CALGARY,
AB, June 28, 2022 /CNW/ - Whitecap Resources
Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to
announce it has entered into a purchase and sale agreement to
acquire XTO Energy Canada for total cash consideration of
approximately $1.9 billion and the
assumption of estimated positive working capital on closing for a
net purchase price of $1.7 billion
(the "Acquisition"). The Acquisition is expected to close before
the end of the third quarter, subject to customary closing
conditions, including the receipt of necessary regulatory
approvals.
The acquired assets are currently producing approximately 32,000
boe/d1 (30% condensate and NGLs) from the Duvernay and Montney formations in Northwest Alberta, and include 672,000
(639,000 net) acres of land containing over 20 years of tier one
drilling locations, and an operated 165 mmcf/d shallow cut gas
processing facility servicing owned and third-party Duvernay volumes.
The Acquisition will be funded through existing credit
facilities and a new committed 4-year term loan. On closing,
Whitecap is expected to have net debt2 of $2.1 billion on total credit capacity of
$3.1 billion and a debt to EBITDA
ratio3 of 0.8 times, decreasing to 0.6 times at year end
on current strip pricing.
STRATEGIC RATIONALE
The Acquisition significantly improves our free funds
flow4 profile, adds top tier Montney inventory by expanding and
consolidating certain working interests in Whitecap's current
Montney assets in the greater
Kakwa, Alberta region, and
represents an entry into the prolific liquids-rich Duvernay play at Kaybob. Further strategic
attributes and transaction rationale include:
- Top Tier Montney & Duvernay Inventory. Montney lands acquired total 598,000
(567,000 net) acres, which increases Whitecap's total acreage in
the Montney by over 500% and adds
1,772 (1,693 net) Montney drilling
locations providing decades of long-term sustainable production
growth and free funds flow generation. Additionally, the
Acquisition consolidates certain working interests at Kakwa,
Alberta, from an average of 66% to
100% on approximately 22,000 gross acres. The Acquisition
represents Whitecap's entry into the prolific liquids-rich
Duvernay play at Kaybob including
74,000 (72,000 net) acres with 252 (217 net) identified drilling
locations.
- Increased Free Funds Flow. The acquired assets generate
significant free funds flow resulting in free funds flow per share
accretion of 20% in 2023 and 2024. Production is expected to grow
to an optimized 50,000 to 60,000 boe/d over the next 3-5 years,
allowing the Company to continue to focus on increasing shareholder
returns at a more advanced pace.
- Enhanced Per Share Value. All-cash transaction
drives accretion to key 2023 per share metrics including 27% on
funds flow, 20% on free funds flow and 27% on production. Accretion
on total proven plus probable reserves per share and net asset
value per share5 are 50% and 28%,
respectively6.
- Strong Balance Sheet. In connection with the
Acquisition, Whitecap has obtained a financing commitment for a new
$1.1 billion 4-year term loan which
results in total credit capacity of $3.1
billion. On closing of the Acquisition, Whitecap is expected
to have net debt of $2.1 billion,
decreasing to $1.5 billion by year
end, which would represent a debt to EBITDA ratio of 0.6 times on
current strip pricing. This is expected to further decrease in 2023
to net debt of $800 million at year
end, which would represent a debt to EBITDA ratio of 0.4 times at
US$85/bbl WTI crude oil and
C$4.50/GJ AECO natural gas.
- Increases Condensate and Natural Gas Exposure. Forecast
2023 production of 36,000 boe/d on the acquired assets consists of
27% condensate, 9% natural gas liquids and 64% natural gas volumes.
On the back of a positive outlook for North American natural gas
driven by increased natural gas exports and a focus on global
energy security, the Acquisition allows Whitecap to deliver a more
balanced portfolio and diversify its commodity revenue streams,
gaining significant long-term exposure to North American natural
gas prices and development optionality.
- Improves ESG7 Profile. The
Acquisition contains attractive environmental attributes including
an expected reduction in our corporate carbon intensity, driven by
the increased focus on natural gas, along with minimal discounted
asset retirement obligation of approximately $30 million. This is accretive to our existing
ESG efforts, building on Whitecap's globally leading carbon
capture, utilization and storage projects and expertise.
- Attractive Acquisition Metrics. At US$85/bbl WTI crude oil and C$4.50/GJ AECO natural gas prices for 2023, the
estimated net purchase price of $1.7
billion equates to 3.3 times operating funds
flow8, a 15% free funds flow yield, and $10.63/boe on a total proved plus probable
reserves basis (including estimated future development
capital).
DIVIDEND INCREASE AND RETURN OF CAPITAL FRAMEWORK
The Acquisition provides Whitecap with approximately
$200 million of incremental free
funds flow per year allowing us to accelerate the return of capital
to our shareholders. Effective with the July dividend payable in
August, our Board of Directors has approved a 22% increase to the
monthly dividend to $0.0367 per
share, from $0.03 per share
previously, which equates to $0.44
per share on an annual basis.
Following the close of the Acquisition, our balance sheet will
remain a priority with net debt milestones of $1.8 billion which we expect to achieve before
year end 2022 and $1.3 billion which
we expect to achieve in the first half of 2023. We are targeting
additional dividend increases of $0.12 - $0.15 per
share annually on achieving each net debt milestone, resulting in a
total targeted annualized dividend of $0.73 per share. Whitecap's net debt milestone of
$1.3 billion represents a debt to
EBITDA ratio of less than 1.0 times at a stress test commodity
price deck of US$50/bbl WTI and
C$4.00/GJ AECO or 0.6 times at
US$85/bbl WTI and C$4.50/GJ AECO. Upon achieving this milestone, we
anticipate returning 75% of free funds flow back to shareholders
with the balance used to position Whitecap for future business
development opportunities.
PRO FORMA OUTLOOK
Whitecap is well positioned to continue to deliver strong total
shareholder returns with enhanced free funds flow, improving
capital efficiencies and a strong balance sheet.
Our revised 2022 forecast, assuming an October 1 closing date for the Acquisition, is as
follows:
|
2022
Pre-Acquisition
|
2022
Post-Acquisition
|
%
Change
|
Average production
(boe/d)
|
130,000 –
132,000
|
138,000 –
140,000
|
6 %
|
Per
million shares outstanding
|
209
|
221
|
6 %
|
%
oil and NGLs
|
73 %
|
71 %
|
(2 %)
|
Funds flow
($MM)
|
$2,240
|
$2,348
|
5 %
|
Per
share
|
$3.56
|
$3.74
|
5 %
|
Development
capital9 ($MM)
|
$570
|
$620
|
9 %
|
Free funds flow
($MM)
|
$1,670
|
$1,728
|
3 %
|
Per
share
|
$2.66
|
$2.75
|
3 %
|
|
|
|
|
Crude Oil (WTI
US$/bbl)
|
$98.04
|
$98.04
|
-
|
Edmonton Par
Differential (US$/bbl)
|
$2.87
|
$2.87
|
-
|
CAD/USD exchange
rate
|
1.27
|
1.27
|
-
|
Natural gas (AECO
C$/GJ)
|
$5.57
|
$5.57
|
-
|
Our preliminary 2023 forecast is as follows:
|
2023
Pre-Acquisition
|
2023
Post-Acquisition
|
%
Change
|
Average production
(boe/d)
|
135,000
|
168,000 –
174,000
|
27 %
|
Per
million shares outstanding
|
216
|
273
|
27 %
|
%
oil and NGLs
|
73 %
|
65 %
|
(8 %)
|
Funds flow
($MM)
|
$1,665
|
$2,108
|
27 %
|
Per
share
|
$2.66
|
$3.37
|
27 %
|
Development capital
($MM)
|
$740
|
$900 -
$1,100
|
35 %
|
Free Funds Flow
($MM)
|
$925
|
$1,108
|
20 %
|
Per
share
|
$1.48
|
$1.77
|
20 %
|
|
|
|
|
Crude Oil (WTI
US$/bbl)
|
$85.00
|
$85.00
|
-
|
Edmonton Par
Differential (US$/bbl)
|
$4.00
|
$4.00
|
-
|
CAD/USD exchange
rate
|
1.28
|
1.28
|
-
|
Natural gas (AECO
C$/GJ)
|
$4.50
|
$4.50
|
-
|
ASSET DETAILS
The acquired assets are characterized by high production rates
and reserves, efficient and highly economic liquids-rich assets
with significant tier one drilling locations across the entire
672,000 (639,000 net) acres land position. Our initial plans are to
grow this asset to 50,000 to 60,000 boe/d over the next 3-5 years,
at which point there will still be 20 years of tier one drilling
inventory to maintain production. Our budgeted wells for the
Montney and Duvernay rank top decile among our asset base,
and pro-forma the Acquisition the Montney and Duvernay will represent the highest proportion
of long-term resource potential within our asset portfolio.
The reserves attributed to the Acquisition were evaluated by
McDaniel & Associates Consultants Ltd. ("McDaniel") in a report
effective as at May 1, 2022 (the
"McDaniel Reserves Report") using the three consultant average
price deck as at April 1, 2022 with
WTI averaging US$80.78/bbl and AECO
averaging C$3.70/GJ (2022 – 2026),
which is lower than current strip prices. Of the 2,024 (1,910 net)
drilling locations identified, 237 (213 net) are included in the
McDaniel Reserves Report and 1,787 (1,697 net) are unbooked.
|
Proven Developed
Producing
|
Total
Proven
|
Total Proven
plus
Probable
|
Reserves (MMboe - %
liquids)
|
49.7
(28 %)
|
226.0
(35 %)
|
403.2
(35 %)
|
Net Present Value ($
million - 10% Discount)
|
$822
|
$2,452
|
$3,829
|
Montney
- The Acquisition consolidates certain working interests at Kakwa
where recent wells drilled and completed by Whitecap have
outperformed internal expectations. Whitecap has optimized its
completion design on recent wells, and there will be no change to
capital spending plans in this area as Whitecap already controls
the pace of development.
- Whitecap's total Montney
acreage is now 683,000 (638,000 net) acres with a total of 2,226
(2,112 net) drilling locations.
- Montney production utilizes
owned gathering and compression along with third-party gas
processing in the area that has significant spare capacity. This
provides ample room for production growth in the area.
- Liquids are currently trucked to processing facilities;
however, the majority of these volumes will be transferred to a
third-party pipeline, scheduled to be in service in the first half
of 2023. Natural gas volumes will be transported to end markets via
firm service on the Nova Gas Transmission Line.
Duvernay
- The Acquisition includes 100% ownership of the 15-07 gas
processing facility which is a shallow cut facility with 165 mmcf/d
of capacity. The facility currently processes the acquired
Duvernay volumes along with
third-party volumes from area producers. Ownership of this facility
provides the Company with development optionality for future
exploitation of the assets.
- Industry has made significant strides to improve the economics
of the Duvernay over the past
several years through refined drilling and completion techniques,
quicker drilling times and improving production rates. We intend on
utilizing these refined methods along with recent learnings from
our Montney program to further
improve the economics and free funds flow potential of the
asset.
- Firm service for both liquids handling as well as natural gas
egress is in place and will be utilized by Whitecap.
ADVISORS
National Bank Financial Inc. is acting as financial advisor to
Whitecap on the Acquisition. National Bank Financial Markets and TD
Securities are acting as joint bookrunners and co-lead arrangers
with respect to the term loan facilities.
On behalf of our employees, management team and Board of
Directors, we would like to thank our shareholders for their
support and look forward to updating you on our progress throughout
the year.
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,
June 29, 2022.
The conference call dial-in number is:
1-888-390-0605 or (587) 880-2175 or (416) 764-8609
A live audio 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.
NOTES
1
|
Disclosure of
production on a per boe basis in this press release consists of the
constituent product types and their respective quantities disclosed
elsewhere in this press release. Refer to Barrel of Oil Equivalency
and Production and Product Type Information in this press release
for additional disclosure.
|
2
|
Funds flow, funds flow
per share and net debt are capital management measures. Refer to
Specified Financial Measures in this press release for additional
disclosure and assumptions.
|
3
|
Debt to EBITDA ratio is
a specified financial measure that is calculated in accordance with
the financial covenants in our credit agreement.
|
4
|
Free funds flow is a
non-GAAP financial measure and free funds flow per share and free
funds flow yield are non-GAAP ratios. Refer to Specified Financial
Measures in this press release for additional disclosure and
assumptions.
|
5
|
Refer to the Oil and
Gas Advisories section for additional disclosure regarding how we
calculate net asset value per share.
|
6
|
Reserves attributed to
the Acquisition are based on the McDaniel Reserves Report. See Oil
and Gas Advisories – Reserves.
|
7
|
ESG represents the
commonly referred to acronym for the non-financial Environmental,
Social and Governance factors impacting investor and stakeholder
analysis.
|
8
|
Also referred to as
"operating netback". Operating netback is a non-GAAP financial
measure. Refer to Specified Financial Measures in this press
release for additional disclosure and assumptions.
|
9
|
Also referred to herein
and/or in our other disclosure documents as "capital
expenditures".
|
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, strategies,
financial, operating and production results and business
opportunities, including relating to the Acquisition and the
Company after completing the Acquisition. 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, position, including the strategic rationale
for, and anticipated benefits to be derived from, the
Acquisition.
In particular, and without limiting the generality of the
foregoing, this press release contains forward-looking information
with respect to: the estimated amount of working capital that we
will assume on closing of the Acquisition and the estimated net
purchase price for the Acquisition; that the Acquisition is
expected to close before the end of the third quarter; forecast
Q4/2022 production in total and by product type from the
Acquisition; the acquired lands have over 20 years of tier one
drilling locations; our plans for how the purchase price will be
funded; our expected net debt on closing and by year end; our
expected debt to EBITDA ratio on closing and at year end on strip
pricing; the anticipated benefits to be derived from, and/or
characteristics of, the Acquisition, including: the number of
Montney and Duvernay drilling locations and the breakdown
by location type, it significantly improves our free funds flow
profile, it adds top tier Montney
and Duvernay drilling inventory,
that the acquired drilling locations in the Montney will provide years of sustainable
production growth and free funds flow generation, it generates free
funds flow of approximately $200
million per year resulting in free funds flow accretion of
20% in 2023 and 2024, that production is expected to grow to an
optimized 50,000 to 60,000 boe/d over the next 3-5 years, allowing
the Company to increase shareholder returns at a more advanced
pace, that it will be highly accretive to key 2023 per share
metrics, including 27% on funds flow, 20% on free funds flow and
27% on production, as well as 50% on total proven plus probable
reserves per share and 28% on net asset value per share, 2023
production forecast in total and by product type, that by adding
both condensate and natural gas volumes, the Acquisition
diversifies our commodity revenue streams, that the Acquisition
will reduce Whitecap's corporate carbon intensity, and the 2023
operating funds flow multiple of 3.3 times, 15% free funds flow
yield and $10.63/boe total proven
plus probable reserve metric of the Acquisition, in each case based
on the estimated net purchase price of $1.7
billion and at US$85/bbl WTI
crude oil and C$4.50/GJ AECO natural
gas prices for 2023; that the Acquisition provides Whitecap with
approximately $200 million of
incremental free funds flow allowing us to accelerate return of
capital to our shareholders, including the 22% increase to our
monthly dividend; the characteristics of the acquired assets
including high production rates and reserves, efficient, highly
economic liquids-rich assets with significant tier one drilling
locations; that there will still be 20 years of tier one drilling
inventory to maintain production after growing the asset to 50,000
– 60,000 boe/d over the next 3-5 years; that our budget wells for
the Montney and Duvernay rank top decile among our asset base,
and that pro forma the Acquisition the Montney and Duvernay will represent the highest proportion
of long-term resource potential within our asset portfolio; the
reserves and net present value estimates in the McDaniel Reserves
Report by reserves category and related forecast commodity price
assumptions; the number of drilling locations on the acquired lands
identified in the McDaniel Reserves Report, estimated by the
Company, and in total; that there will be no change to our capital
spending plans in the Kakwa area; that there is ample room for
Montney production growth based on
the significant spare capacity of existing third-party
infrastructure; that Montney
liquids volumes will be transferred to a third-party pipeline,
scheduled to be in service in the first half of 2023, and our plans
for transporting natural gas volumes; that ownership of the 15-07
gas processing facility provides the Company with development
optionality for future exploitation of the Duvernay assets; and our intention to utilize
refined drilling and completion methods along with recent learning
from our Montney program to
further improve the economics and free funds flow potential of the
asset; our expected net debt on closing, year end 2022 at strip
prices and in 2023 at US$85/bbl WTI
and C$4.50/GJ AECO prices; our
expected debt to EBITDA ratio at closing and year end 2022 at strip
prices and in 2023 at US$85/bbl WTI
and C$4.50/GJ AECO prices; our
expectation to achieve our net debt milestones of $1.8 billion by year end 2022 and $1.3 billion in the first half of 2023; our
target dividend increases upon reaching each net debt milestone of
$0.12 - $0.15 per share annually, resulting in a targeted
annualized dividend of $0.73 per
share; that net debt of $1.3 billion
represents a debt to EBITDA ratio of 1.0 times at US$50/bbl WTI and C$4.00/GJ AECO prices or 0.5 times at
US$85/bbl WTI and C$4.50/GJ AECO prices; our anticipation to return
75% of free funds flow back to shareholders on reaching our net
debt milestones of $1.3 billion; that
Whitecap is well positioned to continue to deliver strong total
shareholder returns with enhanced free funds flow, improving
capital efficiencies and a strong balance sheet; and the
information contained under Pro Forma Outlook, including our
forecast pre-acquisition and post-acquisition 2022 and 2023 average
daily production range totals and by per million shares outstanding
and product type, funds flow, funds flow per share, development
capital, free funds flow and free funds flow per share and our
related commodity price and exchange rate forecast assumptions.
Statements relating to "reserves" are also deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that
the reserves can be profitably produced in the future.
The forward-looking information is based on certain key
expectations and assumptions made by our management, including:
that the parties will be able to satisfy all conditions precedent
to closing the Acquisition, including the receipt of all applicable
regulatory approvals, and that the Acquisition will be completed on
the terms and timing contemplated herein; that we will be able to
satisfy all conditions precedent to obtaining our new committed
4-year term loan, and that the term loan financing will be
completed on the terms and timing contemplated herein; that we will
continue to conduct our operations in a manner consistent with past
operations, except as specifically noted herein; the general
continuance or improvement in current industry conditions; the
continuance of existing (and in certain circumstances, the
implementation of proposed) tax, royalty and regulatory regimes;
expectations and assumptions concerning prevailing and forecast
commodity prices, exchange rates, interest rates, inflation rates,
applicable royalty rates and tax laws, including the assumptions
specifically set forth herein; 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; the ability of OPEC+ nations and other major
producers of crude oil to adjust crude oil production levels and
thereby manage world crude oil prices; the impact (and the duration
thereof) of the ongoing military actions between Russia and Ukraine and related sanctions on crude oil,
NGLs and natural gas prices; the impact of rising inflation rates
and interest rates on the North American and world economies and
the corresponding impact on our costs, our profitability, and on
crude oil, NGLs and natural gas prices; future production rates and
estimates of operating costs and development capital, including as
specifically set forth herein; performance of existing and future
wells; reserve volumes and net present values thereof, including as
set forth in the McDaniel Reserves Report; anticipated timing and
results of capital expenditures / development capital, including as
specifically set forth herein; 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, including our assumptions regarding the number
of drilling locations obtained through the Acquisition; 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; future
dividend levels; the impact of increasing competition; ability to
efficiently integrate assets and employees acquired through
acquisitions, including the Acquisition; ability to market oil and
natural gas successfully; our ability to access capital and the
cost and terms thereof, including as specifically contemplated
herein. In addition, this press release contains various
assumptions regarding future commodity prices, exchange rates,
capital expenditures, net debt levels, free cash flow levels and
other matters that are located proximate to the aforementioned
forward-looking information.
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 risk that the Acquisition is not completed on the
terms and/or on the timing contemplated herein; the risk that our
new term loan is not obtained on the terms and/or on the timing
contemplated herein; the risk that we do not realize some or all of
the anticipated benefits of the Acquisition; the risk that our
anticipated dividend increases and return of capital framework is
delayed or amended; the risk that any of our material assumptions
prove to be materially inaccurate, including our 2022 and 2023 pre-
and post-Acquisition forecasts; 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; risks associated with increasing costs, whether due
to high inflation rates, supply chain disruptions or other factors;
health, safety and environmental risks; commodity price and
exchange rate fluctuations; interest rate fluctuations; inflation
rate fluctuations; marketing and transportation; loss of markets;
environmental risks; competition; incorrect assessment of the value
of acquisitions, including the Acquisition; failure to complete or
realize the anticipated benefits of acquisitions or dispositions,
including the Acquisition; ability to access sufficient capital
from internal and external sources on acceptable terms or at all;
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 planned dividend increases, our target for
returning free funds flow to shareholders, assumption of positive
working capital on closing of the Acquisition and resulting net
purchase price, forecast production volumes for the acquired assets
and the Company in 2022, 2023 and beyond, incremental free funds
flow from the Acquisition, pre-acquisition and post-acquisition
2022 and 2023 production, funds flow, development capital and free
funds flow, net debt upon closing, year end 2022 net debt, first
half 2023 net debt, and year end 2023 net debt and debt to EBITDA
ratios at closing, at year end 2022 and in 2023, 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 herein 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
Reserves
Reserves estimates in this press release in respect of the
Acquisition are based on the evaluation prepared by McDaniel as set
out in the McDaniel Reserves Report effective as at May 1, 2022, which was prepared in accordance
with National Instrument 51-101 ("NI 51-101") and the Canadian Oil
and Gas Evaluation Handbook. The McDaniel Reserves Report was
based on the average forecast pricing of McDaniel, GLJ Ltd. and
Sproule Associates Limited and inflation rates and foreign exchange
rates as at April 1, 2022, which is
available on McDaniel's website at www.mcdan.com.
Acquisition
|
Tight Oil/
Condensate
(MMbbl)
|
NGLs
(MMbbl)
|
Shale
Gas
(MMcf)
|
Total
(MMboe)(1)(2)
|
Proven Developed
Producing
|
7.8
|
6.1
|
214.9
|
49.7
|
Total Proven
|
49.8
|
28.3
|
887.6
|
226.0
|
Total Proven plus
Probable
|
89.8
|
49.7
|
1,582.3
|
403.2
|
Notes:
(1)
|
Disclosure of reserves
on a per boe basis in this press release consists of the
constituent product types and their respective quantities disclosed
in this table.
|
(2)
|
All reserves
information in this press release in respect of the Acquisition are
"Company share reserves". Company share reserves are the total
working interest reserves before the deduction of any royalties and
including any royalty interests receivable on the assets comprising
the Acquisition.
|
It should not be assumed that the present worth of estimated
future net revenues presented in the tables above represents the
fair market value of the reserves. There is no assurance that the
forecast prices and costs assumptions will be attained, and
variances could be material. The recovery and reserve estimates of
the crude oil, natural gas liquids and natural gas reserves
provided herein are estimates only and there is no guarantee that
the estimated reserves will be recovered. Actual crude oil, natural
gas and natural gas liquids reserves may be greater than or less
than the estimates provided herein.
Barrel of Oil Equivalency
"Boe" means barrel of oil equivalent. All boe conversions
in this press release are derived by converting gas to oil at the
ratio of six thousand cubic feet ("Mcf") of natural gas to one
barrel ("Bbl") of oil. Boe may be misleading, particularly if used
in isolation. A Boe conversion rate of 1 Bbl : 6 Mcf is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio of oil compared to natural gas
based on currently prevailing prices is significantly different
than the energy equivalency ratio of 1 Bbl : 6 Mcf, utilizing a
conversion ratio of 1 Bbl : 6 Mcf may be misleading as an
indication of value.
Oil and Gas Metrics
This press release contains metrics commonly used in the oil and
natural gas industry which have been prepared by management, such
as "development capital" and "net asset value per share". These
terms do not have a standardized meaning and may not be comparable
to similar measures presented by other companies, and therefore
should not be used to make such comparisons.
"Development capital" means the aggregate exploration and
development costs incurred or forecast to be incurred in the
financial year on reserves that are categorized as development.
"Net asset value per share" is determined by subtracting
net debt and asset retirement obligations (if not otherwise
deducted) at the applicable date from the total proved plus
probable before tax net present value of future net revenue
discounted at 10% as provided in the McDaniel Reserves Report,
divided by the number of fully diluted shares outstanding at the
applicable date.
Management uses these oil and gas metrics for its own
performance measurements and to provide shareholders with measures
to compare our operations over time. Readers are cautioned that the
information provided by these metrics, or that can be derived from
the metrics presented in this press release, should not be relied
upon for investment or other purposes.
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 McDaniel's reserves evaluation effective
May 1, 2022 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.
|
Acq.
Montney
|
Acq.
Duvernay
|
Acq.
Total
|
Total
Montney
|
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
Proved
Locations
|
102
|
84
|
46
|
46
|
148
|
130
|
196
|
142
|
|
|
|
|
|
|
|
|
|
Probable
Locations
|
67
|
61
|
22
|
22
|
89
|
83
|
104
|
85
|
|
|
|
|
|
|
|
|
|
Unbooked
Locations
|
1,603
|
1,548
|
184
|
149
|
1,787
|
1,697
|
1,926
|
1,885
|
|
|
|
|
|
|
|
|
|
Total
Locations
|
1,772
|
1,693
|
252
|
217
|
2,024
|
1,910
|
2,226
|
2,112
|
Unbooked locations consist of drilling locations that 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 of these 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 and Product Type Information
References to petroleum, crude oil, natural gas liquids
("NGLs"), natural gas and average daily production in this press
release refer to the light and medium crude oil, tight crude oil,
conventional natural gas, shale gas and NGLs product types, as
applicable, as defined in NI 51-101.
NI 51-101 includes condensate within the NGLs product type. The
Company has disclosed condensate as combined with crude oil and
separately from other NGLs since the price of condensate as
compared to other NGLs is currently significantly higher, and the
Company believes that this crude oil and condensate presentation
provides a more accurate description of its operations and results
therefrom. Crude oil therefore refers to light oil, medium oil,
tight oil and condensate. NGLs refers to ethane, propane, butane
and pentane combined. Natural gas refers to conventional natural
gas and shale gas combined.
The forecast average daily production for the Acquisition for
the three months ended December 31,
2022, full year 2023, and target production over the next
3-5 years, the forecast average daily production for the Company
prior to giving effect to the Acquisition for full year 2022 and
2023, and the forecast average daily production for the Company
after giving effect to the Acquisition for full year 2022 and 2023
disclosed in this press release consists of the following product
types, as defined in NI 51-101 and using a conversion ratio of 1
Bbl : 6 Mcf where applicable:
Acquisition
|
Q4/22
|
2023
Forecast
|
Target
Production
|
Light and medium oil
(bbls/d)
|
-
|
-
|
-
|
Tight oil/condensate
(bbls/d)
|
7,100
|
9,650
|
13,500 -
16,200
|
Crude oil
(bbls/d)
|
7,100
|
9,650
|
13,500 -
16,200
|
|
|
|
|
NGLs
(bbls/d)
|
2,700
|
3,400
|
4,500 –
5,400
|
|
|
|
|
Shale gas
(Mcf/d)
|
133,200
|
137,700
|
192,000 –
230,400
|
Conventional natural
gas (Mcf/d)
|
-
|
-
|
-
|
Natural gas
(Mcf/d)
|
133,200
|
137,700
|
192,000 –
230,400
|
|
|
|
|
Total
(boe/d)
|
32,000
|
36,000
|
50,000 -
60,000
|
Whitecap
Corporate
|
2022
Pre-Acquisition
|
2022
Post-Acquisition
|
Light and medium oil
(bbls/d)
|
78,280 -
79,420
|
78,280 -
79,420
|
Tight oil/condensate
(bbls/d)
|
4,290 -
4,350
|
6,065 –
6,125
|
Crude oil
(bbls/d)
|
82,570 -
83,770
|
84,345 –
85,545
|
|
|
|
NGLs
(bbls/d)
|
11,790 –
12,090
|
12,465 –
12,765
|
|
|
|
Shale gas
(Mcf/d)
|
62,760 -
63,640
|
96,060 –
96,940
|
Conventional natural
gas (Mcf/d)
|
151,080 -
153,200
|
151,080 -
153,200
|
Natural gas
(Mcf/d)
|
213,840 -
216,840
|
247,140 –
250,140
|
|
|
|
Total
(boe/d)
|
130,000 -
132,000
|
138,000 –
140,000
|
Whitecap
Corporate
|
2023
Pre-Acquisition
|
2023
Post-Acquisition
|
Light and medium oil
(bbls/d)
|
81,250
|
80,750 –
81,750
|
Tight oil/condensate
(bbls/d)
|
4,450
|
13,800 –
14,400
|
Crude oil
(bbls/d)
|
85,700
|
94,550 –
96,150
|
|
|
|
NGLs
(bbls/d)
|
12,300
|
15,400 –
15,960
|
|
|
|
Shale gas
(Mcf/d)
|
65,100
|
195,400 –
210,440
|
Conventional natural
gas (Mcf/d)
|
156,900
|
152,900 –
160,900
|
Natural gas
(Mcf/d)
|
222,000
|
348,300 –
371,340
|
|
|
|
Total
(boe/d)
|
135,000
|
168,000 –
174,000
|
SPECIFIED FINANCIAL MEASURES
This press release includes various specified financial
measures, including non-GAAP financial measures, non-GAAP ratios,
capital management measures and supplementary financial measures as
further described herein. These financial measures are not
standardized financial measures under International Financial
Reporting Standards ("IFRS" or, alternatively, "GAAP") and,
therefore, may not be comparable with the calculation of similar
financial measures disclosed by other companies.
"Free funds flow" is a non-GAAP financial
measure calculated as 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. Free funds flow is
not a standardized financial measure under IFRS and, therefore, may
not be comparable with the calculation of similar financial
measures disclosed by other entities. The most directly comparable
financial measure to free funds flow disclosed in the Company's
primary financial statements is cash flow from operating
activities. Refer to the "Cash Flow from Operating Activities,
Funds Flow and Payout Ratios" sections of our management's
discussion and analysis for the three months ended March 31, 2022 and the year ended December 31, 2021, both of which are incorporated
herein by reference, and available on SEDAR at www.sedar.com.
"Free funds flow per share" is a non-GAAP ratio.
Free funds flow per share is calculated by dividing free funds flow
by the weighted average number of shares outstanding for the
relevant period. Free funds flow per share is not a
standardized financial measure under IFRS and, therefore, may not
be comparable with the calculation of similar financial measures
disclosed by other entities. See
"Free funds flow" above.
"Free funds flow yield" is a non-GAAP ratio. Free
funds flow yield is calculated by dividing free funds flow before
corporate G&A and interest costs by the estimated net purchase
price of the Acquisition. Free funds flow yield is not a
standardized financial measure under IFRS and, therefore, may not
be comparable with the calculation of similar financial measures
disclosed by other entities. See
"Free funds flow" above.
"Funds flow" and "funds flow per share" are
capital management measures and are key measures of operating
performance as they demonstrate Whitecap's ability to generate the
cash necessary to pay dividends, repay debt, make capital
investments, and/or to repurchase common shares under the Company's
NCIB. Management believes that by excluding the temporary impact of
changes in non-cash operating working capital, funds flow, funds
flow per share provide useful measures of Whitecap's ability to
generate cash that are not subject to short-term movements in
non-cash operating working capital. Whitecap reports funds flow in
total and on a per share basis (basic and diluted), which is
calculated by dividing funds flow by the weighted average number of
basic shares and weighted average number of diluted shares
outstanding for the relevant period. See Note 5(e) (ii) "Capital
Management – Funds Flow" in the Company's unaudited interim
consolidated financial statements for the three months ended
March 31, 2022 and in the Company's
audited annual consolidated financial statements for the year ended
December 31, 2021 for additional
disclosures.
"Net Debt" is a capital management measure that
management considers to be key to assessing the Company's
liquidity. See Note 5(e) (i) "Capital Management – Net Debt and
Total Capitalization" in the Company's unaudited interim
consolidated financial statements for the three months ended
March 31, 2022 and in the Company's
audited annual consolidated financial statements for the year ended
December 31, 2021 for additional
disclosures.
"Operating netback" is a non-GAAP financial measure
determined by adding marketing revenue and processing & other
income, deducting realized losses on commodity risk management
contracts or adding realized gains on commodity risk management
contracts and deducting tariffs, royalties, operating expenses,
transportation expenses and marketing expenses from petroleum and
natural gas revenues. The most directly comparable financial
measure to operating netback disclosed in the Company's primary
financial statements is petroleum and natural gas sales. Operating
netback is a measure used in operational and capital allocation
decisions. Operating netback is not a standardized financial
measure under IFRS and, therefore, may not be comparable with the
calculation of similar financial measures disclosed by other
entities. Refer to the "Operating Netbacks" sections of our
management's discussion and analysis for the three months ended
March 31, 2022 and the year ended
December 31, 2021, both of which are
incorporated herein by reference, and available on SEDAR at
www.sedar.com.
Per Share Amounts
Per share amounts noted in this press release are based on fully
diluted shares outstanding.
SOURCE Whitecap Resources Inc.