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## financial highlights 

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## Message to Shareholders 

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## review of operations 

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## reserves 

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## corporate responsibility 

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## corporate governance 

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## corporate information 

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## INFORMATION REGARDING DISCLOSURE ON OIL AND GAS RESERVES, AND OPERATIONAL INFORMATION 

This Annual Report describes certain informa tion set forth in our news release dated February 10, 2011: ARC Resources Ltd. 2010 Year-end Reserves Increase by 29 Per Cent and readers should refer to that news release, which news release other than (i) the discussion in such release under the heading “Montney Economic Contingent Resource Evalua tion”; and (ii) the discussion in such release under the headings “Headings”, “Reser ves and Resources Overview” and “Informa tion Regarding Disc losure on Oil and Gas Reser ves, Resources and Other Opera tional Information” in respect of “Economic Contingent Resource Evaluation”, “Discovered Gas Initially in Place”, “DGIIP”, “Economic Contingent Resource”, “Contingent Resource”, “resources”  and “possible reser ves”, is hereby incorpora ted by reference. This news release can be found a SEDAR a www .SEDAR.com. 

All amounts in this Annual Report are stated in Canadian dollars unless otherwise specified. Where a pplicable,  natural gas has been converted to barrels of oil equivalent (“BOE”) based on 6 mcf:1 boe. The boe rate is based on an energy equivalent conversion method primarily a pplicable a t the burner tip and does not represent a value equivalent a t the wellhead. Use of boe in isolation may be misleading. In accordance with Canadian practice, production volumes and revenues are reported on a compan gross basis, before deduction of Crown and other royalties, unless otherwise stated. Unless otherwise specified,  all reserves volumes in this Annual Report (and all informa tion derived therefrom) are based on “company interest reserves” using forecast prices and costs. “Company interest reserves” consist of “compan y gross reserves” (as defined in National Instrument 51-101 adopted by the Canadian securities regulators (“NI 51-101”) plus ARC’s royalty interests in reserves. “Company interest reserves” are not a measure defined in NI 51-101 and does not have a standardized meaning under NI 51-101. Accordingly, our company interest reserves may not be comparable to reserves presented or disclosed by other issuers. Our oil and gas reserves statement for the year ended December 31, 2010, which will include complete disclosure of our oil and gas reserves and other oil and gas informa tion in accordance with NI 51-101, will be contained within our Annual Information Form that will be available on SEDAR at www .sedar .com. In relation to the disclosure of estimates for an individual properties, such estimates for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation. 

## NOTICE TO U.S. READERS 

The oil and na tural gas reserves contained in this press release have generally been prepared in accordance with Canadian disc losure standards, which are not comparable in all respects of United Sta tes or other foreign disclosure standards. For example, the United Sta tes Securities and Exchange Commission (the “SEC”) generally permits oil and gas issuers, in their filings with the SEC, to disc lose only proved reserves (as defined in SEC rules). Canadian securities laws require oil and gas issuers, in their filings with Canadian securities regula tors, to disclose not only proved reser ves (which are defined differently from the SEC rules) but also probable and possible reser ves, each as defined in NI 51-101 and allo the disclosure of possible reserves. Accordingly, proved reserves disclosed in this Annual Report may not be comparable to U.S. standards, and in this Annual Report, ARC has disclosed reserves designated as “probable reserves” and “proved plus probable reserves”. Probable reserves are higher risk and are generally believed to be less likely to be accura tely estimated or recovered than proved reserves. The SEC’ guidelines strictly prohibit reserves in these categories from being included in filings with the SEC that are required to be prepared in accordance with U.S. disclosure requirements. In addition, under Canadian disclosure requirements and industry practice, reserves and production are reported using gross (or, as noted above, “compan y interest”) volumes, which are volumes prior to deduction of royalty and similar payments. The practice in the United States is to report reserves and production using net volumes, after deduction of applicable royalties and similar payments. Moreover, ARC has determined and disclosed estimated future net revenue from its proved and probable reserves using forecast prices and costs, whereas the SEC generally requires that prices and costs be averaged for the 12 months as of the date of the reserve report. As a consequence of the foregoing, ARC’s reserve estimates and production volumes in this Annual Report may not be comparable to those made by companies utilizing United States reporting and disclosure standards. Additionally, the SEC prohibits disclosure of oil and gas resources, including contingent resources, whereas Canadian issuers may disclose oil and gas resources. Resources are different than, and should not be construed as, reserves. 

## FORWARD-LOOKING INFORMATION AND STATEMENTS 

This Annual Report contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, 

“estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “strategy” and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this Annual Report contains forward-looking information and statements pertaining to the following: the volumes and estimated value of ARC’s oil and gas reserves; the volumes of resources; the life of ARC’s reserves; the volume and product mix of ARC’s oil and gas production; future oil and natural gas prices and ARC’s commodity risk management programs; future results from operations and operating metrics; and future development, exploration, acquisition and development activities (including drilling plans) and related production expectations. 

The forward-looking information and statements contained in this Annual Report reflect several material factors and expectations and assumptions of ARC including, without limitation: that ARC will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities consistent with past results; the continued and timely development of infrastructure in areas of new production; the general continuance of current industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the accuracy of the estimates of ARC’s reserve volumes; certain commodity price and other cost assumptions; and the continued availability of adequate debt and equity financing and cash flow to fund its plans expenditures. There are a number of assumptions associated with the development of the lands at Dawson, West Montney and Parkland, including the quality of the Montney reservoir, continued performance from existing wells, future drilling programs and performance from new wells, the growth of infrastructure, well density per section, recovery factors and development necessarily involves known and unknown risks and uncertainties, including those risks identified in this Annual Report. ARC believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. ARC believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. 

The forward-looking information and statements included in this Annual Report are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; the early stage of development of some areas in Dawson, west Montney and Parkland; the potential for variation in the quality of the Montney formation, changes in the demand for or supply of ARC’ products; unanticipated operating results or production declines; unanticipated results from ARC’s exploration and development activities; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of ARC or by third party operators of ARC’s properties, increased debt levels or debt service requirements; inaccurate estimation of ARC’s oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time to time in ARC’s public disclosure documents (including, without limitation, those risks identified in this Annual Report and in ARC’s Annual Information Form). 

The forward-looking information and statements contained in this Annual Report speak only as of the date of this Annual Report, and none of ARC or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws. 

“On January 1, 2011 ARC Energy Trust (the “Trust”) completed its conversion to a dividend paying corporation. Prior to the conversion of the Trust to a corporation, distributions were paid to unitholders. Historical references in this Annual Report to “unitholders”, “distributions”, “trust units”, and “per unit” have been replaced with “shareholders”, “dividends”, “common shares” and “per share”, respectively, except where specifically noted in this Annual Report.” 

## INFORMATION REGARDING FINANCIAL INFORMATION 

This Annual Report includes certain information which is set forth in the audited financial statements of the Corporation for the year ended December 31, 2010, including the report of our auditor’s thereon and the notes thereto, and readers should refer to those financial statements, which are hereby incorporated by reference. These financial statements can be found at SEDAR at www.sedar.com and can be obtained from the Corporation upon request. 

