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March 17, 2014
WHITECAP RESOURCES INC. ANNOUNCES ACQUISITION OF STRATEGIC LONG LIFE, LOW DECLINE LIGHT OIL ASSETS, $500 MILLION FINANCING, INCREASED DIVIDEND BY 10% AND INCREASED 2014 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 certain strategic light oil assets focused primarily in Whitecap’s Pembina Cardium / West Central core area, as well as at Boundary Lake in northeast BC, which is located just northwest of its core Valhalla area. Total net consideration is $692.7 million after giving effect to the disposition of certain Nisku natural gas production and related facilities located in the Pembina area to Keyera Corp. and deducting estimated purchase price adjustments of $49.4 million at closing (the “Acquisition”). The Acquisition is highly accretive to Whitecap and adds a concentrated land and operating base with 6,500 boe/d (83% oil and NGLs) of high netback production with a low base decline rate of 16% and significant low risk oil reserves upside. The Acquisition includes material facilities infrastructure and the assets being acquired will be operated by Whitecap providing for low cost future development and a near-term reduction in overall operating costs.
The Acquisition will be funded with a concurrent $500 million bought deal equity financing (the “Financing”) and debt. Whitecap’s credit facilities are anticipated to increase to $1 billion on closing of the Acquisition of which approximately 30% will be undrawn.
Since converting to a dividend-growth strategy in January 2013, our objective has been to maximize total shareholder return through a combination of sustainable dividends and per share growth in cash flow, production and reserves. The Acquisition greatly enhances our sustainable dividend-growth model and is accretive on all key measures both in 2014 and 2015. In 2014, based on the May 1 closing date, we anticipate investing 71% of the cash flow generated from the acquired assets to grow production by 20% leaving $20.5 million of free cash flow. In 2015, we anticipate investing 56% of the cash flow from the acquired assets to grow production by 16%, leaving significant additional free cash flow of $74.0 million. The significant free cash flow will allow Whitecap to prudently increase its monthly dividend by 10% to $0.0625 per share ($0.75 per share annualized) from $0.0567 per share ($0.68 per share annualized).
Pro forma the Acquisition, Whitecap will have production of approximately 33,500 boe/d (72% oil and NGLs), a total payout ratio of 96% reducing to 84% in 2015, and a strong balance sheet with a debt to run-rate cash flow ratio of 1.2x decreasing to 0.9x in 2015. Whitecap continues to position itself as a long-term sustainable dividend-growth entity focused on organic growth and accretive acquisitions within its primary core areas. The acquired assets have significant original oil in place (“OOIP”) with low recovery factors and limited development in recent years. With the current oil price environment and advances in technology, Whitecap has identified considerable upside potential in the assets. Further details are provided below:
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