whitecap resources inc. announces dodsland viking light oil acquisition, $110 million financing and provides increased 2013 guidance
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April 29, 2013
WHITECAP RESOURCES INC. ANNOUNCES DODSLAND VIKING LIGHT OIL ACQUISITION, $110 MILLION FINANCING AND PROVIDES INCREASED 2013 GUIDANCE
CALGARY, ALBERTA – Whitecap Resources Inc. (“Whitecap” or the “Company”) (TSX: WCP) is pleased to announce that it has entered into an agreement to purchase an existing Viking light oil waterflood asset in the Dodsland area of west central Saskatchewan for total consideration of $110 million (the “Acquisition”). The Acquisition adds 900 boe/d (95 percent light oil) of high netback, operated production with a long reserve life index and a low base decline of 20 percent. The Acquisition includes strategic facilities and oil sales pipeline infrastructure and is synergistic to our existing Viking operations at our Lucky Hills core area located only 10 miles away.
In connection with the Acquisition, Whitecap will be raising $110 million through a $90 million bought deal common share financing and a $20 million non-brokered private placement of flow-through common shares on a CDE flow-through basis.
The Acquisition represents the successful continuation of Whitecap’s objective to strengthen the sustainability of its dividend-growth strategy by acquiring high netback, low decline assets that can provide consistent growth and substantial free cash flow. We estimate that production from the Acquisition will increase to 1,200 boe/d in 2014 from its current 900 boe/d and after planned 2014 capital expenditures of $8.2 million, generate free cash flow in 2014 of $17.2 million. The Dodsland Viking oil pool is near our existing Lucky Hills Viking assets where we have significant horizontal drilling and multi stage fracturing expertise. Acquiring an analogous pool in close proximity to our existing Viking development is consistent with our goal to remain highly focused.
The Acquisition includes 24.3 (18.7 net) sections of principally crown lands in the heart of the Dodsland Viking oil pool that has been under waterflood since 1967. This area of the pool has some of the thickest and highest quality Viking reservoir in the Dodsland trend. The waterflood has been and continues to be effective at maintaining reservoir pressure which results in a production decline of 12 percent for the vertical development in this pool. The operator has also drilled 25 horizontal wells with continually improving results, representing 390 net bopd at present. With cumulative oil production of 24 MMbbl (19 percent recovery factor), a current water-cut of only 51 percent and offsetting pool results, Whitecap believes there is considerable incremental upside to the pool which can be realized through a combination of horizontal drilling, water injector reactivations and injector conversions.
Previous to the Acquisition, horizontal wells were successfully drilled by the current operator. Whitecap will bring its experience of drilling over 100 Viking horizontal wells to optimize the results. Similar to our past Viking and Cardium acquisitions, we expect to improve upon the IP(30) rates over time and with 101 (79.5 net) identified locations, there is a multi-year inventory to maintain and grow the production in this pool which fits well with our dividend-growth strategy.
In summary, the highlight benefits of the Acquisition for Whitecap shareholders are as follows:
- Accretive to cash flow and net asset value per fully diluted share.
- Increases our cash flow netback to $40.00 per boe.
- Increases our corporate oil and NGL weighting to 72 percent.
- Decreases our forecast base decline to 30 percent in 2013, 26 percent in 2014, and 23 percent in 2015.
Increases our Viking light oil inventory by 101 (79.5 net) locations of which 45.6 net locations are un-booked.
To view the full press release, click here for the pdf.