1.0 |   |   |   | 158.9 |   |   |   | 159.9 |   |   |   | 37 |   |

| (1) | Value is net of post-closing adjustments. |
|-----|-------------------------------------------|

| (2) | Represents proceeds and adjustments to proceeds from divestitures. |
|-----|--------------------------------------------------------------------|

|   |
|--------|

| Page 19 |
|--------------|

|                                            |   | Twelve Months Ended December 31 |   |
|-------------------------------------------------|--------|---------------------------------|--------|
|                                            |   | 2011                            |   |   | 2010 |   |   |   |   |
| Capital Expenditures($ millions)                |   | E&E                         |   |   | PP&E |   |   | Total |   |   | E&E |   |   | PP&E |   |   | Total |   |   | % Change |   |
| Geological and geophysical                      |   |                            | 8.6    |   |   |   | 17.3 |   |   |   | 25.9 |   |   |   | 2.5 |   |   |   | 13.5 |   |   |   | 16.0 |   |   |   | 62 |   |
| Drilling and completions                        |   |                            | 43.5   |   |   |   | 413.0 |   |   |   | 456.5 |   |   |   | 5.6 |   |   |   | 352.9 |   |   |   | 358.5 |   |   |   | 27 |   |
| Plant and facilities                            |   |                            | 0.2    |   |   |   | 164.9 |   |   |   | 165.1 |   |   |   | - |   |   |   | 131.4 |   |   |   | 131.4 |   |   |   | 26 |   |
| Undeveloped land purchased at crown land sales  |   |                            | 54.4   |   |   |   | 20.5 |   |   |   | 74.9 |   |   |   | 44.0 |   |   |   | 16.9 |   |   |   | 60.9 |   |   |   | 23 |   |
| Other                                           |   |                            | -      |   |   |   | 3.6 |   |   |   | 3.6 |   |   |   | - |   |   |   | 24.1 |   |   |   | 24.1 |   |   |   | (85 | ) |
| Total capital expenditures                      |   |                            | 106.7  |   |   |   | 619.3 |   |   |   | 726.0 |   |   |   | 52.1 |   |   |   | 538.8 |   |   |   | 590.9 |   |   |   | 23 |   |
| Acquisitions (1)                                |   |                            | 15.9   |   |   |   | 41.2 |   |   |   | 57.1 |   |   |   | - |   |   |   | 8.9 |   |   |   | 8.9 |   |   |   | 542 |   |
| Dispositions (2)                                |   |                            | -      |   |   |   | (168.4 | ) |   |   | (168.4 | ) |   |   | - |   |   |   | (3.9 | ) |   |   | (3.9 | ) |   |   | 4218 |   |
| Corporate acquisition                           |   |                            | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 652.1 |   |   |   | 652.1 |   |   |   | (100 | ) |
| Total capital expenditures and net acquisitions |   |                            | 122.6  |   |   |   | 492.1 |   |   |   | 614.7 |   |   |   | 52.1 |   |   |   | 1,195.9 |   |   |   | 1,248.0 |   |   |   | (51 | ) |

| (1) | Value is net of post-closing adjustments. |
|-----|-------------------------------------------|

| (2) | Represents proceeds and adjustments to proceeds from divestitures. |
|-----|--------------------------------------------------------------------|

| Source of Funding of Capital Expenditures and Net Acquisitions |   |
|----------------------------------------------------------------|--------|
| ($ millions)                                                   |   |   |   |   |   |   |
|                                                           |   | Three Months Ended December 31, 2011 |   |   | Three Months Ended December 31, 2010 |   |
|                                                           |   | Capital Expenditures |   |   | Net Acquisitions |   |   | Total Expenditures |   |   | Capital Expenditures |   |   | Net Acquisitions |   |   | Total Expenditures |   |
| Expenditures                                                   |   |   | 195.0 |   |   |   | 24.6 |   |   |   | 219.6 |   |   |   | 159.1 |   |   |   | 0.8 |   |   |   | 159.9 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Funds from operations(1)                                       |   |   | 71 | % |   |   | - |   |   |   | 64 | % |   |   | 66 | % |   |   | - |   |   |   | 65 | % |
| Proceeds from DRIP                                             |   |   | 14 | % |   |   | - |   |   |   | 12 | % |   |   | 15 | % |   |   | - |   |   |   | 15 | % |
| Debt (excess funding)                                          |   |   | 15 | % |   |   | 100 | % |   |   | 24 | % |   |   | 19 | % |   |   | 100 | % |   |   | 20 | % |
|                                                           |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |

| (1) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 20 |
|--------------|

| Source of Funding of Capital Expenditures and Net Acquisitions |   |
|----------------------------------------------------------------|--------|
| ($ millions)                                                   |   |   |   |   |   |   |
|                                                           |   | Twelve Months Ended December 31, 2011 |   |   | Twelve Months Ended December 31, 2010 |   |
|                                                           |   | Capital Expenditures |   |   | Net Acquisitions |   |   | Total Expenditures |   |   | Capital Expenditures |   |   | Net Acquisitions |   |   | Total Expenditures |   |
| Expenditures                                                   |   |   | 726.0 |   |   |   | (111.3 | ) |   |   | 614.7 |   |   |   | 590.9 |   |   |   | 657.1 |   |   |   | 1,248.0 |   |
| Funds from operations(1)                                       |   |   | 68 | % |   |   | - |   |   |   | 81 | % |   |   | 60 | % |   |   | - |   |   |   | 29 | % |
| Proceeds from DRIP                                             |   |   | 15 | % |   |   | - |   |   |   | 17 | % |   |   | 13 | % |   |   | - |   |   |   | 6 | % |
| Debt (excess funding)                                          |   |   | 17 | % |   |   | 100 | % |   |   | 2 | % |   |   | 27 | % |   |   | 100 | % |   |   | 65 | % |
|                                                           |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |

| (1) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Capital Structure and Liquidity($ millions except per cent and ratio amounts) |   | December 31, 2011 |    |   | December 31, 2010 |   |
|-------------------------------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
| Long-term debt(1)                                                             |   |              | 761.7   |   |              |   | 803.5 |   |
| Working capital deficit (2)                                                   |   |              | 148.0   |   |              |   | 67.5 |   |
| Net debt obligations (3)                                                      |   |              | 909.7   |   |              |   | 871.0 |   |
| Market value of common shares (4)                                             |   |              | 7,251.4 |   |              |   | 7,226.6 |   |
| Total capitalization (5)                                                      |   |              | 8,161.1 |   |              |   | 8,097.6 |   |
| Net debt as a percentage of total capitalization                              |   |              | 11.1    | %      |              |   | 10.8 | % |
| Net debt to funds from operations(3)                                          |   |              | 1.1     |   |              |   | 1.3 |   |

| (1) | Includes a current portion of long-term debt of $40.5 million and $15.7 million at December 31, 2011 and December 31, 2010, respectively. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Working capital deficit is calculated as current liabilities less the current assets as they appear on the Consolidated Balance Sheets, and excludes current unrealized amounts pertaining to risk management contracts, assets held for sale and asset retirement obligations contained within liabilities associated with assets held for sale. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Calculated using the total common shares outstanding at December 31, 2011 multiplied by the closing share price of $25.10 at December 31, 2011 (closing share price of $25.41 at December 31, 2010). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Total capitalization as presented does not have any standardized meaning prescribed by Canadian GAAP and therefore it may not be comparable with the calculation of similar measures for other entities. Total capitalization is not intended to represent the total funds from equity and debt received by ARC.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 21 |
|--------------|

|   | · | Long-term debt and letters of credit not to exceed three times annualized net income before non-cash items and interest expense; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | Long-term debt, letters of credit, and subordinated debt not to exceed four times annualized net income before non-cash items and interest expense; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Long-term debt and letters of credit not to exceed 50 per cent of the book value of Shareholders’ equity and long-term debt, letters of credit and subordinated debt. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 22 |
|--------------|

|   | · | To maintain a dividend policy that, in normal times, in the opinion of management and the Board of Directors, is sustainable for a minimum period of six months after factoring in the impact of current commodity prices on funds from operations. ARC’s objective is to normalize the effect of volatility of commodity prices rather than to pass that volatility onto shareholders in the form of fluctuating monthly dividends. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To ensure that ARC’s financial flexibility is maintained by a review of ARC’s level of debt to equity and debt to funds from operations. The use of funds from operations and proceeds from equity offerings to fund capital development activities reduces the need to use debt to finance these expenditures. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |   | Payments Due by Period |   |
|---------------------------------------|--------|------------------------|--------|
|  ($ millions)                    |   | 1 year                 |   |   | 2–3 years |   |   | 4-5 years |   |   | Beyond 5 years |   |   | Total |   |
| Debt repayments (1)                   |   |                   | 44.4   |   |   |   | 80.9 |   |   |   | 408.2 |   |   |   | 228.2 |   |   |   | 761.7 |   |
| Interest payments (2)                 |   |                   | 24.7   |   |   |   | 42.2 |   |   |   | 32.1 |   |   |   | 38.7 |   |   |   | 137.7 |   |
| Reclamation fund contributions (3)    |   |                   | 4.3    |   |   |   | 7.7 |   |   |   | 6.7 |   |   |   | 57.5 |   |   |   | 76.2 |   |
| Purchase commitments                  |   |                   | 33.6   |   |   |   | 42.1 |   |   |   | 12.8 |   |   |   | 5.0 |   |   |   | 93.5 |   |
| Transportation commitments            |   |                   | 33.9   |   |   |   | 60.6 |   |   |   | 36.4 |   |   |   | 5.9 |   |   |   | 136.8 |   |
| Operating leases                      |   |                   | 11.1   |   |   |   | 18.5 |   |   |   | 16.1 |   |   |   | 61.3 |   |   |   | 107.0 |   |
| Risk management contract premiums (4) |   |                   | 0.8    |   |   |   | 1.7 |   |   |   | - |   |   |   | - |   |   |   | 2.5 |   |
| Total contractual obligations         |   |                   | 152.8  |   |   |   | 253.7 |   |   |   | 512.3 |   |   |   | 396.6 |   |   |   | 1,315.4 |   |

|   |
|--------|

| Page 23 |
|--------------|

|   | · | estimated revenues, royalties and operating costs on production as at a specific reporting date but for which actual revenues and costs have not yet been received; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimated capital expenditures on projects that are in progress; |
|--------|--------|------------------------------------------------------------------|

|   | · | estimated depletion, depreciation and amortization charges that are based on estimates of oil and gas reserves that ARC expects to recover in the future; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimated fair values of derivative contracts that are subject to fluctuation depending upon the underlying commodity prices and foreign exchange rates; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimated value of asset retirement obligations that are dependent upon estimates of future costs and timing of expenditures |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimated future recoverable value of property, plant and equipment and goodwill and any associated impairment charges or recoveries. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimated compensation expense under ARC’s PSU plan that is based on an adjustment to the final number of PSU awards that eventually vest based on a performance multiplier; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimated deferred income tax assets and liabilities based on current tax interpretations, regulations and legislation that is subject to change. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 24 |
|--------------|

|   |
|--------|

| Page 25 |
|--------------|

|   |
|--------|

| Page 26 |
|--------------|

|   | · | availability of processing capacity; |
|--------|--------|--------------------------------------|

|   | · | availability and proximity of pipeline capacity; |
|--------|--------|--------------------------------------------------|

|   | · | availability of storage capacity; |
|--------|--------|-----------------------------------|

|   | · | supply of and demand for oil and natural gas; |
|--------|--------|-----------------------------------------------|

|   | · | availability of alternative fuel sources; |
|--------|--------|-------------------------------------------|

|   | · | effects of inclement weather; |
|--------|--------|-------------------------------|

|   | · | availability of drilling and related equipment; |
|--------|--------|-------------------------------------------------|

|   | · | unexpected cost increases; |
|--------|--------|----------------------------|

|   | · | accidental events; |
|--------|--------|--------------------|

|   | · | changes in regulations; |
|--------|--------|-------------------------|

|   | · | availability and productivity of skilled labour; and |
|--------|--------|------------------------------------------------------|

|   | · | regulation of the oil and natural gas industry by various levels of government and governmental agencies. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 27 |
|--------------|

|   | · | Property, Plant and Equipment (“PP&E”) – ARC has applied the exemption provided under IFRS 1 to set its deemed cost of its oil and natural gas PP&E on the date of transition to IFRS to be equal to the carrying value of these assets under Canadian GAAP at January 1, 2010.  The total carrying value of ARC’s PP&E was allocated among seven cash generating units (“CGUs”) based on their respective proved plus probable reserve values at January 1, 2010.  These CGUs are aligned with the major geographic regions in which ARC operates and are subject to change as a result of significant acquisition or disposition activity.  In early 2011, upon completion of a disposition of certain non-core assets, ARC reduced its number of CGUs to six. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Business Combinations – IFRS 1 provides an optional exemption to the requirement to retrospectively restate any business combinations that have previously been recorded under Canadian GAAP.  Accordingly, ARC has not recorded any adjustments to retrospectively restate any of its business combinations that have occurred prior to January 1, 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Leases – IFRS 1 provides an exemption from the requirements of IFRIC 4 – Determining Whether an Arrangement contains a lease in that it does not require an entity to reassess contracts |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Re-classification of Exploration and Evaluation (“E&E”) expenditures from PP&E – Upon transition to IFRS, ARC reclassified all assets that it determined to be in the E&E stage from PP&E to a separate line item on the Consolidated Balance Sheets. E&E assets consist of the carrying value of certain undeveloped land that relates to exploration properties and associated capital expenditures leading to the establishment of reserves that are technically feasible and commercially viable. E&E assets are not amortized and must be assessed for impairment when indicators suggest the possibility of impairment as well as upon transition to PP&E. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| Page 28 |
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|   | · | Calculation of depletion expense for PP&E assets – Upon transition to IFRS, ARC has chosen to calculate depletion using a reserve base of proved plus probable reserves, as compared to the Canadian GAAP requirement to base depletion expense on proved reserves only.  ARC made this accounting policy selection on the basis that proved plus probable reserves is thought to be more reflective of the expected useful life of the underlying asset than proved reserves alone. ARC has determined that its total DD&A expense has been reduced by $42.5 million for the year ended December 31, 2010 as a result of applying this new accounting policy. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Impairment of PP&E assets – Canadian GAAP historically used a two-step approach to impairment testing;  first comparing asset carrying values with undiscounted future cash flows to determine whether an impairment exists, and then measuring impairment by comparing asset carrying values to their fair value (which is calculated using discounted cash flows).  Under Canadian GAAP, ARC included all its petroleum and natural gas assets in one impairment test. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | ARO – Under IFRS, ARC is required to revalue its entire liability for asset retirement costs at each balance sheet date using a current liability-specific discount rate.  Under Canadian GAAP, obligations are discounted using a credit-adjusted risk-free rate and, once recorded, the ARO is not adjusted for future changes in discount rates. At January 1, 2010 ARC’s total of its ARO was increased $148.2 million to $298.1 million as the liability was revalued to reflect the estimated risk-free rate of interest at that time of 4.08 per cent.  As a result of this change, ARC’s deferred tax liability was decreased by $36.9 million and the net offset was recorded as a reduction to deficit. ARC’s net income was decreased by $2.7 million for the year ended December 31, 2010 as a result of an increased amount of accretion charged on its ARO under IFRS. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Exchangeable shares – Under IFRS, ARC’s exchangeable shares met the criteria to be considered a puttable financial instrument and were classified as a current financial liability. They have been recorded on the Consolidated Balance Sheet at their fair value with any changes being recorded in the Consolidated Income Statement. At January 1, 2010, ARC’s current liability associated with exchangeable shares under IFRS was $47.2 million.  Under Canadian GAAP, exchangeable shares were classified as non-controlling interest and measured using the equity method.  At December 31, 2010, all exchangeable shares were exchanged for common shares of ARC and the associated value was recognized in shareholders’ equity. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Deferred taxes – Under IFRS, entities that are subject to different tax rates on distributed and undistributed income must calculate deferred taxes using the undistributed profits rate, which is the higher of the two.  Canadian GAAP requires each individual tax rate to be applied to distributed and undistributed profits, respectively.  As a result of using the undistributed profits rate, ARC recorded a reduction in its deferred tax liability of $29.6 million upon transition to IFRS, with the offset recorded as a reduction to deficit. |
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|                                                                         |   | Three months ended December 31 |   |   | Twelve months ended December 31 |   |
|------------------------------------------------------------------------------|--------|--------------------------------|--------|--------|---------------------------------|--------|
| ($ millions)                                                                 |   | 2011                           |   |   | 2010                            |   |   | 2011 |   |   | 2010 |   |
| Net income (loss)                                                            |   |                           | (49.0  | )      |                            |   | (86.8 | ) |   |   | 287.0 |   |   |   | 212.2 |   |
| Adjusted for the following non-cash items:                                   |   |                           |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Depletion, depreciation, amortization and impairment                         |   |                           | 178.1  |   |                            |   | 137.9 |   |   |   | 509.2 |   |   |   | 408.7 |   |
| Accretion of asset retirement obligation                                     |   |                           | 3.3    |   |                            |   | 3.4 |   |   |   | 13.4 |   |   |   | 12.6 |   |
| Exploration and evaluation expenses                                          |   |                           | -      |   |                            |   | 0.8 |   |   |   | - |   |   |   | 0.8 |   |
| Deferred tax expense                                                         |   |                           | (17.4  | )      |                            |   | 12.9 |   |   |   | 97.0 |   |   |   | 33.2 |   |
| Unrealized gain on risk management contracts                                 |   |                           | 80.1   |   |                            |   | 85.9 |   |   |   | 16.5 |   |   |   | (28.2 | ) |
| Foreign exchange loss (gain) on revaluation of debt                          |   |                           | (9.4   | )      |                            |   | (14.9 | ) |   |   | 9.7 |   |   |   | (26.8 | ) |
| Gain on disposal of petroleum and natural gas properties                     |   |                           | 3.2    |   |                            |   | - |   |   |   | (89.5 | ) |   |   | - |   |
| Other                                                                        |   |                           | (0.4   | )      |                            |   | 41.3 |   |   |   | 1.0 |   |   |   | 54.5 |   |
| Unrealized losses on risk management contracts related to 2011 production(1) |   |                           | 38.1   |   |                            |   | - |   |   |   | - |   |   |   | - |   |
| Funds from operations                                                        |   |                           | 226.6  |   |                            |   | 180.5 |   |   |   | 844.3 |   |   |   | 667.0 |   |

| (1) | ARC has entered into certain commodity price risk management contracts that pertain to production periods spanning the entire calendar year but that are settled at the end of the year on an annual average benchmark commodity price.  Throughout 2011, ARC has applied the portion of losses associated with these contracts to the funds from operations calculation in the production period to which they relate to more appropriately reflect the funds from operations generated during the period after any effect of contracts used for economic hedging. At December 31, 2011, all gains and losses associated with these contracts have been realized, and in the fourth quarter losses previously applied to past production periods are reversed. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| For the year ended December 31(Cdn $ millions, except per share amounts)(5) |   | 2011   |    |   | 2010   |   |    | 2009   |   |   | 2008    |   |   | 2007   |    |
|-----------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| FINANCIAL                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
| Sales of crude oil, natural gas and natural gas liquids                     |   |   | 1,438.2 |   |   |   | 1,213.7 |   |   |   | 978.2   |   |   |   | 1,706.4 |   |   |   | 1,251.6 |   |
| Per share (1)                                                               |   |   | 5.02    |   |   |   | 4.59    |   |   |   | 4.16    |   |   |   | 7.90    |   |   |   | 5.95 |   |
| Funds from operations (2)                                                   |   |   | 844.3   |   |   |   | 667.0   |   |   |   | 497.4   |   |   |   | 944.4   |   |   |   | 704.9 |   |
| Per share (1)                                                               |   |   | 2.95    |   |   |   | 2.52    |   |   |   | 2.11    |   |   |   | 4.37    |   |   |   | 3.35 |   |
| Net income                                                                  |   |   | 287.0   |   |   |   | 212.2   |   |   |   | 225.1   |   |   |   | 539.9   |   |   |   | 502.1 |   |
| Per share (1)                                                               |   |   | 1.00    |   |   |   | 0.80    |   |   |   | 0.96    |   |   |   | 2.50    |   |   |   | 2.39 |   |
| Dividends                                                                   |   |   | 344.2   |   |   |   | 313.5   |   |   |   | 298.5   |   |   |   | 570.0   |   |   |   | 498.0 |   |
| Per share (1)                                                               |   |   | 1.20    |   |   |   | 1.20    |   |   |   | 1.28    |   |   |   | 2.67    |   |   |   | 2.40 |   |
| Total assets                                                                |   |   | 5,323.9 |   |   |   | 5,060.1 |   |   |   | 3,914.5 |   |   |   | 3,766.7 |   |   |   | 3,533.0 |   |
| Total liabilities                                                           |   |   | 2,162.1 |   |   |   | 1,947.7 |   |   |   | 1,540.1 |   |   |   | 1,624.6 |   |   |   | 1,491.3 |   |
| Net debt outstanding (3)                                                    |   |   | 909.7   |   |   |   | 871.0   |   |   |   | 902.4   |   |   |   | 961.9   |   |   |   | 752.7 |   |
| Diluted shares                                                              |   |   | 286.6   |   |   |   | 264.2   |   |   |   | 235.4   |   |   |   | 216.1   |   |   |   | 210.4 |   |
| Shares outstanding, end of period                                           |   |   | 288.9   |   |   |   | 284.4   |   |   |   | 239.0   |   |   |   | 219.2   |   |   |   | 213.2 |   |
| CAPITAL EXPENDITURES                                                        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Geological and geophysical                                                  |   |   | 25.9    |   |   |   | 16.0    |   |   |   | 13.7    |   |   |   | 27.1    |   |   |   | 14.9 |   |
| Land                                                                        |   |   | 74.9    |   |   |   | 60.9    |   |   |   | 7.0     |   |   |   | 122.4   |   |   |   | 77.5 |   |
| Drilling and completions                                                    |   |   | 456.5   |   |   |   | 358.5   |   |   |   | 214.3   |   |   |   | 305.4   |   |   |   | 229.5 |   |
| Plant and facilities                                                        |   |   | 165.1   |   |   |   | 131.4   |   |   |   | 110.0   |   |   |   | 90.4    |   |   |   | 72.1 |   |
| Other                                                                       |   |   | 3.6     |   |   |   | 24.1    |   |   |   | 14.6    |   |   |   | 3.3     |   |   |   | 3.2 |   |
| Total capital expenditures                                                  |   |   | 726.0   |   |   |   | 590.9   |   |   |   | 359.6   |   |   |   | 548.6   |   |   |   | 397.2 |   |
| Property acquisitions (dispositions), net                                   |   |   | (111.3  | )      |   |   | 5.0     |   |   |   | (20.5   | )      |   |   | 51.0    |   |   |   | 42.5 |   |
| Corporate acquisitions (4)                                                  |   |   | -       |   |   |   | 652.1   |   |   |   | 178.9   |   |   |   | -       |   |   |   | - |   |
| Total capital expenditures and net acquisitions                             |   |   | 614.7   |   |   |   | 1,248.0 |   |   |   | 518.0   |   |   |   | 599.6   |   |   |   | 439.7 |   |
| OPERATING                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Production                                                                  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Crude oil (bbl/d)                                                           |   |   | 27,158  |   |   |   | 27,341  |   |   |   | 27,509  |   |   |   | 28,513  |   |   |   | 28,682 |   |
| Condensate (bbl/d)                                                          |   |   | 2,052   |   |   |   | 1,617   |   |   |   | 1,303   |   |   |   | 1,362   |   |   |   | 1,421 |   |
| Natural gas (mmcf/d)                                                        |   |   | 310.6   |   |   |   | 254.2   |   |   |   | 194.0   |   |   |   | 196.5   |   |   |   | 180.1 |   |
| Natural gas liquids (bbl/d)                                                 |   |   | 2,444   |   |   |   | 2,628   |   |   |   | 2,386   |   |   |   | 2,499   |   |   |   | 2,606 |   |
| Total (boe per day 6:1)                                                     |   |   | 83,416  |   |   |   | 73,954  |   |   |   | 63,538  |   |   |   | 65,126  |   |   |   | 62,723 |   |
| Average prices                                                              |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Crude oil ($/bbl)                                                           |   |   | 89.51   |   |   |   | 73.85   |   |   |   | 62.24   |   |   |   | 94.20   |   |   |   | 69.24 |   |
| Condensate ($/bbl)                                                          |   |   | 96.07   |   |   |   | 77.40   |   |   |   | 64.63   |   |   |   | 107.24  |   |   |   | 77.54 |   |
| Natural gas ($/mcf)                                                         |   |   | 3.83    |   |   |   | 4.21    |   |   |   | 4.18    |   |   |   | 8.58    |   |   |   | 6.75 |   |
| Natural gas liquids ($/bbl)                                                 |   |   | 47.53   |   |   |   | 39.57   |   |   |   | 27.57   |   |   |   | 49.25   |   |   |   | 42.38 |   |
| Oil equivalent ($/boe)                                                      |   |   | 47.15   |   |   |   | 44.88   |   |   |   | 42.07   |   |   |   | 71.25   |   |   |   | 54.54 |   |
| RESERVES                                                                    |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| (company interest) (6)                                                      |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Proved plus probable reserves                                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Crude oil and NGL (mbbl)                                                    |   |   | 170,681 |   |   |   | 166,553 |   |   |   | 153,413 |   |   |   | 153,020 |   |   |   | 158,341 |   |
| Natural gas (bcf)                                                           |   |   | 403,754 |   |   |   | 1,925.2 |   |   |   | 1,353.2 |   |   |   | 1,012.2 |   |   |   | 768.2 |   |
| Total (mboe)                                                                |   |   | 574,435 |   |   |   | 487,418 |   |   |   | 378,953 |   |   |   | 321,723 |   |   |   | 286,370 |   |
| TRADING STATISTICS(Cdn$, except volumes) based on intra-day trading         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| High                                                                        |   |   | 28.67   |   |   |   | 26.04   |   |   |   | 21.89   |   |   |   | 33.95   |   |   |   | 23.86 |   |
| Low                                                                         |   |   | 19.40   |   |   |   | 18.77   |   |   |   | 11.73   |   |   |   | 15.01   |   |   |   | 18.90 |   |
| Close                                                                       |   |   | 25.10   |   |   |   | 25.41   |   |   |   | 19.94   |   |   |   | 20.10   |   |   |   | 20.40 |   |
| Average daily volume (thousands)                                            |   |   | 1,251   |   |   |   | 1,197   |   |   |   | 1,057   |   |   |   | 975     |   |   |   | 597 |   |

| (1) | Upon conversion to a corporation, ARC trust units were exchanged for common shares.  In all cases, the term per share can be interpreted as per unit prior to December 31, 2010.  Per share amounts (with the exception of dividends) are based on diluted shares. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Net debt is a non-GAAP measure and therefore it may not be comparable with the calculation of similar measures for other entities.   Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Represents total consideration for corporate acquisitions. |
|-----|------------------------------------------------------------|

| (5) | The financial information above that has been derived from ARC’s financial statements has been prepared under IFRS for 2011 and 2010.  Information for 2009 and prior has been prepared under previous Canadian GAAP. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Company interest reserves are the gross interest reserves plus the royalty interest prior to the deduction of royalty burdens. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

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| (Cdn $ millions, except per share amounts)                   |   | 2011   |    |   | 2010   |   |
|--------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| FINANCIAL                                                    |   |   | Q4      |   |   |   | Q3 |   |   |   | Q2 |   |   |   | Q1 |   |   |   | Q4 |   |   |   | Q3 |   |   |   | Q2 |   |   |   | Q1 |   |
| Sales of crude oil, natural gas and natural gas liquids |   |   | 386.8   |   |   |   | 351.8 |   |   |   | 374.9 |   |   |   | 324.7 |   |   |   | 329.3 |   |   |   | 293.6 |   |   |   | 276.7 |   |   |   | 314.1 |   |
| Per share (1)                                                |   |   | 1.34    |   |   |   | 1.23 |   |   |   | 1.31 |   |   |   | 1.14 |   |   |   | 1.16 |   |   |   | 1.10 |   |   |   | 1.09 |   |   |   | 1.25 |   |
| Funds from operations (2)                                    |   |   | 226.6   |   |   |   | 213.5 |   |   |   | 210.1 |   |   |   | 194.1 |   |   |   | 180.4 |   |   |   | 167.9 |   |   |   | 151.0 |   |   |   | 167.9 |   |
| Per share (1)                                                |   |   | 0.79    |   |   |   | 0.74 |   |   |   | 0.73 |   |   |   | 0.68 |   |   |   | 0.63 |   |   |   | 0.63 |   |   |   | 0.60 |   |   |   | 0.67 |   |
| Net income (loss)                                            |   |   | (49.0   | )      |   |   | 120.8 |   |   |   | 150.1 |   |   |   | 65.2 |   |   |   | (86.9 | ) |   |   | 90.5 |   |   |   | 58.8 |   |   |   | 149.8 |   |
| Per share (1)                                                |   |   | (0.17   | )      |   |   | 0.42 |   |   |   | 0.52 |   |   |   | 0.23 |   |   |   | (0.31 | ) |   |   | 0.34 |   |   |   | 0.23 |   |   |   | 0.60 |   |
| Dividends                                                    |   |   | 86.7    |   |   |   | 86.2 |   |   |   | 85.8 |   |   |   | 85.5 |   |   |   | 82.8 |   |   |   | 80.3 |   |   |   | 75.3 |   |   |   | 75.0 |   |
| Per share(1)                                                 |   |   | 0.30    |   |   |   | 0.30 |   |   |   | 0.30 |   |   |   | 0.30 |   |   |   | 0.30 |   |   |   | 0.30 |   |   |   | 0.30 |   |   |   | 0.30 |   |
| Total assets                                                 |   |   | 5,323.9 |   |   |   | 5,313.3 |   |   |   | 5,053.4 |   |   |   | 5,019.9 |   |   |   | 5,060.1 |   |   |   | 5,092.2 |   |   |   | 4,154.8 |   |   |   | 4,035.1 |   |
| Total liabilities                                            |   |   | 2,162.1 |   |   |   | 2,043.4 |   |   |   | 1,844.6 |   |   |   | 1,902.5 |   |   |   | 1,947.7 |   |   |   | 2,031.6 |   |   |   | 1,575.3 |   |   |   | 1,455.7 |   |
| Net debt outstanding (3)                                     |   |   | 909.7   |   |   |   | 870.1 |   |   |   | 744.8 |   |   |   | 731.9 |   |   |   | 872.7 |   |   |   | 867.3 |   |   |   | 728.8 |   |   |   | 678.3 |   |
| Diluted shares                                               |   |   | 288.3   |   |   |   | 287.1 |   |   |   | 286.0 |   |   |   | 284.9 |   |   |   | 283.7 |   |   |   | 268.0 |   |   |   | 253.2 |   |   |   | 251.8 |   |
| Shares outstanding, end of period                            |   |   | 288.9   |   |   |   | 287.7 |   |   |   | 286.5 |   |   |   | 285.4 |   |   |   | 284.4 |   |   |   | 283.1 |   |   |   | 253.6 |   |   |   | 252.8 |   |
| CAPITAL EXPENDITURES                                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Geological and geophysical                                   |   |   | 4.9     |   |   |   | 9.1 |   |   |   | 5.2 |   |   |   | 6.7 |   |   |   | 5.6 |   |   |   | 0.2 |   |   |   | 3.6 |   |   |   | 6.6 |   |
| Land                                                         |   |   | 3.5     |   |   |   | 26.6 |   |   |   | 34.5 |   |   |   | 10.4 |   |   |   | 6.9 |   |   |   | 28.6 |   |   |   | 21.5 |   |   |   | 3.9 |   |
| Drilling and completions                                     |   |   | 147.5   |   |   |   | 142.0 |   |   |   | 69.8 |   |   |   | 98.6 |   |   |   | 100.4 |   |   |   | 96.0 |   |   |   | 84.9 |   |   |   | 77.2 |   |
| Plant and facilities                                         |   |   | 38.5    |   |   |   | 50.6 |   |   |   | 35.2 |   |   |   | 40.6 |   |   |   | 42.9 |   |   |   | 32.1 |   |   |   | 26.9 |   |   |   | 29.5 |   |
| Other                                                        |   |   | 0.6     |   |   |   | 1.0 |   |   |   | (0.2 | ) |   |   | 0.9 |   |   |   | 3.3 |   |   |   | 2.6 |   |   |   | 7.1 |   |   |   | 11.1 |   |
| Total capital expenditures                                   |   |   | 195.0   |   |   |   | 229.3 |   |   |   | 144.5 |   |   |   | 157.2 |   |   |   | 159.1 |   |   |   | 159.5 |   |   |   | 144.0 |   |   |   | 128.3 |   |
| Property acquisitions (dispositions), net                    |   |   | 24.6    |   |   |   | 8.6 |   |   |   | 13.6 |   |   |   | (157.3 | ) |   |   | 0.8 |   |   |   | (2.1 | ) |   |   | - |   |   |   | 6.3 |   |
| Corporate acquisitions (4)                                   |   |   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 652.1 |   |   |   | - |   |   |   | - |   |
| Total capital expenditures and net acquisitions              |   |   | 219.6   |   |   |   | 237.9 |   |   |   | 158.1 |   |   |   | (0.1 | ) |   |   | 159.9 |   |   |   | 809.5 |   |   |   | 144.0 |   |   |   | 134.6 |   |
| OPERATING                                                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Production                                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Crude oil (bbl/d)                                            |   |   | 28,470  |   |   |   | 26,024 |   |   |   | 26,038 |   |   |   | 28,108 |   |   |   | 27,417 |   |   |   | 26,959 |   |   |   | 27,354 |   |   |   | 27,640 |   |
| Condensate (bbl/d)                                           |   |   | 2,219   |   |   |   | 2,009 |   |   |   | 2,105 |   |   |   | 1,872 |   |   |   | 2,197 |   |   |   | 1,689 |   |   |   | 1,325 |   |   |   | 1,246 |   |
| Natural gas (mmcf/d)                                         |   |   | 355.3   |   |   |   | 327.4 |   |   |   | 311.8 |   |   |   | 246.4 |   |   |   | 311.5 |   |   |   | 275.0 |   |   |   | 211.2 |   |   |   | 217.9 |   |
| Natural gas liquids (bbl/d)                                  |   |   | 2,114   |   |   |   | 2,584 |   |   |   | 2,250 |   |   |   | 2,834 |   |   |   | 3,158 |   |   |   | 3,001 |   |   |   | 2,330 |   |   |   | 2,006 |   |
| Total (boe per day 6:1)                                      |   |   | 92,021  |   |   |   | 85,178 |   |   |   | 82,367 |   |   |   | 73,880 |   |   |   | 84,686 |   |   |   | 77,483 |   |   |   | 66,208 |   |   |   | 67,207 |   |
| Average prices                                               |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Crude oil ($/bbl)                                            |   |   | 92.85   |   |   |   | 85.97 |   |   |   | 97.11 |   |   |   | 82.27 |   |   |   | 76.08 |   |   |   | 71.07 |   |   |   | 71.98 |   |   |   | 76.26 |   |
| Condensate ($/bbl)                                           |   |   | 101.13  |   |   |   | 92.85 |   |   |   | 100.57 |   |   |   | 88.34 |   |   |   | 78.38 |   |   |   | 73.51 |   |   |   | 78.33 |   |   |   | 80.00 |   |
| Natural gas ($/mcf)                                          |   |   | 3.43    |   |   |   | 3.88 |   |   |   | 4.05 |   |   |   | 4.05 |   |   |   | 3.83 |   |   |   | 3.79 |   |   |   | 4.12 |   |   |   | 5.42 |   |
| Natural gas liquids ($/bbl)                                  |   |   | 51.02   |   |   |   | 47.90 |   |   |   | 48.40 |   |   |   | 43.83 |   |   |   | 38.89 |   |   |   | 35.41 |   |   |   | 38.62 |   |   |   | 48.02 |   |
| Oil equivalent ($/boe)                                       |   |   | 45.58   |   |   |   | 44.83 |   |   |   | 49.94 |   |   |   | 48.75 |   |   |   | 42.18 |   |   |   | 41.14 |   |   |   | 45.82 |   |   |   | 51.85 |   |
| TRADING STATISTICS                                           |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Cdn$) based on intra-day trading                            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                         |   |   | 26.74   |   |   |   | 26.23 |   |   |   | 27.00 |   |   |   | 28.67 |   |   |   | 26.05 |   |   |   | 21.11 |   |   |   | 22.89 |   |   |   | 22.78 |   |
| Low                                                          |   |   | 19.40   |   |   |   | 19.81 |   |   |   | 23.41 |   |   |   | 23.66 |   |   |   | 20.42 |   |   |   | 18.77 |   |   |   | 18.80 |   |   |   | 19.71 |   |
| Close                                                        |   |   | 25.10   |   |   |   | 22.56 |   |   |   | 25.01 |   |   |   | 26.35 |   |   |   | 25.41 |   |   |   | 20.55 |   |   |   | 19.73 |   |   |   | 20.50 |   |
| Average daily volume (thousands)                             |   |   | 1,267   |   |   |   | 1,108 |   |   |   | 998 |   |   |   | 1,636 |   |   |   | 1,299 |   |   |   | 1,160 |   |   |   | 1,043 |   |   |   | 1,287 |   |

| (1) | Upon conversion to a corporation, ARC trust units were exchanged for common shares.  In all cases, the term per share can be interpreted as per unit prior to December 31, 2010.  Per share amounts (with the exception of dividends) are based on diluted shares. |
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| (2) | This is a non-GAAP measure which may not be comparable with similar non-GAAP measures used by other entities.  Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
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| (3) | Net debt is a non-GAAP measure and therefore it may not be comparable with the calculation of similar measures for other entities.   Refer to the section entitled “Non-GAAP Measures” contained within this MD&A. |
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| (4) | Represents total consideration for corporate acquisitions including fees but prior to working capital, asset retirement obligation and future income tax liability assumed on acquisition. |
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