October 23, 2024
WHITECAP RESOURCES INC. EXCEEDS 2024 PRODUCTION GUIDANCE AND ANNOUNCES 2025 BUDGET
CALGARY, ALBERTA – Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to report its operating and unaudited financial results for the three and nine months ended September 30, 2024.
Selected financial and operating information is outlined below and should be read with Whitecap’s unaudited interim consolidated financial statements and related management’s discussion and analysis for the three and nine months ended September 30, 2024 which are available at www.sedarplus.ca and on our website at www.wcap.ca.
|
Financial ($ millions except for share amounts) |
Three Months ended Sep. 30 |
Nine Months ended Sep. 30 |
||
|
2024 |
2023 |
2024 |
2023 |
|
|
Petroleum and natural gas revenues |
890.9 |
955.9 |
2,739.6 |
2,637.5 |
|
Net income |
274.2 |
152.7 |
578.5 |
590.7 |
|
Basic ($/share) |
0.46 |
0.25 |
0.97 |
0.98 |
|
Diluted ($/share) |
0.46 |
0.25 |
0.96 |
0.97 |
|
Funds flow 1 |
409.0 |
466.0 |
1,219.4 |
1,329.1 |
|
Basic ($/share) 1 |
0.69 |
0.77 |
2.04 |
2.19 |
|
Diluted ($/share) 1 |
0.68 |
0.76 |
2.03 |
2.18 |
|
Dividends declared |
107.9 |
87.8 |
326.2 |
263.2 |
|
Per share |
0.18 |
0.15 |
0.55 |
0.43 |
|
Expenditures on property, plant and equipment 2 |
272.7 |
281.9 |
869.7 |
753.3 |
|
Free funds flow 1 |
136.3 |
184.1 |
349.7 |
575.8 |
|
Net Debt 1 |
1,361.8 |
1,260.2 |
1,361.8 |
1,260.2 |
|
Operating |
|
|
|
|
|
Average daily production |
|
|
|
|
|
Crude oil (bbls/d) |
92,335 |
85,238 |
91,604 |
84,717 |
|
NGLs (bbls/d) |
20,578 |
17,804 |
20,228 |
16,640 |
|
Natural gas (Mcf/d) |
362,332 |
323,903 |
369,551 |
310,531 |
|
Total (boe/d) 3 |
173,302 |
157,026 |
173,424 |
153,112 |
|
Average realized Price 1,4 |
|
|
|
|
|
Crude oil ($/bbl) |
94.29 |
103.72 |
95.23 |
95.43 |
|
NGLs ($/bbl) |
34.02 |
36.75 |
34.55 |
39.32 |
|
Natural gas ($/Mcf) |
0.76 |
2.76 |
1.56 |
2.97 |
|
Petroleum and natural gas revenues ($/boe) 1 |
55.88 |
66.17 |
57.65 |
63.10 |
|
Operating Netback ($/boe) 1 |
|
|
|
|
|
Petroleum and natural gas revenues1 |
55.88 |
66.17 |
57.65 |
63.10 |
|
Tariffs 1 |
(0.43) |
(0.50) |
(0.43) |
(0.51) |
|
Processing & other income 1 |
0.67 |
0.79 |
0.72 |
0.90 |
|
Marketing revenues 1 |
3.79 |
5.04 |
3.87 |
4.91 |
|
Petroleum and natural gas sales 1 |
59.91 |
71.50 |
61.81 |
68.40 |
|
Realized gain on commodity contracts 1 |
0.93 |
0.04 |
0.53 |
0.52 |
|
Royalties 1 |
(9.01) |
(11.53) |
(9.51) |
(10.90) |
|
Operating expenses 1 |
(13.38) |
(13.97) |
(13.71) |
(14.35) |
|
Transportation expenses 1 |
(2.10) |
(2.22) |
(2.09) |
(2.19) |
|
Marketing expenses 1 |
(3.76) |
(4.99) |
(3.84) |
(4.89) |
|
Operating netbacks |
32.59 |
38.83 |
33.19 |
36.59 |
|
Share information (millions) |
|
|
|
|
|
Common shares outstanding, end of period |
588.0 |
606.2 |
588.0 |
606.2 |
|
Weighted average basic shares outstanding |
595.2 |
606.0 |
597.3 |
605.8 |
|
Weighted average diluted shares outstanding |
599.2 |
610.0 |
600.7 |
609.5 |
MESSAGE TO SHAREHOLDERS
Whitecap continued its strong operational momentum in the third quarter with production exceeding expectations on both a total basis and on liquids production. Production in the quarter averaged 173,302 boe/d (112,913 bbl/d of total liquids and 362,332 mcf/d of natural gas) compared to our forecast of 167,500 boe/d (107,500 bbl/d of total liquids and 360,000 mcf/d of natural gas). As a result of the year to date outperformance, we now forecast our full year production to average 172,500 boe/d which is above the high end of our previously increased production guidance of 167,000 – 172,000 boe/d. This is our third production guidance increase for 2024.
Higher than forecast liquids production from our oil weighted and condensate rich assets contributed to funds flow of $409 million ($0.68 per share). WTI averaged above $100/bbl Canadian in the third quarter, resulting in a strong operating netback of $32.59/boe. After capital expenditures of $273 million, free funds flow was $136 million in the quarter and was $350 million for the nine months ended September 30, 2024.
We have a robust return of capital framework in place where for the nine months ended September 30, 2024, we have repurchased $119 million of shares under our normal course issuer bid ("NCIB") and paid $326 million of dividends to shareholders.
Net debt at the end of the third quarter was $1.4 billion (0.6 times Debt to EBITDA5) on total credit capacity of $2.2 billion. On closing of the Pembina Gas Infrastructure ("PGI") transaction (details press released on July 2, 2024), net debt is expected to be approximately $1 billion (0.5 times Debt to EBITDA) which provides us with low leverage and ample liquidity. The closing of the PGI transaction is pending final regulatory approval.
We also recently released our investment grade credit rating of BBB (low), with a stable trend, by DBRS, Inc. Whitecap can now, and intends to, access the investment grade bond market to diversify our debt structure into a deeper market that provides for longer tenors and a lower cost of funding.
We provide the following third quarter and year to date 2024 financial and operating highlights:
· Production Growth. Production momentum and continued operational execution resulted in 12% production per share growth6 compared to the third quarter of 2023. Crude oil and condensate production from our unconventional Montney and Duvernay and Southeast Saskatchewan Frobisher assets contributed to our overall liquids production outperforming expectations.
· Funds Flow. Third quarter funds flow of $409 million ($0.68 per share) benefitted from strength in crude oil and condensate prices along with continued focus on reducing operating costs. Natural gas revenue was less than 3% of petroleum and natural gas revenue in the third quarter as AECO natural gas prices averaged $0.65/GJ.
· Capital Program. Third quarter capital expenditures of $273 million included the drilling of a total of 67 (63.8 net) wells including 2 (2.0 net) Montney, 5 (5.0 net) Duvernay and 60 (56.8 net) conventional wells. We brought 4 (4.0 net) Montney wells at Musreau on production during the third quarter.
· Return of Capital. For the nine months ended September 30, 2024, we have returned $445 million to shareholders ($0.74 per share) through $326 million of base dividends and $119 million of share repurchases under our NCIB.
· Balance Sheet Strength. Quarter end net debt of $1.4 billion equated to a Debt to EBITDA ratio of 0.6 times, an EBITDA to interest expense ratio5 of 25.3 times, and a debt to capitalization ratio5 of 0.17 times, all well within our debt covenants of not greater than 4.0 times, not less than 3.5 times and not greater than 0.6 times, respectively. During the third quarter, we entered into a new $2 billion unsecured covenant-based credit facility which replaced our previous secured credit and term loan facilities.
2025 BUDGET
Our Board of Directors has approved a 2025 capital budget of $1.1 – $1.2 billion which is forecast to achieve average production of 176,000 – 180,000 boe/d (63% liquids). This is expected to deliver organic production per share growth of 4% – 6% and generate funds flow of approximately $1.6 – $1.7 billion at US$70/bbl WTI and $2.50/GJ AECO.
Whitecap has an enviable portfolio of highly economic drilling inventory in both our conventional light oil plays as well as the unconventional liquids rich Montney and Duvernay plays providing decades of sustainable production and funds flow growth.
Unconventional
Building off our operational success in 2024, we plan to allocate approximately 50% of our capital budget ($550 – $600 million) to our Montney and Duvernay assets which includes drilling 30 (30.0 net) wells in 2025. With 34 (32.5 net) wells coming on stream in 2025, including wells drilled in 2024, these assets are expected to deliver production growth of 10% on an annual basis and 20% exit to exit.
Duvernay
We drilled our first Duvernay pad in mid-2023 and have now drilled and brought on production 10 (10.0 net) Duvernay wells at Kaybob. Results to date have exceeded our initial expectations that were set upon completion of an extensive technical analysis that we undertook after acquiring the asset in the third quarter of 2022.
We plan to drill 20 (20.0 net) Duvernay wells in 2025 which will have our 15-07 gas processing facility operating at capacity in the second half of 2025. Our recently drilled 11-14B five well pad (5.0 net) will be tied into permanent facilities by the end of October this year. This is our first pad that incorporated a benching trial as the thickness in this area of the Duvernay lends itself to vertical inter-well spacing to access greater portions of the reservoir. Given the thickness of the Duvernay across our land base, results from this pad will inform future well designs to optimize capital efficiency as we develop our expansive drilling inventory.
Montney
At Musreau, our 05-09 battery has been operating at condensate capacity with our most recent four well pad producing at restricted rates due to continued strong condensate production from our previous two pads. We have completed the drilling of our last four well pad (4.0 net) in 2024 and this is expected to be on production prior to year end. In 2025, we have one four well pad (4.0 net) planned for the second half of the year to maintain production at the battery.
In Kakwa, we are currently drilling our first triple bench pad, testing the potential of each of the D2, D3 and Lower Middle Montney zones. In 2025, we have one four well pad (4.0 net) at southeast Kakwa planned which will be our third pad with wider inter-well spacing, building on the success of our previous pads in the Kakwa area.
At Lator, we are progressing our technical analysis as well as development planning for the area to coincide with the completion of our planned 04-13 battery in late 2026/early 2027. The two (2.0 net) wells drilled in 2024 will be on production prior to year end and we will follow up with two (2.0 net) additional wells in 2025. Results from this targeted development will inform development plans as we progress from phase one to phase two over the next several years. The focus for Lator in 2025 will be on technical due diligence, development planning, completion of the detailed engineering and design work for the 04-13 battery, and obtaining the required regulatory approvals for the commencement of the development program in 2026.
Conventional
We plan to invest $550 – $600 million to drill 190 (171.8 net) conventional wells in Alberta and Saskatchewan in 2025 which will deliver modest growth while generating 70% of Whitecap’s free cash flow.
The very active capital programs across our conventional assets lead to stronger capital efficiencies and greater opportunities for inventory enhancement by using the same rigs, crews and service providers across our base programs. As a result, we are able to quickly implement new well designs and/or development plans to improve the already robust economics and further extend the inventory duration of this asset base.
In Central Alberta, we plan to drill 30 (23.7 net) wells in 2025 with a focus on the Glauconite in southwestern Alberta and the Cardium at West Pembina. Our operational momentum in the Glauconite has continued with the successful drilling of three monobores, resulting in 10% cost savings per well and we are currently drilling our fourth monobore. We plan to utilize a monobore drilling design for the majority of our Glauconite program in 2025. With continued success, the 10% cost savings per well provide a line of sight to over 90% of our inventory being identified as top tier locations.
Western Saskatchewan will be our most active area of development, with plans to drill 100 (98.8 net) wells of which 79 (79.0 net) will be targeting light oil in the Viking. In our Elrose Viking area, we have transitioned the drilling program to extended reach horizontal development to improve on the historic results. At US$70/bbl WTI, our 2025 Viking program is expected to have an average per well payout7 of only eleven months.
In Eastern Saskatchewan, we plan to drill 39 (35.3 net) wells in 2025 of which 31 (12.7 net) will be targeting the Frobisher formation. The economics of our light oil Frobisher assets are extremely robust and recent wells are forecasted to achieve capital payout8 three times in the first three years of production. Early time results from our State A (Frobisher) open hole multi-lateral pilot well are encouraging and further success will extend the inventory duration of this highly economic asset.
At Weyburn, we plan to drill 21 (14.2 net) wells in 2025, which will be a mix of new phase rollouts and infill wells on existing phases. We have achieved strong production results relative to our expectations on our rollout programs over the past four years, further validating the success of the CO2 flood and our forecasts for ultimate recovery.
OUTLOOK
Our operational execution to date has been exceptional and we expect this to continue for the rest of the year and into 2025. We believe that crude oil prices will remain volatile but on balance robust, especially considering the weak Canadian dollar, and are expected to average US$65/bbl to US$75/bbl (C$90/bbl to C$103/bbl) in 2025. AECO prices are anticipated to remain weak, although incremental egress with LNG Canada 1 & 2, Cedar, Woodfibre and Ksi Lisims will be supportive of higher natural gas prices longer term.
We have taken a prudent approach to our 2025 capital budget to ensure it is defensible at lower commodity prices but also provides us optionality should commodity prices be higher than we anticipate. We expect to deliver organic production per share growth of approximately 5% and similar to 2024, we will look for opportunities to enhance our per share metrics in 2025.
Our balance sheet remains in excellent shape with low leverage and ample liquidity and will be further strengthened with our free funds flow in 2025.
We are excited about the opportunities within our vast portfolio of over 6,400 drilling locations8 including the enhanced oil recovery projects that underpin the sustainability of our dividend and growth model, and we look forward to updating our shareholders on our progress for the rest of the year, in 2025, and beyond.
On behalf of our employees, management team and Board of Directors, we would like to thank our shareholders for their continued support.
NOTES
1 Funds flow, funds flow basic ($/share), funds flow diluted ($/share) and net debt are capital management measures. Average realized price and per boe disclosure figures are supplementary financial measures. Operating netback and free funds flow are non-GAAP financial measures. Operating netbacks ($/boe) is a non-GAAP ratio. Refer to the Specified Financial Measures section in this press release for additional disclosure and assumptions.
2 Also referred to herein as "capital expenditures" and "capital budget".
3 Disclosure of production on a per boe basis in this press release consists of the constituent product types and their respective quantities disclosed herein. Refer to Barrel of Oil Equivalency and Production and Product Type Information in this press release for additional disclosure.
4 Prior to the impact of risk management activities and tariffs.
5 Debt to EBITDA ratio, EBITDA to interest expense ratio and debt to capitalization ratio are specified financial measures that are calculated in accordance with the financial covenants in our credit agreement.
6 Production per share is the Company's total crude oil, NGL and natural gas production volumes for the applicable period divided by the weighted average number of diluted shares outstanding for the applicable period. Production per share growth is determined in comparison to the applicable comparative period.
7 Also referred to herein as "capital payout". Refer to Oil and Gas Metrics in this press release for additional disclosure.
8 Disclosure of drilling locations in this press release consists of proved, probable, and unbooked locations and their respective quantities on a gross and net basis as disclosed herein. Refer to Drilling Locations in this press release for additional disclosure.
CONFERENCE CALL AND WEBCAST
Whitecap has scheduled a conference call and webcast to begin promptly at 9:00 am MT (11:00 am ET) on Wednesday, October 23, 2024.
The conference call dial-in number is: 1-888-510-2154 or (403) 910-0389 or (437) 900-0527
A live webcast of the conference call will be accessible on Whitecap’s website at www.wcap.ca by selecting "Investors", then "Presentations & Events". Shortly after the live webcast, an archived version will be available for approximately 14 days.
For further information:
Grant Fagerheim, President & CEO
or
Thanh Kang, Senior Vice President & CFO
Whitecap Resources Inc.
3800, 525 – 8th Avenue SW
Calgary, AB T2P 1G1
(403) 266-0767
www.wcap.ca
InvestorRelations@wcap.ca
Refer to full press release for forward-looking statements and advisories.
