CALGARY, AB, Oct. 5, 2021 /CNW/ - Whitecap Resources Inc.
("Whitecap" or the "Company") (TSX: WCP) is pleased to announce
that it has entered into a definitive agreement (the "Agreement")
with Topaz Energy Corp. for the sale of a newly formed 5% Gross
Overriding Royalty ("GORR") on its working interest in the Weyburn
CO2 Unit for cash proceeds of $188 million. The transaction is expected to
close on or before October 31,
2021.
Following the completion of the GORR sale, Whitecap will retain
its operated 65.3% working interest ownership in the Weyburn Unit
which remains a core, strategic asset within our portfolio. The
Weyburn Unit is the single largest anthropogenic carbon
sequestration project in the world and has sequestered over 36
million tonnes of CO2 since the project's first
CO2 injection in 2000. The project is expected to
continue to sequester carbon at a rate of approximately 2 million
tonnes per year, driving Whitecap's net negative carbon footprint
after accounting for scope 1 & 2 emissions. With a 100% oil and
natural gas liquids weighting and less than 3% base decline rate,
the profitability of the Weyburn
asset is robust and after the sale of the GORR, it will
continue to generate significant free funds flow for Whitecap, with
a free funds flow break-even price of approximately US$35/bbl WTI based on preliminary 2022 capital
plans. Production volumes from the previously announced unplanned
downtime at Weyburn are now back
online and current net production is approximately 14,000
boe/d.
RETURN OF CAPITAL FOCUS
The GORR sale aligns with Whitecap's stated priorities of
maintaining balance sheet strength and increasing return of capital
to shareholders. The GORR sale allows Whitecap to accelerate the
achievement of our near-term net debt target of $1.2 billion and reach our long-term net debt
target of $1.0 billion by year end
2021 to enhance total shareholder returns.
In achieving $1.0 billion of net
debt by year end 2021, Whitecap retains $1.0
billion of liquidity on our credit facility and a forecasted
debt to EBITDA ratio of 1.3 times at US$45/bbl WTI and 0.7 times at US$70/bbl WTI, providing significant financial
flexibility and long-term sustainability.
With our debt targets achieved, Whitecap has significant
optionality for free funds flow allocation and the potential to
accelerate return of capital to shareholders through targeted share
buybacks and dividend increases. Year to date, Whitecap has
repurchased 5.1 million shares at an average price of $5.98 per share and is permitted to purchase an
additional 26.3 million shares under its current normal course
issuer bid that runs between May 21,
2021 and May 20, 2022.
On behalf of our management team and Board of Directors, we
would like to thank our shareholders for their ongoing support.
ADVISOR
National Bank Financial Inc. acted as exclusive financial
advisor to Whitecap in connection with the GORR sale.
Note Regarding Forward-Looking Statements
This press release contains forward-looking statements and
forward-looking information (collectively "forward-looking
information") within the meaning of applicable securities laws
relating to the Company's plans and other aspects of our
anticipated future operations, management focus, priorities,
strategies, financial, operating and production results and
business opportunities. Forward-looking information typically uses
words such as "anticipate", "believe", "continue", "trend",
"sustain", "project", "expect", "forecast", "budget", "goal",
"guidance", "plan", "objective", "strategy", "target", "intend",
"estimate", "potential", or similar words suggesting future
outcomes, statements that actions, events or conditions "may",
"would", "could" or "will" be taken or occur in the future,
including statements about our strategy, plans, focus, objectives,
priorities and position; and the strategic rationale for, and
anticipated benefits derived from, the Agreement. In particular,
and without limiting the generality of the foregoing, this press
release contains forward-looking information with respect to: the
expected close of the Agreement on or before October 31, 2021; that the Weyburn Unit
will remain a core, strategic asset within Whitecap's
portfolio following the completion of the GORR sale; that the
Weyburn project will sequester 2
MT of carbon per year; the production decline rate of the
Weyburn asset; our ability to
generate significant free funds flow from the Weyburn asset; the underlying assumptions and
the benefits to be derived therefrom from the Agreement; the
Weyburn free funds flow break-even
price; that we will reach our target net debt prior to year end;
2021 year end unutilized credit capacity and forecasted debt to
EBITDA ratio at US$45/bbl WTI and
US$70/bbl WTI; that Whitecap's debt
reduction plans will provide significant financial flexibility,
optionality and long-term sustainability; plans to maintain balance
sheet strength; and potential plans to accelerate the return of
capital to shareholders through targeted share buybacks and
dividend increases.
The forward-looking information is based on certain key
expectations and assumptions made by our management, including
expectations and assumptions concerning prevailing commodity
prices, exchange rates, interest rates, applicable royalty rates
and tax laws; the impact (and the duration thereof) that the
COVID-19 pandemic will have on (i) the demand for crude oil, NGLs
and natural gas, (ii) our supply chain, including our ability to
obtain the equipment and services we require, and (iii) our
ability to produce, transport and/or sell our crude oil, NGLs and
natural gas; future production rates and estimates of operating
costs; performance of existing and future wells; reserve volumes;
anticipated timing and results of capital expenditures; the success
obtained in drilling new wells; the sufficiency of budgeted capital
expenditures in carrying out planned activities; the timing,
location and extent of future drilling operations; the state of the
economy and the exploration and production business; results of
operations; performance; business prospects and opportunities; the
availability and cost of financing, labour and services; the impact
of increasing competition; ability to efficiently integrate assets
and employees acquired through acquisitions, ability to market oil
and natural gas successfully and our ability to access capital.
Although we believe that the expectations and assumptions on
which such forward-looking information is based are reasonable,
undue reliance should not be placed on the forward-looking
information because Whitecap can give no assurance that they will
prove to be correct. Since forward-looking information addresses
future events and conditions, by its very nature they involve
inherent risks and uncertainties. These include, but are not
limited to: the risks associated with the oil and gas industry in
general such as operational risks in development, exploration and
production; pandemics and epidemics; delays or changes in plans
with respect to exploration or development projects or capital
expenditures; the uncertainty of estimates and projections relating
to reserves, production, costs and expenses; health, safety and
environmental risks; commodity price and exchange rate
fluctuations; interest rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to
complete or realize the anticipated benefits of acquisitions or
dispositions; ability to access sufficient capital from internal
and external sources; failure to obtain required regulatory and
other approvals; reliance on third parties and pipeline systems;
and changes in legislation, including but not limited to tax laws,
production curtailment, royalties and environmental regulations.
Our actual results, performance or achievement could differ
materially from those expressed in, or implied by, the
forward-looking information and, accordingly, no assurance can be
given that any of the events anticipated by the forward-looking
information will transpire or occur, or if any of them do so, what
benefits that we will derive therefrom. Management has included the
above summary of assumptions and risks related to forward-looking
information provided in this press release in order to provide
security holders with a more complete perspective on our future
operations and such information may not be appropriate for other
purposes.
Readers are cautioned that the foregoing lists of factors are
not exhaustive. Additional information on these and other factors
that could affect our operations or financial results are included
in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website
(www.sedar.com).
These forward-looking statements are made as of the date of this
press release and we disclaim any intent or obligation to update
publicly any forward-looking information, whether as a result of
new information, future events or results or otherwise, other than
as required by applicable securities laws.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Whitecap's 2021 year-end net debt; free funds flow,;
liquidity of Whitecap's credit facility and debt to EBITDA ratio,
all of which are subject to the same assumptions, risk factors,
limitations, and qualifications as set forth in the above
paragraphs. The actual results of operations of Whitecap and the
resulting financial results will likely vary from the amounts set
forth in this press release and such variation may be material.
Whitecap and its management believe that the FOFI has been prepared
on a reasonably basis, reflecting management's best estimates and
judgments. However, because this information is subjective and
subject to numerous risks, it should not be relied on as
necessarily indicative of future results. Except as required by
applicable securities laws, Whitecap undertakes no obligation to
update such FOFI. FOFI contained in this press release was made as
of the date of this press release and was provided for the purpose
of providing further information about Whitecap's anticipated
future business operations. Readers are cautioned that the FOFI
contained in this press release should not be used for purposes
other than for which it is disclosed herein.
Oil and Gas Advisories
References to crude oil or natural gas production in this press
release refer to the light and medium crude oil and conventional
natural gas, respectively, product types as defined in National
Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities ("NI 51-101").
"Boe" means barrel of oil equivalent based on 6 mcf
of natural gas to 1 bbl of oil. Boe may be misleading, particularly
if used in isolation. A boe conversion ratio of 6:1 is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. In addition, given that the value ratio based on the
current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Production
|
Crude oil
(bbls/d)
|
NGLs
(bbls/d)
|
Natural
gas
(Mcf/d)
|
Total
(boe/d) (1)
|
Current Net
Weyburn
|
13,500
|
500
|
0
|
14,000
|
Note:
(1) Disclosure of production on a
per boe basis of amounts in the above table in this press release
consists of the constituent product types and their respective
quantities disclosed in this table.
Non-GAAP Measures
This press release includes non-GAAP measures as further
described herein. These non-GAAP measures do not have a
standardized meaning prescribed by International Financial
Reporting Standards ("IFRS" or, alternatively, "GAAP") and,
therefore, may not be comparable with the calculation of similar
measures by other companies. See the Company's Management's
Discussion and Analysis of financial condition and results of
operation for the period ended June 30,
2021 for a reconciliation of the non-GAAP measures.
"Debt to EBITDA" is calculated in accordance with
the Company's credit agreements, copies of which may be accessed
through the SEDAR website (www.sedar.com).
"Free funds flow" represents funds flow less
expenditures on property, plant and equipment. Management believes
that free funds flow provides a useful measure of Whitecap's
ability to increase returns to shareholders and to grow the
Company's business. Previously, Whitecap also deducted dividends
paid or declared in the calculation of free funds flow. The Company
believes the change in presentation better allows comparison with
both dividend paying and non-dividend paying peers.
SOURCE Whitecap Resources Inc.