CALGARY, AB, Dec. 6, 2021 /CNW/ - Whitecap Resources Inc.
("Whitecap" or the "Company") (TSX: WCP) is pleased to announce
three separate transactions that will consolidate core assets
within its Central Alberta,
Eastern Saskatchewan and
Western Saskatchewan business
units (the "Acquisitions"). The Acquisitions will increase 2022
discretionary funds flow after capital and dividends by
$80 million or 10% per share at
US$65/bbl WTI and C$3.50/GJ AECO by adding approximately 9,000
boe/d (67% liquids) to our average production in 2022 and further
improving our long-term sustainability by adding 345 (257.5 net)
top tier drilling locations. The combined purchase price of the
Acquisitions is $342.5 million,
consisting of approximately 15.2 million Whitecap shares at a
weighted average price of $7.20 per
share and approximately $240 million
of cash.
Whitecap is also pleased to continue to advance our return of
capital strategy with the repurchase of 19.2 million shares at a
price of $6.95 per share for total
value of $133.7 million returned to
shareholders. The repurchase was executed by way of a block trade
under our normal course issuer bid ("NCIB"). We now have 7.1
million shares remaining on our current NCIB and intend to renew
the NCIB for another year when it expires on May 20, 2022.
Acquisition Highlights
- Accretive to Shareholders. The Acquisitions are 7%
accretive to 2022 funds flow per share, 8% accretive to 2022 free
funds flow per share, 10% accretive to 2022 discretionary funds
flow per share and 5% accretive to 2022 production per share. The
Acquisitions were executed at a forecast 2022 operating income
multiple of 2.6 times, while forecast 2022 discretionary funds flow
of $80 million from the Acquisitions
represents a yield of 23% relative to the purchase price and high
grades our inventory across three of our four existing business
units. The Acquisitions are also accretive to our environmental
sustainability with asset retirement obligations of only
$7 million (discounted at 10%) or
$26 million undiscounted. We plan to
further reduce the emissions profile of the Acquisitions by
completing the tie-in of natural gas currently being flared in
mid-2022.
- Central Alberta Private Co. Whitecap has entered into a
purchase and sale agreement to acquire a private company with
operations focused on the Glauconite formation in our Central Alberta business unit. The transaction
consolidates our working interest and allows Whitecap to control
the pace of development and optimize future production through its
facility ownership. Our Glauconite well type curve expectations
rank top quartile within our portfolio and this acquisition adds a
total of 65 (46.1 net) Glauconite locations within this business
unit. The purchase price includes approximately 12.5 million
Whitecap common shares and a cash payment of $180 million and is expected to close
mid-January 2022.
- Western Saskatchewan Asset. Whitecap acquired additional
Viking production and lands in the Forgan, Kerrobert and Plenty areas. The transaction consolidates our
working interests in the Kerrobert
area along with significant undrilled inventory at Forgan. The
majority of the 239 (171.4 net) identified locations are for
extended reach horizontal wells, and Whitecap will implement its
proven development strategies across the acquired acreage. The
$40 million purchase price was all
cash and closed on November 10,
2021.
- Eastern Saskatchewan Asset. Whitecap continues our
consolidation of assets in the Weir Hill area and adds 41 (40.0
net) locations, where our conventional Frobisher drilling results have yielded top
decile results. The tie-in of flared natural gas is expected to be
completed in mid-2022. The purchase price includes 2.7 million
Whitecap common shares and approximately $21
million of cash and closed on December 1, 2021.
Outlook
The Acquisitions are consistent with our strategy of continuing
to strengthen our asset base and longer-term sustainability through
strategic acquisitions to improve operational efficiencies and
increase profitability and returns to our shareholders. The
incremental debt added through the Acquisitions and the repurchase
of 19.2 million Whitecap shares will be funded with our 2022
discretionary funds flow. We continue to target 50% of
discretionary funds flow being returned to shareholders through
increased dividends and share buybacks.
There is no change to our 2021 capital spending guidance of
$425 - $435
million, and our fourth quarter production guidance is now
119,000 boe/d (75% liquids). For 2022, we are increasing our
capital spending guidance by $40
million to $510 - $530 million and production guidance by 9,000
boe/d (67% liquids) to 130,000 – 132,000 boe/d (73% liquids).
Including the recent share repurchase, our production per share
growth in 2022 is now 11%, up from 3% previously, and is similar to
our per share growth in 2021.
We are also pleased to advise that in addition to improving our
base business, we continue to make progress with our New Energy
initiatives. Whitecap has recently signed an additional Memorandum
of Understanding (MOU) with a CO2 emitter in the
Regina/Belle Plaine area. Including the previously
announced Federated Co-op Refinery and Ethanol complexes, the
aggregate emissions reductions covered by the two MOU's represents
0.8 - 1.0 million tonnes of annual carbon dioxide to be
sequestered. The additional support from other large emitters will
further advance our intention to create a centralized hub in the
area for economic carbon transportation and sequestration
solutions.
We remain constructive on the outlook for Canadian energy, and
the Acquisitions, share repurchases, along with the New Energy
initiatives, are a continuation of our efforts to increase
profitability to generate higher returns to shareholders while
improving long-term financial, operational and environmental
sustainability of our Company.
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 Acquisitions. In particular,
and without limiting the generality of the foregoing, this press
release contains forward-looking information with respect to: the
number of Whitecap shares to be issued pursuant to the Central Alberta acquisition; the anticipated
closing date of the Central
Alberta acquisition; the anticipated benefits of the
Acquisitions, including: (i) that the Acquisitions are expected to
generate discretionary funds flow after capital and dividends of
approximately $80 million or 10% per
share at US$65/bbl WTI and
C$3.50/GJ AECO, (ii) that the
Acquisitions will add approximately 9,000 boe/d (67% liquids) to
our average production in 2022; (iii) that the Acquisitions improve
our long-term sustainability, (iv) that the Acquisitions will add
345 (257.5 net) top tier drilling locations (v) 2022 funds flow per
share, free funds flow per share, discretionary funds flow,
discretionary funds flow per share, production per share, operating
income and transaction yield metrics, (vi) that the Acquisitions
high grade our inventory, (vii) that the Acquisitions are accretive
to our environmental sustainability, and (viii) that natural gas
currently being flared will be tied-in; that the Central Alberta acquisition allows for control
over pace of development and optimization of future production
through facility ownership; that the majority of identified
locations in the Western
Saskatchewan acquisition are for extended reach horizontal
wells; that Whitecap will implement its proven development
strategies as part of the Western
Saskatchewan acquisition; plans to tie-in of flared natural
gas from the Eastern Saskatchewan
acquisition and the expected completion date; the source of funding
the incremental debt added through the Acquisitions and the
repurchase of 19.2 million Whitecap shares; our plans to direct 50%
of discretionary funds flow to shareholders through increased
dividends and share buybacks; our budgeted 2021 and 2022 capital
expenditures; average production and liquids weighting for
Q4/21 and 2022; our anticipated 2022 production per share growth
and the underlying assumptions; the aggregate emissions covered by
both signed MOU's; that the support from emitters will further
advance the creation of a centralized hub for economic carbon
transportation and sequestration solutions; our expectations with
respect to the outlook for Canadian energy; that the Acquisitions
and New Energy initiatives will increase profitability and generate
higher returns to shareholders while improving our long-term
financial, operational, and environmental sustainability; and our
plans to renew the NCIB for another year when it expires on
May 20, 2022.
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; that the
Central Alberta acquisition will
be completed on the terms and timing contemplated; 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, including the Acquisitions; 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 2022 budgeted capital investments, funds
flow, free funds flow, and discretionary funds flow; and 2021
budgeted capital investments, 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 reasonable 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.
Drilling Locations
This press release discloses drilling inventory in three
categories: (i) proved locations; (ii) probable locations; and
(iii) unbooked locations. Proved locations and probable locations
are derived from Whitecap's internal evaluation and were prepared
by a member of Whitecap's management who is a qualified reserves
evaluator in accordance with NI 51-101 effective December 1, 2021 and account for drilling
locations that have associated proved and/or probable reserves, as
applicable. Unbooked locations are internal estimates based on our
prospective acreage and an assumption as to the number of wells
that can be drilled per section based on industry practice and
internal review. Unbooked locations do not have attributed reserves
or resources.
- Of the 345 (257.5 net) total drilling locations to be acquired
pursuant to the Acquisitions identified herein, 17 (14.4 net) are
proved locations, 4 (2.2 net) are probable locations, and 324
(240.9 net) are unbooked locations.
- Of the 65 (46.1 net) total Central Alberta Private Co. drilling
locations identified herein, 8 (5.4 net) are proved locations, 4
(2.2 net) are probable locations, and 53 (38.5 net) are unbooked
locations.
- Of the 239 (171.4 net) total Western
Saskatchewan asset drilling locations identified herein, 4
(4.0 net) are proved locations, and 235 (167.4 net) are unbooked
locations.
- Of the 41 (40.0 net) total Eastern
Saskatchewan asset drilling locations identified herein, 5
(5.0 net) are proved locations, and 36 (35.0 net) are unbooked
locations.
Unbooked locations have been identified by management as an
estimation of our multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that we will drill
all unbooked drilling locations and if drilled there is no
certainty that such locations will result in additional oil and gas
reserves, resources or production. The drilling locations on which
we drill wells will ultimately depend upon the availability of
capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While
certain of the unbooked drilling locations have been de-risked by
drilling existing wells in relative close proximity to such
unbooked drilling locations, other unbooked drilling locations are
farther away from existing wells where management has less
information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves,
resources or production.
Production
|
Crude oil
(bbls/d)
|
NGLs
(bbls/d)
|
Natural
gas (Mcf/d)
|
Total
(boe/d) (1)
|
Acquisitions 2022
Impact
|
4,570
|
1,490
|
17,640
|
9,000
|
Fourth Quarter
2021
|
78,500
|
10,400
|
180,600
|
119,000
|
2022
Revised
|
82,570 –
83,770
|
11,790 –
12,090
|
213,840 –
216,840
|
130,000 –
132,000
|
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 September 30,
2021 for a reconciliation of the non-GAAP measures.
"Free funds flow" represents funds flow less
expenditures on PP&E. 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.
"Discretionary funds flow" represents funds flow
less expenditures on property, plant and equipment ("PP&E") and
dividends. Management believes that discretionary funds flow
provides a useful measure of Whitecap's ability to increase returns
to shareholders and to grow the Company's business.
"Operating income" is determined by deducting
royalties and operating costs from petroleum and natural gas
revenues. Operating income is used in operational and capital
allocation decisions.
SOURCE Whitecap Resources Inc.