The company's quarterly report released yesterday, said gas production was down from 1900 terajoules in the December 2007 quarter to 1316TJ in the March 2008 quarter.
The reduced gas production was due to a planned maintenance shutdown at the Yolla gas plant and the shutdown of the Beharra Springs plant.
Oil production was also lower than previous quarter's, down to 3980 barrels of oil per day, down from 4794 the previous quarter, due to natural field declines in the onshore and offshore Perth Basin fields.
Oil sales revenue was also down from $44.1 million in the previous quarter to $37.8 million.
During the quarter, ongoing problems with the Century 18 rig prevented a flow test at the Yulleroo-2 well in the Canning Basin. Yulleroo-2 encountered the same gas sands as Yulleroo-1.
In addition, three offshore Perth Basin wells - Lilac-1, Frankland-2 and Dunsborough-2 - were plugged and abandoned after disappointing results from the appraisal of the Frankland and Dunsborough-1 discoveries.
Despite the lower production rates, Arc said record oil prices during the quarter helped increase its net cash reserves.
Net operating revenues were steady at $41.3 million with higher oil prices and the termination of the Anzon merger offsetting lower production volumes.
Managing director Eric Streitberg said Arc's assets continued to generate strong cash flows during the quarter and the company is benefiting from historically high oil prices.
"We are assessing the results of the offshore Perth Basin drilling program and reviewing the commercial viability of the Frankland gas discovery and the oil discovery at Dunsborough, using a detailed interpretation of the recently acquired Diana 3D seismic survey over the area," he said.
"The Canning Basin drilling program has been frustrating and expensive because of the continuing rig problems and we will now be looking at innovative ways to ensure the resumption of the drilling program does not encounter the same problems."
According to Streitberg, the recently announced merger with Australian Worldwide Exploration makes strategic sense and would bring together two complementary asset portfolios, to create a leader in the Australian mid-tier oil and gas sector.
