| (signed)                | (signed)                                                  |
|-------------------------|-----------------------------------------------------------|
|                    |                                                      |
| John P. Dielwart        | Steven W. Sinclair                                        |
| Chief Executive Officer | Senior Vice-President Finance and Chief Financial Officer |

----

----

----

| (Cdn$ millions)                                        |   | December 31, 2011 |    |   | December 31, 2010 |   |    | January 1, 2010 |   |
|--------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|---------|-----------------|--------|
| ASSETS                                                 |   |              |    |   |              |   |    |            |   |
| Current assets                                         |   |              |    |   |              |   |    |            |   |
| Cash and cash equivalents (Note 7)                     |   | $                 | 0.5     |   |              | $      | 2.0     |            |   | $ | - |   |
| Short-term investment                                  |   |              | 3.3     |   |              |   | 3.5     |            |   |   | - |   |
| Accounts receivable                                    |   |              | 168.1   |   |              |   | 160.5   |            |   |   | 115.9 |   |
| Prepaid expenses                                       |   |              | 14.3    |   |              |   | 12.0    |            |   |   | 18.2 |   |
| Risk management contracts (Note 16)                    |   |              | 21.0    |   |              |   | 66.8    |            |   |   | 5.9 |   |
| Assets held for sale (Note 11)                         |   |              | 4.6     |   |              |   | 123.9   |            |   |   | - |   |
|                                                   |   |              | 211.8   |   |              |   | 368.7   |            |   |   | 140.0 |   |
| Reclamation funds (Note 9)                             |   |              | 26.9    |   |              |   | 25.0    |            |   |   | 33.2 |   |
| Risk management contracts  (Note 16)         |   |              | 3.7     |   |              |   | 0.6     |            |   |   | 3.2 |   |
| Property, plant and equipment (Note 11)                |   |              | 4,645.6 |   |              |   | 4,343.2 |            |   |   | 3,550.4 |   |
| Intangible exploration and evaluation assets (Note 10) |   |              | 187.7   |   |              |   | 74.4    |            |   |   | 23.0 |   |
| Goodwill (Note 6)                                      |   |              | 248.2   |   |              |   | 248.2   |            |   |   | 157.6 |   |
| Total assets                                           |   | $                 | 5,323.9 |   |              | $      | 5,060.1 |            |   | $ | 3,907.4 |   |
|                                                   |   |              |    |   |              |   |    |            |   |   |   |   |
| LIABILITIES                                            |   |              |    |   |              |   |    |            |   |   |   |   |
| Current liabilities                                    |   |              |    |   |              |   |    |            |   |   |   |   |
| Accounts payable and accrued liabilities               |   | $                 | 305.0   |   |              | $      | 211.7   |            |   | $ | 166.7 |   |
| Current portion of long-term debt (Note 13)            |   |              | 40.5    |   |              |   | 15.7    |            |   |   | 27.0 |   |
| Dividends payable                                      |   |              | 28.9    |   |              |   | 27.7    |            |   |   | 23.7 |   |
| Risk management contracts (Note 16)                    |   |              | 18.9    |   |              |   | 22.0    |            |   |   | 12.9 |   |
| Exchangeable shares                                    |   |              | -       |   |              |   | -       |            |   |   | 47.2 |   |
| Liabilities associated with assets held for sale       |   |              | 1.9     |   |              |   | 18.0    |            |   |   | - |   |
|                                                   |   |              | 395.2   |   |              |   | 295.1   |            |   |   | 277.5 |   |
| Risk management contracts (Note 16)                    |   |              | 3.0     |   |              |   | 20.9    |            |   |   | 1.0 |   |
| Long-term debt (Note 13)                               |   |              | 721.2   |   |              |   | 787.8   |            |   |   | 819.1 |   |
| Long-term incentive compensation liability (Note 19)   |   |              | 18.5    |   |              |   | 26.6    |            |   |   | 10.9 |   |
| Other deferred liabilities                             |   |              | 21.4    |   |              |   | 25.0    |            |   |   | - |   |
| Asset retirement obligations (Note 14)                 |   |              | 496.4   |   |              |   | 381.7   |            |   |   | 298.1 |   |
| Deferred taxes (Note 17)                               |   |              | 506.4   |   |              |   | 410.6   |            |   |   | 255.1 |   |
| Total liabilities                                      |   |              | 2,162.1 |   |              |   | 1,947.7 |            |   |   | 1,661.7 |   |
|                                                   |   |              |    |   |              |   |    |            |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES (Note 20)                |   |              |    |   |              |   |    |            |   |   |   |   |
|                                                   |   |              |    |   |              |   |    |            |   |   |   |   |
| SHAREHOLDERS’ EQUITY                             |   |              |    |   |              |   |    |            |   |   |   |   |
| Shareholders’ capital (Note 18)                  |   |              | 3,218.3 |   |              |   | 3,112.5 |            |   |   | 2,898.3 |   |
| Contributed surplus                                    |   |              | 0.5     |   |              |   | -       |            |   |   | - |   |
| Deficit                                                |   |              | (57.0   | )      |              |   | -       |            |   |   | (652.0 | ) |
| Accumulated other comprehensive loss                   |   |              | -       |   |              |   | (0.1    | )               |   |   | (0.6 | ) |
| Total shareholders’ equity                       |   |              | 3,161.8 |   |              |   | 3,112.4 |            |   |   | 2,245.7 |   |
| Total liabilities and shareholders’ equity       |   | $                 | 5,323.9 |   |              | $      | 5,060.1 |            |   | $ | 3,907.4 |   |

| (signed)                                        | (signed)                                  |
|-------------------------------------------------|-------------------------------------------|
| Mac H. Van Wielingen                            | Fred J. Dyment                            |
| Chairman of the Board of Directors and Director | Chair of the Audit Committee and Director |

----

| (Cdn$ millions, except per share amounts)                          |   | 2011   |    |   | 2010   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                               |   |   |    |   |   |   |
| Sales of crude oil, natural gas and natural gas liquids            |   | $      | 1,438.2 |   |   | $      | 1,213.7 |   |
| Royalties                                                          |   |   | (219.3  | )      |   |   | (192.8 | ) |
| REVENUE                                                            |   |   | 1,218.9 |   |   |   | 1,020.9 |   |
|                                                               |   |   |    |   |   |   |   |   |
| Gain on risk management contracts (Note 16)                        |   |   | 59.3    |   |   |   | 93.6 |   |
|                                                               |   |   | 1,278.2 |   |   |   | 1,114.5 |   |
|                                                               |   |   |    |   |   |   |   |   |
| EXPENSES                                                           |   |   |    |   |   |   |   |   |
| Transportation                                                     |   |   | 36.1    |   |   |   | 29.7 |   |
| Operating                                                          |   |   | 295.3   |   |   |   | 261.9 |   |
| Exploration and evaluation expenses (Note 10)                      |   |   | -       |   |   |   | 0.8 |   |
| General and administrative                                         |   |   | 80.1    |   |   |   | 91.6 |   |
| Interest and financing charges                                     |   |   | 38.9    |   |   |   | 42.5 |   |
| Accretion of asset retirement obligation (Note 14)                 |   |   | 13.4    |   |   |   | 12.6 |   |
| Depletion, depreciation, amortization and impairment (Note 11)     |   |   | 509.2   |   |   |   | 408.7 |   |
| Loss (gain) on foreign exchange                                    |   |   | 10.5    |   |   |   | (26.8 | ) |
| Loss on revaluation of exchangeable shares                         |   |   | -       |   |   |   | 48.8 |   |
| Loss (gain) on short-term investments                              |   |   | 0.2     |   |   |   | (0.9 | ) |
| Gain on disposal of petroleum and natural gas properties (Note 11) |   |   | (89.5   | )      |   |   | - |   |
|                                                               |   |   | 894.2   |   |   |   | 868.9 |   |
| Capital and other taxes                                            |   |   | -       |   |   |   | 0.2 |   |
| Deferred tax expense (Note 17)                                     |   |   | 97.0    |   |   |   | 33.2 |   |
| Net income                                                         |   | $      | 287.0   |   |   | $      | 212.2 |   |
|                                                               |   |   |    |   |   |   |   |   |
| Net income per share (Note 18)                                     |   |   |    |   |   |   |   |   |
| Basic                                                              |   | $      | 1.00    |   |   | $      | 0.82 |   |
| Diluted                                                            |   | $      | 1.00    |   |   | $      | 0.80 |   |

| (Cdn$ millions)                                                                                                                                                     |   | 2011   |   |   | 2010   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                                                |   |   |   |   |   |   |
| Net income                                                                                                                                                          |   | $      | 287.0  |   |   | $      | 212.2 |   |
|                                                                                                                                                                |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                                                                                                                              |   |   |   |   |   |   |   |   |
| Gains on financial instruments designated as cash flow hedges                                                                                                       |   |   | -      |   |   |   | 0.5 |   |
| Gains on financial instruments designated as cash flow hedges in prior periods realized in net income in the current year                                           |   |   | -      |   |   |   | 0.1 |   |
| Net unrealized gains on available-for-sale reclamation funds’ investments                                                                                     |   |   | 0.1    |   |   |   | 0.1 |   |
| Gains and losses on financial instruments designated as available-for-sale reclamation fund investments in prior periods realized in net income in the current year |   |   | -      |   |   |   | (0.2 | ) |
| Other comprehensive income                                                                                                                                          |   |   | 0.1    |   |   |   | 0.5 |   |
| Comprehensive income                                                                                                                                                |   | $      | 287.1  |   |   | $      | 212.7 |   |

----

|                                                                 |   | Shareholders’ Capital |    |   | ContributedSurplus |   |   | Deficit |   |   | Accumulated other comprehensive loss |   |   | Total Shareholders’ Equity |   |
|----------------------------------------------------------------------|--------|-----------------------------|---------|--------|--------------------|--------|--------|---------|--------|--------|--------------------------------------|--------|--------|----------------------------------|--------|
| January 1, 2010                                                      |   | $                           | 2,898.3 |   |               | $      | -      |    |   | $      | (652.0                               | )      |   | $                                | (0.6   | ) |   | $ | 2,245.7 |   |
| Equity offering                                                      |   |                        | 252.3   |   |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | 252.3 |   |
| Issued on acquisition (Note 5)                                       |   |                        | 449.2   |   |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | 449.2 |   |
| Issued on conversion of exchangeable shares                          |   |                        | 7.9     |   |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | 7.9 |   |
| Trust units issued pursuant to the distribution reinvestment program |   |                        | 74.4    |   |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | 74.4 |   |
| Trust unit issue costs(1)                                            |   |                        | (10.7   | )      |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | (10.7 | ) |
| Comprehensive income                                                 |   |                        | -       |   |               |   | -      |    |   |   | 212.2                                |   |   |                             | 0.5    |   |   |   | 212.7 |   |
| Distributions declared                                               |   |                        | -       |   |               |   | -      |    |   |   | (313.5                               | )      |   |                             | -      |   |   |   | (313.5 | ) |
| Issued for exchangeable shares pursuant to the Arrangement (Note 1)  |   |                        | 194.4   |   |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | 194.4 |   |
| Elimination of deficit pursuant to the Arrangement (Note 1)          |   |                        | (753.3  | )      |               |   | -      |    |   |   | 753.3                                |   |   |                             | -      |   |   |   | - |   |
| December 31, 2010                                                    |   | $                           | 3,112.5 |   |               | $      | -      |    |   | $      | -                                    |   |   | $                                | (0.1   | ) |   | $ | 3,112.4 |   |
| Shares issued pursuant to the dividend reinvestment program          |   |                        | 105.8   |   |               |   | -      |    |   |   | -                                    |   |   |                             | -      |   |   |   | 105.8 |   |
| Share options granted                                                |   |                        | -       |   |               |   | 0.5    |    |   |   | -                                    |   |   |                             | -      |   |   |   | 0.5 |   |
| Comprehensive income                                                 |   |                        | -       |   |               |   | -      |    |   |   | 287.0                                |   |   |                             | 0.1    |   |   |   | 287.1 |   |
| Dividends declared                                                   |   |                        | -       |   |               |   | -      |    |   |   | (344.0                               | )      |   |                             | -      |   |   |   | (344.0 | ) |
| December 31, 2011                                                    |   | $                           | 3,218.3 |   |               | $      | 0.5    |    |   | $      | (57.0                                | )      |   | $                                | -      |   |   | $ | 3,161.8 |   |

| (1) | Amount is net of deferred tax of $4.7 million. |
|-----|------------------------------------------------|

----

| (Cdn$ millions)                                                    |   | 2011   |   |   | 2010   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                               |   |   |   |   |   |   |
| Net income                                                         |   | $      | 287.0  |   |   | $      | 212.2 |   |
| Add items not involving cash:                                      |   |   |   |   |   |   |   |   |
| Unrealized gain (loss) on risk management contracts (Note 16)      |   |   | 16.5   |   |   |   | (28.2 | ) |
| Accretion of asset retirement obligation (Note 14)                 |   |   | 13.4   |   |   |   | 12.6 |   |
| Depletion, depreciation, amortization and impairment (Note 11)     |   |   | 509.2  |   |   |   | 408.7 |   |
| Exploration and evaluation expenses (Note 10)                      |   |   | -      |   |   |   | 0.8 |   |
| Unrealized loss (gain) on foreign exchange                         |   |   | 9.7    |   |   |   | (26.8 | ) |
| Gain on disposal of petroleum and natural gas properties (Note 11) |   |   | (89.5  | )      |   |   | - |   |
| Deferred tax expense                                               |   |   | 97.0   |   |   |   | 33.2 |   |
| Other (Note 22)                                                    |   |   | 1.0    |   |   |   | 54.5 |   |
| Net change in other liabilities (Note 22)                          |   |   | (9.6   | )      |   |   | 7.9 |   |
| Change in non-cash working capital (Note 22)                       |   |   | 68.0   |   |   |   | 2.1 |   |
|                                                               |   |   | 902.7  |   |   |   | 677.0 |   |
|                                                               |   |   |   |   |   |   |   |   |
| CASH FLOW FROM FINANCING ACTIVITIES                                |   |   |   |   |   |   |   |   |
| Repayment of long-term debt under revolving credit facilities, net |   |   | (35.2  | )      |   |   | (241.3 | ) |
| Issue of Senior Notes                                              |   |   | -      |   |   |   | 210.4 |   |
| Repayment of Senior Notes                                          |   |   | (16.3  | )      |   |   | (81.4 | ) |
| Issue of shares                                                    |   |   | 1.6    |   |   |   | 241.8 |   |
| Cash dividends paid                                                |   |   | (238.7 | )      |   |   | (237.1 | ) |
|                                                               |   |   | (288.6 | )      |   |   | (107.6 | ) |
|                                                               |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                               |   |   |   |   |   |   |   |   |
| Acquisition of petroleum and natural gas properties                |   |   | (57.8  | )      |   |   | (9.0 | ) |
| Disposals of petroleum and natural gas properties                  |   |   | 167.6  |   |   |   | 3.9 |   |
| Property, plant and equipment development expenditures             |   |   | (614.8 | )      |   |   | (537.9 | ) |
| Exploration and evaluation expenditures                            |   |   | (113.3 | )      |   |   | (51.4 | ) |
| Net reclamation fund (contributions) withdrawals                   |   |   | (1.8   | )      |   |   | 8.3 |   |
| Change in non-cash working capital (Note 22)                       |   |   | 4.5    |   |   |   | 18.7 |   |
|                                                               |   |   | (615.6 | )      |   |   | (567.4 | ) |
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                   |   |   | (1.5   | )      |   |   | 2.0 |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                     |   |   | 2.0    |   |   |   | - |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                           |   | $      | 0.5    |   |   | $      | 2.0 |   |

| Income taxes paid in cash |   | $ | 1.7  |   |   | $ | -    |   |
|---------------------------|--------|---|------|--------|--------|---|------|--------|
| Interest paid in cash     |   | $ | 25.8 |   |   | $ | 20.6 |   |

----

| 1. | STRUCTURE OF THE BUSINESS |
|----|---------------------------|

| 2.  | BASIS OF PREPARATION |
|----------|----------------------|

----

|   | · | available-for-sale assets; and |
|--------|--------|--------------------------------|

|   | · | derivative financial instruments. |
|--------|--------|-----------------------------------|

| 3.  | SUMMARY OF ACCOUNTING POLICIES |
|----------|--------------------------------|

|   | • | ARC has transferred the significant risks and rewards of ownership of the goods to the buyer; |
|--------|---------|-----------------------------------------------------------------------------------------------|

|   | • | ARC retains no continuing managerial involvement to the degree usually associated with ownership or effective control over the goods sold; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the amount of revenue can be measured reliably; |
|--------|---------|-------------------------------------------------|

|   | • | it is probable that the economic benefits associated with the transaction will flow to ARC; and |
|--------|---------|-------------------------------------------------------------------------------------------------|

|   | • | the costs incurred or to be incurred in respect of the transaction can be measured reliably. |
|--------|---------|----------------------------------------------------------------------------------------------|

----

|   | (a) | total estimated proved and probable reserves calculated in accordance with Ontario Securities Commission’s National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | total capitalized costs plus estimated future development costs of proved and probable reserves, including future estimated asset retirement costs; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | relative volumes of petroleum and natural gas reserves and production, before royalties, converted at the energy equivalent conversion ratio of six thousand cubic feet of natural gas to one barrel of oil. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| 4.  | NEW ACCOUNTING POLICIES |
|----------|-------------------------|

|   | · | IFRS 10, “Consolidated Financial Statements” supercedes IAS 27 “Consolidation and Separate Financial Statements” and SIC-12 “Consolidation – Special Purpose Entities”.  This standard provides a single model to be applied in control analysis for all investees including special purpose entities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | IFRS 11, “Joint Arrangements” divides joint arrangements into two types, joint operations and joint ventures, each with their own accounting model.  All joint arrangements are required to be reassessed on transition to IFRS 11 to determine their type to apply the appropriate accounting. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | IFRS 12, “Disclosure of Interests in Other Entities” combines in a single standard the disclosure requirements for subsidiaries, associates and joint arrangements as well as unconsolidated structured entities. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | IFRS 13, “Fair Value Measurement” defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements.  This standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.  | BUSINESS COMBINATION |
|----------|----------------------|

----

| Net Assets Acquired            |   |   |   |
|--------------------------------|--------|--------|--------|
| Property, plant and equipment  |   | $      | 712.7  |   |
| Short term investment          |   |   | 2.9    |   |
| Risk management contracts      |   |   | 0.7    |   |
| Goodwill                       |   |   | 90.6   |   |
| Net working capital deficiency |   |   | (3.3   | ) |
| Office lease obligation        |   |   | (1.2   | ) |
| Asset retirement obligations   |   |   | (21.7  | ) |
| Deferred income tax liability  |   |   | (128.6 | ) |
| Total net assets acquired      |   | $      | 652.1  |   |

| Consideration                                                  |   |   |   |
|----------------------------------------------------------------|--------|--------|--------|
| Trust units issued (23,003,154 units)                          |   | $      | 449.2  |   |
| Exchangeable Shares issued (1,924,997 exchangeable shares) (1) |   |   | 106.2  |   |
| Bank debt (net of cash acquired)                               |   |   | 96.7   |   |
| Total consideration paid                                       |   | $      | 652.1  |   |

|   | (1) | At acquisition date, 1,924,997 ARL Series B exchangeable shares were issued at an average exchange ratio of 2.82551, for total trust unit equivalent of 5,439,098 units. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.  | MANAGEMENT JUDGMENTS AND ESTIMATION UNCERTAINTY |
|----------|-------------------------------------------------|

|   | i) | the net present value of the after-tax cash flows from oil and gas reserves of each CGU based on reserves estimated by ARC’s independent reserve evaluator; and |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | the fair value of undeveloped land based on estimates provided by ARC’s independent land evaluator |
|--------|-----|----------------------------------------------------------------------------------------------------------|

----

|   | a) | Reserves.  Assumptions that are valid at the time of reserve estimation may change significantly when new information becomes available.  Changes in forward price estimates, production costs or recovery rates may change the economic status of reserves and may ultimately result in reserves being restated. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | Oil and natural gas prices.  Forward price estimates of the oil and natural gas prices are used in the cash flow model.  Commodity prices have fluctuated widely in recent years due to global and regional factors including supply and demand fundamentals, inventory levels, exchange rates, weather, economic and geopolitical factors. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | Discount rate.  The discount rate used to calculate the net present value of cash flows is based on estimates of an approximate industry peer group weighted average cost of capital.  Changes in the general economic environment could result in significant changes to this estimate. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         |   | WTI Oil      |   |   | AECO Gas        |   |   | Cdn$/US$          |   |
|--------------|--------|--------------|--------|--------|-----------------|--------|--------|-------------------|--------|
| Year         |   | (US$/bbl)(1) |   |   | (Cdn$/mmbtu)(1) |   |   | Exchange Rates(1) |   |
| 2012         |   |         | 97.00  |   |            |   | 3.49   |              |   |   | 0.980 |   |
| 2013         |   |         | 100.00 |   |            |   | 4.13   |              |   |   | 0.980 |   |
| 2014         |   |         | 100.00 |   |            |   | 4.59   |              |   |   | 0.980 |   |
| 2015         |   |         | 100.00 |   |            |   | 5.05   |              |   |   | 0.980 |   |
| 2016         |   |         | 100.00 |   |            |   | 5.51   |              |   |   | 0.980 |   |
| 2017         |   |         | 100.00 |   |            |   | 5.97   |              |   |   | 0.980 |   |
| 2018         |   |         | 101.35 |   |            |   | 6.21   |              |   |   | 0.980 |   |
| 2019         |   |         | 103.38 |   |            |   | 6.33   |              |   |   | 0.980 |   |
| 2020         |   |         | 105.45 |   |            |   | 6.46   |              |   |   | 0.980 |   |
| 2021         |   |         | 107.56 |   |            |   | 6.58   |              |   |   | 0.980 |   |
| Remainder(2) |   |         | 2.0    | %      |            |   | 2.0    | %                 |   |   | 0.980 |   |

|   | (1) | Source:  GLJ Petroleum Consultants price forecast, effective January 1, 2012. |
|--------|-----|-----------------------------------------------------------------------------------------|

|   | (2) | Percentage change represents the change in each year after 2021 to the end of the reserve life. |
|--------|-----|-------------------------------------------------------------------------------------------------|

----

| 7.  | CASH AND CASH EQUIVALENTS |
|----------|---------------------------|

| 8.  | FINANCIAL ASSETS AND CREDIT RISK |
|----------|----------------------------------|

|   | · | By entering into sales contracts with only established creditworthy counterparties as verified by a third party rating agency, through internal evaluation or by requiring security such as letters of credit;  |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | By limiting exposure to any one counterparty in accordance with ARC’s credit policy; and |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | By restricting cash equivalent investments, reclamation fund investments, and risk management transactions to counterparties that, at the time of transaction, are not less than investment grade. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 9.  | RECLAMATION FUNDS |
|----------|-------------------|

|                                                           |   | December 31, 2011 |   |   | December 31, 2010 |   |
|----------------------------------------------------------------|--------|-------------------|--------|--------|-------------------|--------|
|                                                           |   | Unrestricted      |   |   | Restricted        |   |   | Unrestricted |   |   | Restricted |   |
| Balance, beginning of year                                     |   | $                 | -      |   |              | $      | 25.0 |   |   | $ | 12.6 |   |   |   | 20.6 |   |
| Contributions                                                  |   |              | -      |   |              |   | 3.7 |   |   |   | 8.2 |   |   |   | 5.8 |   |
| Reimbursed expenditures (1)                                    |   |              | -      |   |              |   | (2.2 | ) |   |   | (7.4 | ) |   |   | (1.5 | ) |
| Interest earned on funds                                       |   |              | -      |   |              |   | 0.3 |   |   |   | 0.4 |   |   |   | 0.2 |   |
| Withdrawals                                                    |   |              | -      |   |              |   | - |   |   |   | (14.0 | ) |   |   | - |   |
| Net unrealized gains and (losses) on available-for-sale assets |   |              | -      |   |              |   | 0.1 |   |   |   | 0.2 |   |   |   | (0.1 | ) |
| Balance, end of year (2)                                       |   | $                 | -      |   |              | $      | 26.9 |   |   | $ | - |   |   |   | 25.0 |   |

|   | (1) | Amount differs from actual expenditures incurred by ARC due to timing differences and discretionary reimbursements. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------|

|   | (2) | As at December 31, 2011 the restricted reclamation fund held the balance in investment grade assets. |
|--------|-----|------------------------------------------------------------------------------------------------------|

| 10.  | INTANGIBLE EXPLORATION AND EVALUATION ASSETS (“E&E”) |
|-----------|----------------------------------------------------------------------|

|                                |   | E&E |   |
|-------------------------------------|--------|---------|--------|
| Balance, January 1, 2010            |   | $       | 23.0   |   |
| Additions                           |   |    | 52.2   |   |
| Exploration and evaluation expenses |   |    | (0.8   | ) |
| Balance, December 31, 2010          |   | $       | 74.4   |   |
| Additions                           |   |    | 113.3  |   |
| Balance, December 31, 2011          |   | $       | 187.7  |   |

| 11.  | PROPERTY, PLANT AND EQUIPMENT |
|-----------|-------------------------------|

| Cost                                               |   | Development and Production Assets |    |   | Administrative Assets |   |
|----------------------------------------------------|--------|-----------------------------------|---------|--------|-----------------------|--------|
| Balance, January 1, 2010                           |   | $                                 | 3,537.5 |   |                  | $      | 12.9 |   |
| Additions                                          |   |                              | 584.3   |   |                  |   | 28.5 |   |
| Acquisition through business combinations (Note 5) |   |                              | 712.7   |   |                  |   | - |   |
| Assets reclassified as held for sale               |   |                              | (135.2  | )      |                  |   | - |   |
| Balance, December 31, 2010                         |   | $                                 | 4,699.3 |   |                  | $      | 41.4 |   |
| Additions                                          |   |                              | 818.3   |   |                  |   | 3.6 |   |
| Assets reclassified as held for sale               |   |                              | (13.0   | )      |                  |   | - |   |
| Balance, December 31, 2011                         |   | $                                 | 5,504.6 |   |                  | $      | 45.0 |   |

----

| Accumulated depletion, depreciation and amortization |   |   |   |   |   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance, January 1, 2010                             |   | $      | -      |   |   | $      | - |   |
| Depletion, depreciation and amortization             |   |   | (374.9 | )      |   |   | (3.1 | ) |
| Impairment loss (Note 6)                             |   |   | (30.7  | )      |   |   | - |   |
| Accumulated depletion reclassified as held for sale  |   |   | 11.2   |   |   |   | - |   |
| Balance, December 31, 2010                           |   | $      | (394.4 | )      |   | $      | (3.1 | ) |
| Depletion, depreciation and amortization             |   |   | (430.6 | )      |   |   | (5.7 | ) |
| Impairment loss (Note 6)                             |   |   | (71.9  | )      |   |   | - |   |
| Accumulated depletion reclassified as held for sale  |   |   | 1.7    |   |   |   | - |   |
| Balance, December 31, 2011                           |   | $      | (895.2 | )      |   | $      | (8.8 | ) |

| As at January 1, 2010   |   |   | 3,537.5 |   |   |   | 12.9 |   |
|-------------------------|--------|--------|---------|--------|--------|--------|------|--------|
| As at December 31, 2010 |   |   | 4,304.9 |   |   |   | 38.3 |   |
| As at December 31, 2011 |   |   | 4,609.4 |   |   |   | 36.2 |   |

| Assets held for sale       |   |   |   |   |   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|
| Balance, January 1, 2010   |   | $      | -      |   |   | $      | - |   |
| Additions                  |   |   | 123.9  |   |   |   | - |   |
| Balance, December 31, 2010 |   | $      | 123.9  |   |   | $      | - |   |
| Additions                  |   |   | 11.3   |   |   |   | - |   |
| Disposals                  |   |   | (130.6 | )      |   |   | - |   |
| Balance, December 31, 2011 |   | $      | 4.6    |   |   | $      | - |   |

| 12.  | FINANCIAL LIABILITIES AND LIQUIDITY RISK |
|-----------|------------------------------------------|

| ($ millions)                                            |   | 1 year |   |   | 2 - 3 years |   |   | 4 - 5years |   |   | Beyond 5 years |   |   | Total  |   |
|---------------------------------------------------------|--------|--------|--------|--------|------------------|--------|--------|------------|--------|--------|----------------|--------|--------|--------|--------|
| Accounts payable and accrued liabilities  (1) |   |   | 310.4  |   |             |   | -      |       |   |   | -              |   |   |   | -      |   |   |   | 310.4 |   |
| Dividends payable (2)                                   |   |   | 20.0   |   |             |   | -      |       |   |   | -              |   |   |   | -      |   |   |   | 20.0 |   |
| Risk management contracts (3)(4)                        |   |   | 14.7   |   |             |   | 4.4    |       |   |   | -              |   |   |   | -      |   |   |   | 19.1 |   |
| Senior notes and interest                               |   |   | 65.2   |   |             |   | 123.1  |       |   |   | 120.3          |   |   |   | 266.9  |   |   |   | 575.5 |   |
| Revolving credit facilities                             |   |   | -      |   |             |   | 319.9  |       |   |   | -              |   |   |   | -      |   |   |   | 319.9 |   |
| Working capital facility                                |   |   | 3.9    |   |             |   | -      |       |   |   | -              |   |   |   | -      |   |   |   | 3.9 |   |
| Accrued long-term incentive compensation (1)            |   |   | -      |   |             |   | 38.3   |       |   |   | -              |   |   |   | -      |   |   |   | 38.3 |   |
| Total financial liabilities                             |   |   | 414.2  |   |             |   | 485.7  |       |   |   | 120.3          |   |   |   | 266.9  |   |   |   | 1,287.1 |   |

|   | (1) | Liabilities under the RSU & PSU Plan represent the total amount expected to be paid out on vesting. |
|--------|-----|---------------------------------------------------------------------------------------------------------|

|   | (2)  | Amounts payable for the dividend represent the net cash payable after dividend reinvestment. |
|--------|-----------|----------------------------------------------------------------------------------------------|

|   | (3)  | Amounts payable under risk management contracts have been presented at their future value without any reduction for entity-specific risk. |
|--------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4)  | Risk management contracts are derivatives.  All other financial liabilities contained in this table are non-derivative liabilities. |
|--------|-----------|------------------------------------------------------------------------------------------------------------------------------------------|

----

| 13.  | LONG-TERM DEBT |
|-----------|----------------|

|                             | December 31,2011 |   | December 31, 2010 |   |   | January 1, 2010 |   |
|----------------------------------|------------------|--------|-------------------|--------|--------|-----------------|--------|
| Syndicated credit facilities:    |             |   |              |   |   |            |
|  Cdn$ denominated           |             | $      | 319.9             |   |   | $               | 357.7  |   |   | $ | 423.0 |   |
|  US $ denominated           |             |   | -                 |   |   |            | -      |   |   |   | 74.3 |   |
| Working capital facility         |             |   | 3.9               |   |   |            | 1.3    |   |   |   | 7.9 |   |
| Senior notes:                    |             |   |              |   |   |            |
| Master Shelf Agreement           |             |   |              |   |   |
| 5.42% US$ Note                   |             |   | 57.2              |   |   |            | 65.3   |   |   |   | 78.5 |   |
| 4.94% US$ Note                   |             |   | -                 |   |   |            | -      |   |   |   | 6.3 |   |
| 4.98% US$ Note                   |             |   | 50.9              |   |   |            | 49.7   |   |   |   | - |   |
| 2004 Note Issuance               |             |   |              |   |   |
| 4.62% US$ Note                   |             |   | 19.6              |   |   |            | 25.5   |   |   |   | 54.5 |   |
| 5.10% US$ Note                   |             |   | 24.4              |   |   |            | 23.9   |   |   |   | 65.4 |   |
| 2009 Note Issuance               |             |   |              |   |   |
| 7.19% US$ Note                   |             |   | 68.6              |   |   |            | 67.1   |   |   |   | 70.6 |   |
| 8.21% US$ Note                   |             |   | 35.6              |   |   |            | 34.8   |   |   |   | 36.6 |   |
| 6.50% Cdn$ Note                  |             |   | 29.0              |   |   |            | 29.0   |   |   |   | 29.0 |   |
| 2010 Note Issuance               |             |   |              |
| 5.36% US$ Note                   |             |   | 152.6             |   |   |            | 149.2  |   |   |   | - |   |
| Total long-term debt outstanding |             | $      | 761.7             |   |   | $               | 803.5  |   |   | $ | 846.1 |   |

| Issue Date        | Remaining Principal | Coupon Rate | Maturity Date     | Principal Payment Terms                              |
|-------------------|---------------------|-------------|-------------------|------------------------------------------------------|
| December 15, 2005 | US$56.3 million     | 5.42%       | December 15, 2017 | Eight equal installments beginning December 15, 2010 |
| March 5, 2010     | US$50.0 million     | 4.98%       | March 5, 2019     | Five equal installments beginning March 5, 2015      |

----

| Issue Date     | Remaining Principal | Coupon Rate | Maturity Date  | Principal Payment Terms                          |
|----------------|---------------------|-------------|----------------|--------------------------------------------------|
| April 27, 2004 | US$19.3 million     | 4.62%       | April 27, 2014 | Six equal installments beginning April 27, 2009  |
| April 27, 2004 | US$24.0 million     | 5.10%       | April 27, 2016 | Five equal installments beginning April 27, 2012 |
| April 14, 2009 | US $67.5 million    | 7.19%       | April 14, 2016 | Five equal installments beginning April 14, 2012 |
| April 14, 2009 | US$35.0 million     | 8.21%       | April 14, 2021 | Five equal installments beginning April 14, 2017 |
| April 14, 2009 | Cdn $29.0 million   | 6.5%        | April 14, 2016 | Five equal installments beginning April 14, 2012 |
| May 27, 2010   | US$150.0 million    | 5.36%       | May 27, 2022   | Five equal installments beginning May 27, 2018   |

|                                                 |   | Credit Capacity |    |   | Drawn  |   |   | Remaining |   |
|------------------------------------------------------|--------|-----------------|---------|--------|--------|--------|--------|-----------|--------|
| Syndicated Credit Facility                           |   | $               | 1,000.0 |   |   | $      | 319.9  |      |   | $ | 680.1 |   |
| Working Capital Facility                             |   |            | 25.0    |   |   |   | 3.9    |      |   |   | 21.1 |   |
| Senior Notes Subject to a Master Shelf Agreement(1)  |   |            | 228.8   |   |   |   | 108.1  |      |   |   | 120.7 |   |
| Senior Notes Not Subject to a Master Shelf Agreement |   |            | 329.8   |   |   |   | 329.8  |      |   |   | - |   |
| Total                                                |   | $               | 1,583.6 |   |   | $      | 761.7  |      |   | $ | 821.9 |   |

|   | (1) | Total credit capacity is US$225 million. |
|--------|-----|------------------------------------------|

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

|   | · | Long-term debt, letters of credit, and subordinated debt not to exceed four times trailing twelve month 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. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.  | ASSET RETIREMENT OBLIGATIONS |
|-----------|------------------------------|

----

|                                                                     |   | Year EndedDecember 31, 2011 |   |   | Year EndedDecember 31, 2010 |   |
|--------------------------------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
| Balance, beginning of period                                             |   | $                           | 381.7  |   |                        | $      | 298.1 |   |
| Increase in liabilities relating to corporate acquisitions               |   |                        | -      |   |                        |   | 21.8 |   |
| Increase in liabilities relating to development activities               |   |                        | 6.3    |   |                        |   | 4.6 |   |
| Increase in liabilities relating to change in estimate and discount rate |   |                        | 105.6  |   |                        |   | 64.3 |   |
| Settlement of reclamation liabilities during the period                  |   |                        | (8.4   | )      |                        |   | (7.8 | ) |
| Accretion expense                                                        |   |                        | 13.4   |   |                        |   | 12.6 |   |
| Reclassified as liabilities associated with assets held for sale         |   |                        | (2.2   | )      |                        |   | (11.9 | ) |
| Balance, end of period                                                   |   | $                           | 496.4  |   |                        | $      | 381.7 |   |

| 15.  | CAPITAL MANAGEMENT |
|-----------|--------------------|

|   | · | Fund its development and exploration program; |
|--------|--------|-----------------------------------------------|

|   | · | Provide financial flexibility to execute on strategic opportunities; and |
|--------|--------|--------------------------------------------------------------------------|

|   | · | 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 in order to normalize the effect of commodity price volatility to shareholders. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Common shares and |
|--------|--------|-------------------|

|   | · | Net debt, which includes long-term debt and working capital deficit, if any.  Working capital deficit is calculated as current liabilities less current assets, 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 |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ($ millions)                                 |   | December 31, 2011 |   |   | December 31, 2010 |   |
|----------------------------------------------|--------|-------------------|--------|--------|-------------------|--------|
| Cash from operating activities               |   |              | 902.7  |   |              |   | 677.0 |   |
| Net change in other liabilities (Note 22)    |   |              | 9.6    |   |              |   | (7.9 | ) |
| Change in non-cash working capital (Note 22) |   |              | (68.0  | )      |              |   | (2.1 | ) |
| Funds from operations(1)                     |   |              | 844.3  |   |              |   | 667.0 |   |

| ($ millions, except per share and per cent amounts)                                          |   | December 31, 2011 |    |   | December 31, 2010 |   |
|----------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
| Long-term debt(2)                                                                            |   |              | 761.7   |   |              |   | 803.5 |   |
| Accounts payable and accrued liabilities                                                     |   |              | 305.0   |   |              |   | 211.7 |   |
| Dividends payable                                                                            |   |              | 28.9    |   |              |   | 27.7 |   |
| Financial liabilities associated with assets held for sale                                   |   |              | 0.3     |   |              |   | 6.1 |   |
| Cash and cash equivalents, accounts receivable, prepaid expenses, and short term investments |   |              | (186.2  | )      |              |   | (178.0 | ) |
| Net debt obligations (1)                                                                     |   |              | 909.7   |   |              |   | 871.0 |   |
|                                                                                         |   |              |    |   |              |   |   |   |
| Shares outstanding (millions)                                                                |   |              | 288.9   |   |              |   | 284.4 |   |
| Share price (3)                                                                              |   |              | 25.10   |   |              |   | 25.41 |   |
| Market capitalization (1)                                                                    |   |              | 7,251.4 |   |              |   | 7,226.6 |   |
| Net debt obligations (1)                                                                     |   |              | 909.7   |   |              |   | 871.0 |   |
| Total capitalization (1)                                                                     |   |              | 8,161.1 |   |              |   | 8,097.6 |   |
|                                                                                         |   |              |    |   |              |   |   |   |
| Net debt as a percentage of total capitalization                                             |   |              | 11.1    | %      |              |   | 10.8 | % |
| Net debt obligations to annualized funds from operations                                     |   |              | 1.1     |   |              |   | 1.3 |   |

----

|   | (1) | Funds from Operations, net debt obligations, market capitalization and total capitalization as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Includes current portion of long-term debt at December 31, 2011 and 2010 of $40.5 million and $15.7 million respectively. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------|

|   | (3) | TSX closing price as at December 31, 2011 and December 31, 2010 respectively. |
|--------|-----|-------------------------------------------------------------------------------|

| 16.  | FINANCIAL INSTRUMENTS AND MARKET RISK MANAGEMENT |
|-----------|--------------------------------------------------|

|   | · | Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.  Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1.  Prices in Level 2 are either directly or indirectly observable as of the reporting date.  Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

| Sensitivity of Commodity Price Risk Management Contracts: |   |
|-----------------------------------------------------------|--------|
|                                                      |   | Increase in Commodity Price |   |   | Decrease in Commodity Price |   |
|                                                      |   | Crude oil |   |   | Natural gas |   |   | Crude oil |   |   | Natural gas |   |
| Net income (decrease) increase                            |   |   | (78.5 | ) |   |   | (7.0 | ) |   |   | 76.6 |   |   |   | 7.1 |   |

----

| Sensitivity of Foreign Exchange Exposure: |   | Increase in Cdn$/US$ rate |   |   | Decrease in Cdn$/US$ rate |   |
|-------------------------------------------|--------|---------------------------|--------|--------|---------------------------|--------|
| Risk management contracts                 |   | $                         | 3.1    |   |                      | $      | (2.8 | ) |
| U.S dollar denominated debt               |   |                      | (44.5  | )      |                      |   | 44.5 |   |
| Net income (decrease) increase            |   | $                         | (41.4  | )      |                      | $      | 41.7 |   |

| Financial WTI Crude Oil Contracts |      |   |   |   |
|-----------------------------------|-----------|--------|--------|--------|
| Term                              | Contract  |   | Volume |   |   | Bought Put |   |   | Sold Put |   |   | Sold Call |   |   | Bought Call |   |
|                              |      |   |   | bbl/d  |   |   | US $/bbl(1) |   |   | US $/bbl(1) |   |   | US $/bbl |   |   | US $/bbl(1) |   |
| 1-Jan-12                          | 31-Dec-12 | Collar |   |   | 1,000 |   |   | $ | 90.00 |   |   |   | - |   |   | $ | 90.00 | (2) |   |   | - |   |
| 1-Jan-12                          | 31-Dec-12 | 3-Way  |   |   | 5,000 |   |   | $ | 90.00 |   |   | $ | 60.00 |   |   | $ | 90.00 | (2) |   |   | - |   |
| 1-Jan-12                          | 31-Dec-12 | Collar |   |   | 1,000 |   |   | $ | 90.00 |   |   |   | - |   |   | $ | 90.00 | (1) |   |   | - |   |
| 1-Jan-12                          | 31-Dec-12 | 4-Way  |   |   | 3,000 |   |   | $ | 90.00 |   |   | $ | 70.00 |   |   | $ | 90.00 | (1) |   | $ | 120.00 |   |
| 1-Jan-12                          | 31-Dec-12 | 3-Way  |   |   | 1,000 |   |   | $ | 90.00 |   |   | $ | 70.00 |   |   | $ | 90.00 | (1) |   |   | - |   |
| 1-Jan-12                          | 31-Dec-12 | 3-Way  |   |   | 3,000 |   |   | $ | 90.00 |   |   | $ | 65.00 |   |   | $ | 90.00 | (1) |   |   | - |   |
| 1-Jan-12                          | 31-Dec-12 | 4-Way  |   |   | 1,000 |   |   | $ | 90.00 |   |   | $ | 60.00 |   |   | $ | 90.00 | (1) |   | $ | 105.00 |   |
| 1-Jan-12                          | 31-Dec-12 | 3-Way  |   |   | 1,000 |   |   | $ | 90.00 |   |   | $ | 60.00 |   |   | $ | 90.00 | (1) |   |   | - |   |
| 1-Jan-12                          | 31-Dec-12 | 3-Way  |   |   | 2,000 |   |   | $ | 90.00 |   |   | $ | 60.00 |   |   | $ | 100.00 | (2) |   |   | - |   |
| 1-Jan-13                          | 31-Dec-13 | 3-Way  |   |   | 2,000 |   |   | $ | 90.00 |   |   | $ | 60.00 |   |   | $ | 100.00 | (2) |   |   | - |   |
| 1-Jan-13                          | 31-Dec-13 | 3-Way  |   |   | 4,000 |   |   | $ | 95.00 |   |   | $ | 65.00 |   |   | $ | 105.00 | (2) |   |   | - |   |
| 1-Jan-13                          | 30-Jun-13 | Collar |   |   | 2,000 |   |   | $ | 90.00 |   |   |   | - |   |   | $ | 110.00 | (2) |   |   | - |   |

|   | (1) | Settled on the monthly average price |
|--------|-----|--------------------------------------|

|   | (2) | Settled on the term average price |
|--------|-----|-----------------------------------|

| Financial WTI Crude Oil Swap Contracts(3) |
|-------------------------------------------|
| Term                                      | Contract | Volume | Sold Swap |
|                                      |   |   | bbl/d | US$/bbl |
|  1-Jan-13                            | 30-Jun-13 | Swap | 2,000 | $90.075 |

|   | (3) | Settled on the monthly average price |
|--------|-----|--------------------------------------|

| Financial WTI Crude Oil Calendar Spread Contracts(4) |
|------------------------------------------------------|
| Term                                                 | Contract | Volume | Spread |
|                                                 |   |   | bbl/d | US$/bbl |
| 1-Jan-12                                             | 31-Dec-12 | 1st vs. 2nd Month | 4,000 | $0.12 |

|   | (4) | ARC pays the prompt contract monthly average; ARC receives the second delivery month contract average plus the calendar spread |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------|

| Financial NYMEX Natural Gas Swap Contracts(5) |
|-----------------------------------------------|
| Term                                          | Contract | Volume | Sold Swap |
|                                          |   |   | mmbtu/d | US$/mmbtu |
| 1-Jan-12                                      | 31-Mar-12 | Swap | 55,000 | $5.03 |
| 1-Apr-12                                      | 31-Oct-12 | Swap | 65,000 | $4.94 |
| 1-Jan-12                                      | 31-Dec-12 | Swap | 25,000 | $5.08 |

|   | (5) | Last Day Settlement |
|--------|-----|---------------------|

----

| Financial Basis Swap Contracts |
|--------------------------------|
| Term                           | Contract | Volume | Sold Swap | Ratio Sold Swap |   |
|                           |   |   | mmbtu/d | US$/mmbtu(6) | AECO/NYMEX (7) |   |
| 1-Jan-12                       | 31-Oct-12 | L3d Settlement | 15,000 | ($0.4067) |   |   |
| 1-Jan-12                       | 31-Oct-12 | Ld Settlement | 75,000 | ($0.5276) |   |   |
| 1-Jan-12                       | 31-Dec-12 | Ld Settlement | 20,000 | - | 0.9012 |   |
| 1-Nov-12                       | 31-Dec-12 | Ld Settlement | 50,000 | ($0.6035) |   |   |

|   | (6) | ARC receives Nymex price based on Last Day (Ld) or Last 3 Day (L3d) settlement less fixed basis; ARC pays AECO (7a) monthly index $US/mmbtu |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | ARC receives Nymex price based on Last Day (Ld) settlement multiplied by AECO/NYMEX $US/mmbtu ratio; ARC pays AECO (7a) monthly index $US/mmbtu |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

| US$ Obligations (8) |
|---------------------|
|  Forward Date  | Contract | Notional US$ |   |  CDN$/US$ |  US$/CDN$ |
| 09-Jan-12           | USD Purchased Forward | $30,000,000 |   | $1.0124 | $0.9878 |

|   | (8) | Based on USD payments that relate to annual settled call contracts. |
|--------|-----|---------------------------------------------------------------------|

| Financial Electricity Heat Rate Contracts (9) |
|-----------------------------------------------|
| Term                                          | Contract | Volume | AESO Power | AECO 5(a) | multiplied | Heat Rate |
|                                          |   |   | MWh | $C/MWh | $C/GJ | by | GJ/MWh |
| 1-Jan-12                                      | 31-Dec-12 | Heat Rate Swap | 15 | Receive AESO | Pay AECO 5(a) | X |  9.10 |
| 1-Jan-13                                      | 31-Dec-13 | Heat Rate Swap | 10 | Receive AESO | Pay AECO 5(a) | X |  9.15 |

|   | (9) | Alberta Power Pool (monthly average 24x7); AECO Monthly (5a) index |
|--------|-----|--------------------------------------------------------------------|

| Financial Electricity Contracts (10) |
|--------------------------------------|
| Term                                 | Contract | Volume | Bought Swap |
|                                 |   |   | MWh | Cdn$/MWh |
| 01-Jan-12                            | 31-Dec-12 | Swap | 5 | $72.50 |

|   | (10)Alberta Power Pool (monthly average 24x7) |
|--------|-----------------------------------------------|

| 17.  | INCOME TAXES |
|-----------|--------------|

|                                           |   | December 31, 2011 |   | December 31, 2010 |
|------------------------------------------------|--------|-------------------|--------|-------------------|
| Income before deferred income tax recovery     |   | $                 | 384.0  |              |   | $ | 245.4 |   |
| Canadian statutory rate (1)                    |   |              | 26.5   | %                 |   |   | 28.0 | % |
| Expected income tax expense at statutory rates |   |              | 101.8  |              |   |   | 68.7 |   |
| Effect on income tax of:                       |   |              |   |              |   |   |   |   |
| Net income of ARC Energy Trust                 |   |              | -      |              |   |   | (75.5 | ) |
| Effect of change in corporate tax rate         |   |              | (6.4   | )                 |   |   | 28.6 |   |
| Unrealized loss on foreign exchange            |   |              | 1.7    |              |   |   | 0.8 |   |
| Change in estimated pool balances              |   |              | (0.3   | )                 |   |   | (0.9 | ) |
| Loss on revaluation of exchangeable shares     |   |              | -      |              |   |   | 12.2 |   |
| Other non-deductible items                     |   |              | 0.2    |              |   |   | (0.7 | ) |
| Deferred income tax expense                    |   | $                 | 97.0   |              |   | $ | 33.2 |   |

|   | (1) | The statutory rate consists of the combined statutory tax rate for the Company and its subsidiaries for the year ended December 31, 2011 and the combined statutory tax rate for the Trust and its subsidiaries for the year ended December 31, 2010. The general combined Federal/ Provincial tax rate lowered to 26.5% in 2011 from 28% in 2010 due to the Federal rate dropping from 18% (2010) to 16.5% in 2011. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                  |   | December 31, 2011 |   |   | December 31, 2010 |   |   | January 1, 2010 |   |
|-------------------------------------------------------|--------|-------------------|--------|--------|-------------------|--------|--------|-----------------|--------|
| Deferred tax liabilities:                             |   |              |   |   |              |   |   |            |   |
| Capital assets in excess of tax value                 |   | $                 | 610.9  |   |              | $      | 575.9  |            |   | $ | 389.3 |   |
| Risk management contracts                             |   |              | 6.2    |   |              |   | 11.0   |            |   |   | 2.3 |   |
| Long-term debt                                        |   |              | 6.1    |   |              |   | 7.7    |            |   |   | 8.5 |   |
|    Partnership Deferral                |   |              | 120.5  |   |              |   | -      |            |   |   | - |   |
|                                                  |   |              |   |   |              |   |   |            |   |   |   |   |
| Deferred tax assets:                                  |   |              |   |   |              |   |   |            |   |   |   |   |
| Asset retirement obligations                          |   |              | (124.5 | )      |              |   | (98.5  | )               |   |   | (74.8 | ) |
| Non-capital losses                                    |   |              | (80.7  | )      |              |   | (54.0  | )               |   |   | (49.9 | ) |
| Risk management contracts                             |   |              | (5.5   | )      |              |   | (5.1   | )               |   |   | (3.4 | ) |
| Long-term incentive compensation expense              |   |              | (13.1  | )      |              |   | (12.0  | )               |   |   | (8.2 | ) |
| Attributed Canadian royalty income                    |   |              | (4.5   | )      |              |   | (4.5   | )               |   |   | (4.5 | ) |
| Make whole payment                                    |   |              | (0.8   | )      |              |   | (1.0   | )               |   |   | - |   |
| CEC, SR&ED pools and deductible share issue costs |   |              | (8.2   | )      |              |   | (8.9   | )               |   |   | (4.2 | ) |
| Deferred income tax liability                         |   | $                 | 506.4  |   |              | $      | 410.6  |            |   | $ | 255.1 |   |

| ($ millions)                             |   | BalanceJanuary 1, 2010Asset (Liability) |   |   | Recognized in profit or lossAsset (Liability) |   |   | Recognized in equityAsset (Liability) |   |   | Acquired in business combinationAsset (Liability) |   |   | Recognized in Property, plant and equipmentAsset (Liability) |   |   | BalanceDecember 31, 2010Asset (Liability) |   |
|------------------------------------------|--------|-----------------------------------------|--------|--------|-----------------------------------------------|--------|--------|---------------------------------------|--------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                     |   |                                    |   |   |                                          |   |   |                                  |   |   |                                              |   |   |                                                         |   |   |                                      |   |
| Property, plant and equipment            |   |                                    | (389.3 | )      |                                          |   | (56.8  | )                                     |   |   | -                                                 |   |   |                                                         | (134.3 | )      |                                      |   | 4.5 |   |   |   | (575.9 | ) |
| Risk management contracts                |   |                                    | 1.1    |   |                                          |   | (7.2   | )                                     |   |   | 0.2                                               |   |   |                                                         | -      |   |                                      |   | - |   |   |   | (5.9 | ) |
| Long-term debt                           |   |                                    | (8.5   | )      |                                          |   | 0.8    |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | (7.7 | ) |
| Asset retirement obligation              |   |                                    | 74.8   |   |                                          |   | 18.2   |                                  |   |   | -                                                 |   |   |                                                         | 5.5    |   |                                      |   | - |   |   |   | 98.5 |   |
| Non-capital losses                       |   |                                    | 49.9   |   |                                          |   | 4.1    |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 54.0 |   |
| Long-term incentive compensation expense |   |                                    | 8.2    |   |                                          |   | 3.8    |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 12.0 |   |
| Attributed Canadian Royalty Income       |   |                                    | 4.5    |   |                                          |   | -      |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 4.5 |   |
| Make whole payment                       |   |                                    | -      |   |                                          |   | 1.0    |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 1.0 |   |
| Other                                    |   |                                    | 4.2    |   |                                          |   | 2.9    |                                  |   |   | 1.6                                               |   |   |                                                         | 0.2    |   |                                      |   | - |   |   |   | 8.9 |   |
| Total                                    |   |                                    | (255.1 | )      |                                          |   | (33.2  | )                                     |   |   | 1.8                                               |   |   |                                                         | (128.6 | )      |                                      |   | 4.5 |   |   |   | (410.6 | ) |

| ($ millions)                             |   | BalanceJanuary 1, 2011Asset (Liability) |   |   | Recognized in profit or lossAsset (Liability) |   |   | Recognized in equityAsset (Liability) |   |   | Acquired in business combinationAsset (Liability) |   |   | Recognized in Property, plant and equipmentAsset (Liability) |   |   | BalanceDecember 31, 2011Asset (Liability) |   |
|------------------------------------------|--------|-----------------------------------------|--------|--------|-----------------------------------------------|--------|--------|---------------------------------------|--------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                     |   |                                    |   |   |                                          |   |   |                                  |   |   |                                              |   |   |                                                         |   |   |                                      |   |
| Property, plant and equipment            |   |                                    | (575.9 | )      |                                          |   | (36.3  | )                                     |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | 1.3 |   |   |   | (610.9 | ) |
| Risk management contracts                |   |                                    | (5.9   | )      |                                          |   | 5.4    |                                  |   |   | (0.2                                              | )      |   |                                                         | -      |   |                                      |   | - |   |   |   | (0.7 | ) |
| Long-term debt                           |   |                                    | (7.7   | )      |                                          |   | 1.6    |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | (6.1 | ) |
| Partnership deferral                     |   |                                    | -      |   |                                          |   | (120.5 | )                                     |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | (120.5 | ) |
| Asset retirement obligation              |   |                                    | 98.5   |   |                                          |   | 26.0   |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 124.5 |   |
| Non-capital losses                       |   |                                    | 54.0   |   |                                          |   | 26.7   |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 80.7 |   |
| Long-term incentive compensation expense |   |                                    | 12.0   |   |                                          |   | 1.1    |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 13.1 |   |
| Attributed Canadian Royalty Income       |   |                                    | 4.5    |   |                                          |   | -      |                                  |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 4.5 |   |
| Make whole payment                       |   |                                    | 1.0    |   |                                          |   | (0.2   | )                                     |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | - |   |   |   | 0.8 |   |
| Other                                    |   |                                    | 8.9    |   |                                          |   | (0.8   | )                                     |   |   | -                                                 |   |   |                                                         | -      |   |                                      |   | 0.1 |   |   |   | 8.2 |   |
| Total                                    |   |                                    | (410.6 | )      |                                          |   | (97.0  | )                                     |   |   | (0.2                                              | )      |   |                                                         | -      |   |                                      |   | 1.4 |   |   |   | (506.4 | ) |

----

|                                   |   | December 31, 2011 |    |   | December 31, 2010 |   |    | January 1, 2010 |   |
|----------------------------------------|--------|-------------------|---------|--------|-------------------|--------|---------|-----------------|--------|
| Canadian oil and gas property expenses |   | $                 | 876.8   |   |              | $      | 982.5   |            |   | $ | 951.6 |   |
| Canadian development expenses          |   |              | 678.0   |   |              |   | 504.4   |            |   |   | 391.1 |   |
| Canadian exploration expenses          |   |              | 103.6   |   |              |   | 95.5    |            |   |   | 105.6 |   |
| Undepreciated capital costs            |   |              | 690.0   |   |              |   | 619.2   |            |   |   | 432.2 |   |
| Non-capital losses                     |   |              | 290.7   |   |              |   | 183.9   |            |   |   | 181.9 |   |
| SR&ED tax pools                    |   |              | 28.7    |   |              |   | 22.2    |            |   |   | 0.8 |   |
| Other                                  |   |              | 19.7    |   |              |   | 26.0    |            |   |   | 15.2 |   |
| Estimated tax basis, federal           |   |              | 2,687.5 |   |              |   | 2,433.7 |            |   |   | 2,078.4 |   |
| Provincial tax pools                   |   |              | 177.6   |   |              |   | 177.6   |            |   |   | 155.5 |   |

| 18.  | SHAREHOLDERS’ CAPITAL |
|-----------|-----------------------------|

| (thousands of units)                        |   | Year Ended December 31, 2011 |   |   | Year Ended December 31, 2010 |   |
|---------------------------------------------|--------|------------------------------|--------|--------|-----------------------------------|--------|
| Trust units , beginning of year             |   |                         | -      |   |                              |   | 236,615 |   |
| Equity offering                             |   |                         | -      |   |                              |   | 13,000 |   |
| Issued on conversion of exchangeable shares |   |                         | -      |   |                              |   | 424 |   |
| Issued for acquisition consideration        |   |                         | -      |   |                              |   | 23,003 |   |
| Distribution reinvestment program           |   |                         | -      |   |                              |   | 3,683 |   |
| Exchanged pursuant to the Arrangement       |   |                         | -      |   |                              |   | (276,725 | ) |
| Trust units, end of year                    |   |                         | -      |   |                              |   | - |   |

| (thousands of shares)                                           |   | Year EndedDecember 31, 2011 |    |   | Year EndedDecember 31, 2010 |   |
|-----------------------------------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
| Common shares, beginning of year                                |   |                        | 284,379 |   |                        |   | - |   |
| Issued for trust units pursuant to the Arrangement              |   |                        | -       |   |                        |   | 276,725 |   |
| Issued for exchangeable shares pursuant to the Arrangement |   |                        | -       |   |                        |   | 7,654 |   |
| Dividend reinvestment program                                   |   |                        | 4,516   |   |                        |   | - |   |
| Common shares, end of year                                      |   |                        | 288,895 |   |                        |   | 284,379 |   |

| (thousands of shares)          |   | Year EndedDecember 31, 2011 |    |   | Year EndedDecember 31, 2010 |   |
|--------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
| Weighted average common shares |   |                        | 286,593 |   |                        |   | 259,903 |   |
| Diluted common shares          |   |                        | 286,593 |   |                        |   | 264,220 |   |

----

| 19.  | LONG TERM INCENTIVE PLANS |
|-----------|---------------------------|

| (number of units, thousands) |   | RSUs   |   |   | PSUs   |   |   | DSUs   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Balance, beginning of period |   |   | 1,017  |   |   |   | 1,301  |   |   |   | - |   |
| Granted                      |   |   | 381    |   |   |   | 522    |   |   |   | 64 |   |
| Distributed                  |   |   | (474   | )      |   |   | (304   | )      |   |   | - |   |
| Forfeited                    |   |   | (72    | )      |   |   | (74    | )      |   |   | - |   |
| Balance, end of period       |   |   | 852    |   |   |   | 1,445  |   |   |   | 64 |   |

|                               |   | Year EndedDecember 31, 2011 |   |   | Year EndedDecember 31, 2010 |   |
|------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
| General and administrative expense |   |                        | 25.5   |   |                        |   | 32.2 |   |
| Operating expense                  |   |                        | 4.3    |   |                        |   | 5.6 |   |
| Property, plant and equipment      |   |                        | 2.5    |   |                        |   | 5.9 |   |
| Total compensation charges         |   | $                           | 32.3   |   |                        | $      | 43.7 |   |
| Cash payments                      |   | $                           | 28.1   |   |                        | $      | 28.0 |   |

----

| Weighted average share price     |   | $              | 27.11  |   |
|----------------------------------|--------|----------------|--------|--------|
| Exercise price                   |   | $              | 27.11  |   |
| Expected annual dividends        |   | $              | 1.20   |   |
| Expected volatility (1)          |   |           | 37.00  | %      |
| Risk-free interest rate          |   |           | 2.61   | %      |
| Expected life of share option(2) |   | 5.5 to 6 years |   |

|                           |   | Number of share     |    |   | Weighted average |   |
|--------------------------------|--------|---------------------|---------|--------|------------------|--------|
|                           |   | options outstanding |    |   | exercise price   |   |
| Balance, beginning of year     |   |                | -       |   |             | $      | - |   |
| Granted                        |   |                | 430,990 |   |             |   | 27.11 |   |
| Exercised                      |   |                | -       |   |             |   | - |   |
| Forfeited                      |   |                | (11,708 | )      |             |   | 27.11 |   |
| Balance, December 31, 2011     |   |                | 419,282 |   |             | $      | 27.11 |   |
| Exercisable, December 31, 2011 |   |                | -       |   |             | $      | - |   |

| 20.  | COMMITMENTS AND CONTINGENCIES |
|-----------|-------------------------------|

|                                  |   | 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 |   |

|   | (1) | Long-term and short-term debt. |
|--------|-----|--------------------------------|

|   | (2) | Fixed interest payments on senior notes. |
|--------|-----|------------------------------------------|

|   | (3) | Contribution commitments to a restricted reclamation fund associated with the Redwater property. |
|--------|-----|--------------------------------------------------------------------------------------------------|

|   | (4) | Fixed premiums to be paid in future periods on certain commodity risk management contracts. |
|--------|-----|---------------------------------------------------------------------------------------------|

----

| 21.  | RELATED PARTIES |
|-----------|-----------------|

| 22.  | SUPPLEMENTAL DISCLOSURES |
|-----------|--------------------------|

|                              | Year Ended December 31, 2011 |   | Year Ended December 31, 2010 |   |
|-----------------------------------|------------------------------|--------|------------------------------|--------|
| Operating                         |                         | $      | 25.5                         |   |   | $ | 23.7 |   |
| General and administrative        |                         |   | 71.5                         |   |   |   | 75.4 |   |
| Total employee compensation costs |                         | $      | 97.0                         |   |   | $ | 99.1 |   |

|                                     |   | Year Ended December 31, 2011 |   |   | Year Ended December 31, 2010 |   |
|------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|
| Accounts receivable                      |   | $                            | (11.6  | )      |                         | $      | (26.1 | ) |
| Accounts payable and accrued liabilities |   |                         | 86.5   |   |                         |   | 38.6 |   |
| Prepaid expenses                         |   |                         | (2.4   | )      |                         |   | 8.3 |   |
| Total                                    |   |                         | 72.5   |   |                         |   | 20.8 |   |
|                                     |   |                         |   |   |                         |   |   |   |
| Operating activities                     |   |                         | 68.0   |   |                         |   | 2.1 |   |
| Investing activities                     |   |                         | 4.5    |   |                         |   | 18.7 |   |
| Total                                    |   | $                            | 72.5   |   |                         | $      | 20.8 |   |

|                                       |   | Year Ended December 31, 2011 |   |   | Year Ended December 31, 2010 |   |
|--------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|
| Non-cash lease inducement                  |   | $                            | 0.3    |   |                         | $      | 6.6 |   |
| Loss on revaluation of exchangeable shares |   |                         | -      |   |                         |   | 48.8 |   |
| Loss (gain) on short term investments      |   |                         | 0.2    |   |                         |   | (0.9 | ) |
| Share option expense                       |   |                         | 0.5    |   |                         |   | - |   |
| Total other non-cash items                 |   | $                            | 1.0    |   |                         | $      | 54.5 |   |

----

|                                       |   | Year Ended December 31, 2011 |   |   | Year Ended December 31, 2010 |   |
|--------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|
| Long-term incentive compensation liability |   | $                            | (6.4   | )      |                         | $      | 13.7 |   |
| Risk management contracts                  |   |                         | 5.2    |   |                         |   | - |   |
| Asset retirement obligations               |   |                         | (8.4   | )      |                         |   | (7.8 | ) |
| Long-term government grant                 |   |                         | -      |   |                         |   | 2.0 |   |
| Total other liabilities                    |   | $                            | (9.6   | )      |                         | $      | 7.9 |   |

| 23.  | EXPLANATION OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS |
|-----------|--------------------------------------------------------------------------|

|   | (a) | Business Combinations |
|--------|-----|-----------------------|

|   | (b) | Deemed Cost |
|--------|-----|-------------|

|   | · | Exploration and evaluation assets at their carrying value under Canadian GAAP; and |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | Development and production assets at the amount determined by allocating their total net book value under Canadian GAAP on a pro rata basis using discounted proved plus probable reserve values. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Borrowing Costs |
|--------|-----|-----------------|

|   | (d) | Leases |
|--------|-----|--------|

----

----

| CONSOLIDATED BALANCE SHEET |
|----------------------------|
| As at January 1, 2010      |

| (Cdn$ millions)                                  |   | Previous Canadian GAAP |    |   | Effect of transition to IFRS |   |   | IFRS   |   |
|--------------------------------------------------|--------|------------------------|---------|--------|------------------------------|--------|--------|--------|--------|
| ASSETS                                           |   |                   |    |   |                         |   |   |   |   |
| Current assets                                   |   |                   |    |   |                         |   |   |   |   |
| Accounts receivable                              |   | $                      | 115.9   |   |                         | $      | -      |   |   | $ | 115.9 |   |
| Prepaid expenses                                 |   |                   | 18.2    |   |                         |   | -      |   |   |   | 18.2 |   |
| Risk management contracts                        |   |                   | 5.9     |   |                         |   | -      |   |   |   | 5.9 |   |
| Future income/deferred taxes (j)                 |   |                   | 7.1     |   |                         |   | (7.1   | )      |   |   | - |   |
|                                             |   |                   | 147.1   |   |                         |   | (7.1   | )      |   |   | 140.0 |   |
| Reclamation funds                                |   |                   | 33.2    |   |                         |   | -      |   |   |   | 33.2 |   |
| Risk management contracts                        |   |                   | 3.2     |   |                         |   | -      |   |   |   | 3.2 |   |
| Property, plant and equipment (b)                |   |                   | 3,573.4 |   |                         |   | (23.0  | )      |   |   | 3,550.4 |   |
| Intangible exploration and evaluation assets (b) |   |                   | -       |   |                         |   | 23.0   |   |   |   | 23.0 |   |
| Goodwill                                         |   |                   | 157.6   |   |                         |   | -      |   |   |   | 157.6 |   |
| Total assets                                     |   | $                      | 3,914.5 |   |                         | $      | (7.1   | )      |   | $ | 3,907.4 |   |
|                                             |   |                   |    |   |                         |   |   |   |   |   |   |   |
| LIABILITIES                                      |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Current liabilities                              |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Accounts payable and accrued liabilities         |   | $                      | 166.7   |   |                         | $      | -      |   |   | $ | 166.7 |   |
| Current portion of long-term debt (i)            |   |                   | -       |   |                         |   | 27.0   |   |   |   | 27.0 |   |
| Distributions payable                            |   |                   | 23.7    |   |                         |   | -      |   |   |   | 23.7 |   |
| Risk management contracts                        |   |                   | 12.9    |   |                         |   | -      |   |   |   | 12.9 |   |
| Exchangeable shares (f)                          |   |                   | -       |   |                         |   | 47.2   |   |   |   | 47.2 |   |
|                                             |   |                   | 203.3   |   |                         |   | 74.2   |   |   |   | 277.5 |   |
| Risk management contracts                        |   |                   | 1.0     |   |                         |   | -      |   |   |   | 1.0 |   |
| Long-term debt  (i)                    |   |                   | 846.1   |   |                         |   | (27.0  | )      |   |   | 819.1 |   |
| Accrued long-term incentive compensation         |   |                   | 10.9    |   |                         |   | -      |   |   |   | 10.9 |   |
| Asset retirement obligations (e)                 |   |                   | 149.9   |   |                         |   | 148.2  |   |   |   | 298.1 |   |
| Future income/deferred taxes (j)                 |   |                   | 328.9   |   |                         |   | (73.8  | )      |   |   | 255.1 |   |
| Total liabilities                                |   |                   | 1,540.1 |   |                         |   | 121.6  |   |   |   | 1,661.7 |   |
|  COMMITMENTS AND CONTINGENCIES              |   |                   |    |   |                         |   |   |   |   |   |   |   |
|                                             |   |                   |    |   |                         |   |   |   |   |   |   |   |
| UNITHOLDERS’ EQUITY                        |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Unitholders’ capital (f), (k)              |   |                   | 2,917.6 |   |                         |   | (19.3  | )      |   |   | 2,898.3 |   |
| Non-controlling interest (f)                     |   |                   | 36.0    |   |                         |   | (36.0  | )      |   |   | - |   |
| Deficit (l)                                      |   |                   | (578.6  | )      |                         |   | (73.4  | )      |   |   | (652.0 | ) |
| Accumulated other comprehensive loss             |   |                   | (0.6    | )      |                         |   | -      |   |   |   | (0.6 | ) |
| Total unitholders’ equity                  |   |                   | 2,374.4 |   |                         |   | (128.7 | )      |   |   | 2,245.7 |   |
| Total liabilities and unitholders’ equity  |   | $                      | 3,914.5 |   |                         | $      | (7.1   | )      |   | $ | 3,907.4 |   |

----

| (Cdn$ millions)                                       |   | Previous Canadian GAAP |    |   | Effect of Transition to IFRS |   |   | IFRS   |   |
|-------------------------------------------------------|--------|------------------------|---------|--------|------------------------------|--------|--------|--------|--------|
| ASSETS                                                |   |                   |    |   |                         |   |   |   |   |
| Current assets                                        |   |                   |    |   |                         |   |   |   |   |
| Cash and cash equivalents (a)                         |   | $                      | 0.3     |   |                         | $      | 1.7    |   |   | $ | 2.0 |   |
| Accounts receivable                                   |   |                   | 160.5   |   |                         |   | -      |   |   |   | 160.5 |   |
| Prepaid expenses                                      |   |                   | 12.0    |   |                         |   | -      |   |   |   | 12.0 |   |
| Risk management contracts                             |   |                   | 66.8    |   |                         |   | -      |   |   |   | 66.8 |   |
| Short-term investment                                 |   |                   | 3.5     |   |                         |   | -      |   |   |   | 3.5 |   |
| Assets held for sale (g)                              |   |                   | -       |   |                         |   | 123.9  |   |   |   | 123.9 |   |
|                                                  |   |                   | 243.1   |   |                         |   | 125.6  |   |   |   | 368.7 |   |
| Restricted cash (a)                                   |   |                   | 1.7     |   |                         |   | (1.7   | )      |   |   | - |   |
| Reclamation funds                                     |   |                   | 25.0    |   |                         |   | -      |   |   |   | 25.0 |   |
| Risk management contracts                             |   |                   | 0.6     |   |                         |   | -      |   |   |   | 0.6 |   |
| Property, plant and equipment (b), (c), (d), (e), (g) |   |                   | 4,432.9 |   |                         |   | (89.7  | )      |   |   | 4,343.2 |   |
| Intangible exploration and evaluation assets (b)      |   |                   | -       |   |                         |   | 74.4   |   |   |   | 74.4 |   |
| Goodwill (h)                                          |   |                   | 243.2   |   |                         |   | 5.0    |   |   |   | 248.2 |   |
| Total assets                                          |   | $                      | 4,946.5 |   |                         | $      | 113.6  |   |   | $ | 5,060.1 |   |
|                                                  |   |                   |    |   |                         |   |   |   |   |   |   |   |
| LIABILITIES                                           |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Current liabilities                                   |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Accounts payable and accrued liabilities (g)          |   | $                      | 217.8   |   |                         | $      | (6.1   | )      |   | $ | 211.7 |   |
| Current portion of long-term debt (i)                 |   |                   | -       |   |                         |   | 15.7   |   |   |   | 15.7 |   |
| Distributions payable                                 |   |                   | 27.7    |   |                         |   | -      |   |   |   | 27.7 |   |
| Exchangeable shares (f), (m)                          |   |                   | -       |   |                         |   | -      |   |   |   | - |   |
| Risk management contracts                             |   |                   | 22.0    |   |                         |   | -      |   |   |   | 22.0 |   |
| Future income/deferred taxes (j)                      |   |                   | 6.0     |   |                         |   | (6.0   | )      |   |   | - |   |
| Liabilities associated with assets held for sale (g)  |   |                   | -       |   |                         |   | 18.0   |   |   |   | 18.0 |   |
|                                                  |   |                   | 273.5   |   |                         |   | 21.6   |   |   |   | 295.1 |   |
| Risk management contracts                             |   |                   | 20.9    |   |                         |   | -      |   |   |   | 20.9 |   |
| Long-term debt (i)                                    |   |                   | 803.5   |   |                         |   | (15.7  | )      |   |   | 787.8 |   |
| Long-term incentive compensation liability            |   |                   | 26.6    |   |                         |   | -      |   |   |   | 26.6 |   |
| Other deferred liabilities                            |   |                   | 25.0    |   |                         |   | -      |   |   |   | 25.0 |   |
| Asset retirement obligations (e), (g), (h)            |   |                   | 169.1   |   |                         |   | 212.6  |   |   |   | 381.7 |   |
| Future income/deferred taxes (j)                      |   |                   | 433.5   |   |                         |   | (22.9  | )      |   |   | 410.6 |   |
| Total liabilities                                     |   |                   | 1,752.1 |   |                         |   | 195.6  |   |   |   | 1,947.7 |   |
|                                                  |   |                   |    |   |                         |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES                         |   |                   |    |   |                         |   |   |   |   |   |   |   |
|                                                  |   |                   |    |   |                         |   |   |   |   |   |   |   |
| SHAREHOLDERS’ EQUITY                            |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Shareholders’ capital (m)                       |   |                   | 3,194.5 |   |                         |   | (82.0  | )      |   |   | 3,112.5 |   |
| Deficit (l), (m)                                      |   |                   | -       |   |                         |   | -      |   |   |   | - |   |
| Accumulated other comprehensive loss                  |   |                   | (0.1    | )      |                         |   | -      |   |   |   | (0.1 | ) |
| Total shareholders’ equity                      |   |                   | 3,194.4 |   |                         |   | (82.0  | )      |   |   | 3,112.4 |   |
| Total liabilities and shareholders’ equity      |   | $                      | 4,946.5 |   |                         | $      | 113.6  |   |   | $ | 5,060.1 |   |

----

| (Cdn$ millions)                                                          |   | Previous Canadian GAAP |    |   | Effect of Transition to IFRS |   |   | IFRS   |   |
|--------------------------------------------------------------------------|--------|------------------------|---------|--------|------------------------------|--------|--------|--------|--------|
|                                                                     |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Sales of crude oil, natural gas and natural gas liquids                  |   | $                      | 1,213.7 |   |                         | $      | -      |   |   | $ | 1,213.7 |   |
| Royalties                                                                |   |                   | (192.8  | )      |                         |   | -      |   |   |   | (192.8 | ) |
| REVENUE                                                                  |   |                   | 1,020.9 |   |                         |   | -      |   |   |   | 1,020.9 |   |
|                                                                     |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Gain on risk management contracts                                        |   |                   | 93.6    |   |                         |   | -      |   |   |   | 93.6 |   |
|                                                                     |   |                   | 1,114.5 |   |                         |   | -      |   |   |   | 1,114.5 |   |
|                                                                     |   |                   |    |   |                         |   |   |   |   |   |   |   |
| EXPENSES                                                                 |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Transportation                                                           |   |                   | 29.7    |   |                         |   | -      |   |   |   | 29.7 |   |
| Operating                                                                |   |                   | 261.9   |   |                         |   | -      |   |   |   | 261.9 |   |
| Exploration and evaluation expenses (b)                                  |   |                   | -       |   |                         |   | 0.8    |   |   |   | 0.8 |   |
| General and administrative                                               |   |                   | 91.6    |   |                         |   | -      |   |   |   | 91.6 |   |
| Interest and financing charges                                           |   |                   | 42.5    |   |                         |   | -      |   |   |   | 42.5 |   |
| Accretion of asset retirement obligation (e)                             |   |                   | 9.9     |   |                         |   | 2.7    |   |   |   | 12.6 |   |
| Depletion, depreciation, amortization and impairment (recovery) (c), (d) |   |                   | 451.2   |   |                         |   | (42.5  | )      |   |   | 408.7 |   |
| Gain on foreign exchange                                                 |   |                   | (26.8   | )      |                         |   | -      |   |   |   | (26.8 | ) |
| Loss on revaluation of exchangeable shares (f)                           |   |                   | -       |   |                         |   | 48.8   |   |   |   | 48.8 |   |
|                                                                     |   |                   | 860.0   |   |                         |   | 9.8    |   |   |   | 869.8 |   |
|                                                                     |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Gain on short term investments                                           |   |                   | 0.9     |   |                         |   | -      |   |   |   | 0.9 |   |
| Capital and other taxes                                                  |   |                   | (0.2    | )      |                         |   | -      |   |   |   | (0.2 | ) |
| Future income/deferred tax recovery (expense) (j), (k)                   |   |                   | 5.6     |   |                         |   | (38.8  | )      |   |   | (33.2 | ) |
| Net income                                                               |   | $                      | 260.8   |   |                         | $      | (48.6  | )      |   | $ | 212.2 |   |
|                                                                     |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Net income per unit                                                      |   |                   |    |   |                         |   |   |   |   |   |   |   |
| Basic                                                                    |   | $                      | 1.00    |   |                         | $      | (0.18  | )      |   | $ | 0.82 |   |
| Diluted                                                                  |   | $                      | 0.99    |   |                         | $      | (0.19  | )      |   | $ | 0.80 |   |

| (Cdn$ millions)                                                                                                                                                     |   | Previous Canadian GAAP |   |   | Effect of Transition to IFRS |   |   | IFRS   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|------------------------------|--------|--------|--------|--------|
|                                                                                                                                                                |   |                   |   |   |                         |   |   |   |   |
| Net Income                                                                                                                                                          |   | $                      | 260.8  |   |                         | $      | (48.6  | )      |   | $ | 212.2 |   |
|                                                                                                                                                                |   |                   |   |   |                         |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                                                                                                                              |   |                   |   |   |                         |   |   |   |   |   |   |   |
| Gains on financial instruments designated as cash flow hedges                                                                                                       |   |                   | 0.5    |   |                         |   | -      |   |   |   | 0.5 |   |
| Gains and losses on financial instruments designated as cash flow hedges in prior periods realized in net income in the current year                                |   |                   | 0.1    |   |                         |   | -      |   |   |   | 0.1 |   |
| Net unrealized gains on available-for-sale reclamation funds’ investments                                                                                     |   |                   | 0.1    |   |                         |   | -      |   |   |   | 0.1 |   |
| Gains and losses on financial instruments designated as available-for-sale reclamation fund investments in prior periods realized in net income in the current year |   |                   | (0.2   | )      |                         |   | -      |   |   |   | (0.2 | ) |
| Other comprehensive income                                                                                                                                          |   |                   | 0.5    |   |                         |   | -      |   |   |   | 0.5 |   |
| Comprehensive income                                                                                                                                                |   | $                      | 261.3  |   |                         | $      | (48.6  | )      |   | $ | 212.7 |   |

----

|   | (a) | Restricted Cash |
|--------|-----|-----------------|

|                                  |   | January 1, 2010 |   |   | December 31, 2010 |   |
|---------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in cash and cash equivalents |   |            | -      |   |              |   | 1.7 |   |
| Decrease in restricted cash           |   |            | -      |   |              |   | (1.7 | ) |
| Impact on deficit                     |   |            | -      |   |              |   | - |   |

|   | (b) | Intangible Exploration and Evaluation Assets |
|--------|-----|----------------------------------------------|

|                                                               |   | January 1, 2010 |   |   | December 31, 2010 |   |
|--------------------------------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Costs classified as E&E assets                                 |   |            | 23.0   |   |              |   | 75.2 |   |
| E&E assets reclassified to exploration and evaluation expenses |   |            | -      |   |              |   | (0.8 | ) |
| Decrease in property, plant and equipment                          |   |            | (23.0  | )      |              |   | (75.2 | ) |
| Increase in deficit                                                |   |            | -      |   |              |   | (0.8 | ) |

|                                            |   | Year ended December 31, 2010 |   |
|-------------------------------------------------|--------|------------------------------|--------|
| Increase in exploration and evaluation expenses |   |                         | 0.8    |   |
| Adjustment before tax                           |   |                         | 0.8    |   |

|   | (c) | Property, Plant and Equipment - Depletion |
|--------|-----|-------------------------------------------|

|                                      |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in property, plant and equipment |   |            | -      |   |              |   | 73.2 |   |
| Related tax effect                        |   |            | -      |   |              |   | (18.3 | ) |
| Decrease in deficit                       |   |            | -      |   |              |   | 54.9 |   |

|                                   |   | Year ended December 31, 2010 |   |
|----------------------------------------|--------|------------------------------|--------|
| Decrease in depletion and depreciation |   |                         | (73.2  | ) |
| Adjustment before tax                  |   |                         | (73.2  | ) |

|   | (d) | Property, Plant & Equipment - Impairment |
|--------|-----|----------------------------------------------|

----

|                                      |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Decrease in property, plant and equipment |   |            | -      |   |              |   | (30.7 | ) |
| Related tax effect                        |   |            | -      |   |              |   | 7.7 |   |
| Increase in deficit                       |   |            | -      |   |              |   | (23.0 | ) |

|                                   |   | Year ended December 31, 2010 |   |
|----------------------------------------|--------|------------------------------|--------|
| Increase in depletion and depreciation |   |                         | 30.7   |   |
| Adjustment before tax                  |   |                         | 30.7   |   |

|   | (e) | Asset Retirement Obligation |
|--------|-----|-----------------------------|

|                                      |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in property, plant and equipment |   |            | -      |   |              |   | 66.9 |   |
| Increase in asset retirement obligation   |   |            | (148.2 | )      |              |   | (217.8 | ) |
| Related tax effect                        |   |            | 37.1   |   |              |   | 37.8 |   |
| Increase in deficit                       |   |            | (111.1 | )      |              |   | (113.1 | ) |

|                  |   | Year ended December 31, 2010 |   |
|-----------------------|--------|------------------------------|--------|
| Increase in accretion |   |                         | 2.7    |   |
| Adjustment before tax |   |                         | 2.7    |   |

|   | (f) | Exchangeable Shares |
|--------|-----|---------------------|

----

|                                                                |   | January 1, 2010 |   |   | December 31, 2010 |   |
|---------------------------------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in exchangeable shares on revaluation                      |   |            | (34.4  | )      |              |   | (83.2 | ) |
| Decrease in non-controlling interest                                |   |            | 23.2   |   |              |   | 23.2 |   |
| Decrease in unitholders’ capital                              |   |            | 20.1   |   |              |   | 20.1 |   |
| Increase in exchangeable shares on book value reclassification      |   |            | (12.8  | )      |              |   | (12.8 | ) |
| Decrease in non-controlling interest on book value reclassification |   |            | 12.8   |   |              |   | 12.8 |   |
| Decrease (increase) in deficit                                      |   |            | 8.9    |   |              |   | (39.9 | ) |

|                               |   | Year ended December 31, 2010 |   |
|------------------------------------|--------|------------------------------|--------|
| Revaluation of exchangeable shares |   |                         | 48.8   |   |
| Adjustment before tax              |   |                         | 48.8   |   |

|   | (g) | Assets Held For Sale |
|--------|-----|----------------------|

|                                                         |   | January 1, 2010 |   |   | December 31, 2010 |   |
|--------------------------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in assets held for sale                             |   |            | -      |   |              |   | 123.9 |   |
| Decrease in property, plant and equipment                    |   |            | -      |   |              |   | (123.9 | ) |
| Increase in liabilities associated with assets held for sale |   |            | -      |   |              |   | (18.0 | ) |
| Decrease in accounts payable and accrued liabilities         |   |            | -      |   |              |   | 6.1 |   |
| Decrease in asset retirement obligation                      |   |            | -      |   |              |   | 11.9 |   |
| Impact on deficit                                            |   |            | -      |   |              |   | - |   |

|   | (h) | Goodwill |
|--------|-----|----------|

|                                    |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-----------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in asset retirement obligation |   |            | -      |   |              |   | (6.7 | ) |
| Increase in goodwill                    |   |            | -      |   |              |   | 5.0 |   |
| Decrease in deferred tax liability      |   |            | -      |   |              |   | 1.7 |   |
| Impact on deficit                       |   |            | -      |   |              |   | - |   |

|   | (i) | Current Portion of Long-Term Debt |
|--------|-----|-----------------------------------|

----

|                                          |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-----------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in current portion of long-term debt |   |            | 27.0   |   |              |   | 15.7 |   |
| Decrease in long-term debt                    |   |            | (27.0  | )      |              |   | (15.7 | ) |
| Impact on deficit                             |   |            | -      |   |              |   | - |   |

|   | (j) | Deferred Taxes |
|--------|-----|----------------|

|                                                     |   | January 1, 2010 |   |   | December 31, 2010 |   |
|----------------------------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Change in asset retirement obligation (i)                |   |            | 37.1   |   |              |   | 37.8 |   |
| Change in asset retirement obligation on acquisition (i) |   |            | -      |   |              |   | 1.7 |   |
| Depletion (i)                                            |   |            | -      |   |              |   | (18.3 | ) |
| Asset impairment (i)                                     |   |            | -      |   |              |   | 7.7 |   |
| Change in future tax rate (ii)                           |   |            | 29.6   |   |              |   | - |   |
| Decrease in deferred tax liability                       |   |            | 66.7   |   |              |   | 28.9 |   |

|   | (i) | As per notes (c), (d), (e), and (h) above. |
|--------|-----|--------------------------------------------|

|   | (ii) | 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.  On December 31, 2010 ARC effectively completed its conversion from an income trust to a corporation, therefore, the undistributed profits rate was no longer applicable in calculating ARC’s deferred tax liability. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (k) | Share Issue Costs |
|--------|-----|-------------------|

|                                   |   | January 1, 2010 |   |   | December 31, 2010 |   |
|----------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Increase in unitholders’ capital |   |            | (0.8   | )      |              |   | - |   |
| Increase in deficit                    |   |            | (0.8   | )      |              |   | - |   |

|   | (l) | Deficit |
|--------|-----|---------|

|                                |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Asset retirement obligation         |   |            | (148.2 | )      |              |   | (148.2 | ) |
| Revaluation of exchangeable shares  |   |            | 8.9    |   |              |   | (39.9 | ) |
| Deferred tax                        |   |            | 65.9   |   |              |   | 27.2 |   |
| Exploration and evaluation expenses |   |            | -      |   |              |   | (0.8 | ) |
| Depletion                           |   |            | -      |   |              |   | 73.2 |   |
| Impairment of oil and gas assets    |   |            | -      |   |              |   | (30.7 | ) |
| Accretion                           |   |            | -      |   |              |   | (2.7 | ) |
| Increase in deficit                 |   |            | (73.4  | )      |              |   | (121.9 | ) |

|   | (m) | Shareholders’ Capital |
|--------|-----|-----------------------------|

----

|                                    |   | January 1, 2010 |   |   | December 31, 2010 |   |
|-----------------------------------------|--------|-----------------|--------|--------|-------------------|--------|
| Elimination of deficit                  |   |            | -      |   |              |   | (121.9 | ) |
| Exchangeable shares exchanged           |   |            | -      |   |              |   | 39.9 |   |
| Decrease in shareholders’ capital |   |            | -      |   |              |   | (82.0 | ) |

----