whitecap resources inc. announces acquisition of high quality low decline oil assets, $470 million financing and increased 2016 guidance
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May 10, 2016
WHITECAP RESOURCES INC. ANNOUNCES ACQUISITION OF HIGH QUALITY LOW DECLINE OIL ASSETS, $470 MILLION FINANCING AND INCREASED 2016 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 premium oil assets (“Assets”) in western Canada for cash consideration of $595 million. The Assets are located in southwest Saskatchewan and add 11,600 boe/d (98% oil) of low decline operated production and include significant facility infrastructure for future growth (the “Acquisition”).
The Acquisition will be funded through a concurrent $470 million bought deal financing (the “Financing”) and Whitecap’s existing credit facilities.
The Acquisition is consistent with Whitecap’s return on capital strategy focusing on large oil in place assets that have significant development upside remaining. The Assets include 11,600 boe/d (98% oil) of low decline medium gravity oil within a concentrated area, approximately 10 miles west of Swift Current, Saskatchewan. The majority of this production is operated (78%) and is processed through a vast infrastructure network consisting of 23 oil batteries and 1 gas plant. The majority of the production (92%) is under active waterflood and enhanced oil recovery (“EOR”) which has resulted in a base decline that is very predictable and stable at 5% historically (conservatively forecasted in our 2016 budget at 10%). Capital spending incurred on the EOR projects to date totals approximately $600 million net or 84% of the total anticipated project costs.
The production profile characteristics of the Assets further enhance Whitecap’s current suite of premium oil assets in western Canada and strengthens our ability to grow funds flow and production per share while providing a dividend to shareholders all within funds flow and without the use of a dividend reinvestment program (“DRIP”). The Acquisition immediately reduces our base decline rate and increases our production under waterflood and EOR from 54% to 63%.
There are significant growth opportunities identified on the Assets including 659 (487 net) drilling locations, as well as an additional 2,400 boe/d from 228 (157 net) optimization and recompletion opportunities.
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