2012 YEAR-END RESERVES
Whitecap’s year-end 2012 reserves were evaluated by independent reserves evaluator McDaniel & Associates Consultants Ltd. (“McDaniels”). The evaluation of all of Whitecap’s oil and gas properties was done in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in the Company’s Annual Information Form which will be filed on SEDAR by March 22, 2013 .
Highlights of the 2012 reserve report include:
Summary of Reserves
(Forecast Pricing)
| As at December 31, 2012 (1) | ||||
| Gross company reserves(2) | ||||
| Description | Oil (Mbbl) | Gas (MMcf) | NGL (Mbbl) | Total (Mboe) |
| Proved producing | 21,954 | 72,265 | 3,182 | 37,181 |
| Proved non-producing | 290 | 4,278 | 15 | 1,017 |
| Undeveloped | 15,056 | 34,962 | 1,845 | 22,729 |
| Total proved(3) | 37,300 | 111,505 | 5,043 | 60,927 |
| Probable | 15,702 | 52,273 | 2,159 | 26,573 |
| Total proved plus probable(3) | 53,002 | 163,778 | 7,201 | 87,500 |
| (1) | Based on McDaniels’ January 1, 2013 forecast prices. |
| (2) | Gross Company reserves are the Company’s total working interest share before the deduction of any royalties and without including any royalty interest of the Company. |
| (3) | Numbers may not add due to rounding. |
Summary of Before Tax Net Present Values
(Forecast Pricing)
| As at December 31, 2012 (1) | ||||||||||
| Before Tax Net Present Value ($MM) | ||||||||||
| Discount Rate | ||||||||||
| Description | 0% | 5% | 10% | 15% | 20% | |||||
| Proved producing | $ | 1,408 | $ | 1,030 | $ | 817 | $ | 682 | $ | 590 |
| Proved non-producing | 17 | 13 | 11 | 9 | 8 | |||||
| Undeveloped | 619 | 376 | 240 | 157 | 101 | |||||
| Total proved | $ | 2,043 | $ | 1,419 | $ | 1,068 | $ | 848 | $ | 700 |
| Probable(2) | 1,150 | 562 | 335 | 226 | 166 | |||||
| Total proved plus probable(2) | $ | 3,194 | $ | 1,980 | $ | 1,402 | $ | 1,074 | $ | 865 |
| (1) | Based on McDaniels’ January 1, 2013 forecast prices. |
| (2) | Numbers may not add due to rounding. |
Capital Program Efficiency
Based on the evaluation of our petroleum and natural gas reserves prepared in accordance with NI 51-101 by our independent reserve evaluator, McDaniels, the historical efficiency of our capital programs is summarized as follows:
| 2012 | 2011 | Three Year Weighted Average |
||||
| Excluding Future Development Costs | ||||||
| Proved ($/boe) | ||||||
| F&D costs(1) | $ | 19.03 | $ | 14.59 | $ | 18.65 |
| FD&A costs(2) | $ | 22.04 | $ | 20.77 | $ | 21.70 |
| Proved plus probable ($/boe) | ||||||
| F&D costs(1) | $ | 14.87 | $ | 10.74 | $ | 15.06 |
| FD&A costs(2) | $ | 16.49 | $ | 14.97 | $ | 15.87 |
| Recycle ratio(3) | ||||||
| Proved plus probable | 2.72 | 3.27 | 2.6 | |||
| Including Future Development Costs | ||||||
| Proved ($/boe) | ||||||
| F&D costs(1) | $ | 22.74 | $ | 24.13 | $ | 25.59 |
| FD&A costs(2) | $ | 27.78 | $ | 27.90 | $ | 28.27 |
| Proved plus probable ($/boe) | ||||||
| F&D costs(1) | $ | 18.07 | $ | 17.83 | $ | 21.90 |
| FD&A costs(2) | $ | 20.94 | $ | 20.80 | $ | 21.36 |
| Recycle ratio(3) | ||||||
| Proved plus probable | 2.15 | 2.35 | 1.9 | |||
| Q4 Operating netback per boe(3) | $ | 44.92 | $ | 48.93 | $ | 40.49 |
| (1) | The aggregate of the exploration and development costs incurred in the most recent financial year and change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year. |
| (2) | The capital expenditures include the announced purchase price of corporate acquisitions rather than the amounts allocated to property, plant and equipment for accounting purposes. The capital expenditures also exclude capitalized administration costs and transaction costs. |
| (3) | Recycle ratio is calculated as operating netback divided by FD&A costs (proved plus probable). Operating netback is calculated as revenue (including realized hedging gains and losses) minus royalties, production and operating expenses and transportation expenses. |
In addition to our 2012 year-end reserves evaluation noted above, McDaniels is also conducting an evaluation of our economic contingent resources, the results of which will be released later in the first quarter 2013.
OPERATIONAL UPDATE
In the fourth quarter of 2012, Whitecap achieved record production of approximately 17,000 boe/d, a 118% increase on an absolute basis and a 25% increase per share, fully diluted, over our fourth quarter 2011 average production of 7,806 boe/d. The production increase is 8% over our third quarter 2012 average production of 15,795 boe/d. Our 2012 average annual production is approximately 14,000 boe/d, a 148% increase on an absolute basis and a 40% increase per share, fully diluted, over our 2011 average annual production of 5,657 boe/d.
We drilled a total of 114 (91.0 net) wells all targeting oil with a 100% success rate in 2012 of which 30 (26.2 net) wells were drilled in the fourth quarter of 2012. Our extensive inventory of low risk development drilling opportunities, predictable and stable production base and associated hedging program will allow us to pay meaningful and consistent dividends as well as continue to focus on per share growth in production, reserves and cash flow.
In West Central Saskatchewan, we drilled 10 (10.0 net) wells in the fourth quarter of 2012 and have plans to drill an additional 19 (17.4 net) in the first quarter of 2013 all targeting Viking light oil. We continue to achieve production results that are at or above our type curves. Our drilling and completion costs continue to be optimized with our last six wells averaging $772,000 per well to drill and complete, approximately 6% lower than our type economic assumptions.
In the Garrington area of West Central Alberta, Whitecap drilled 5 (5.0 net) oil wells in the fourth quarter of 2012 and anticipates drilling an additional 10 (5.2 net) wells in the first quarter of 2013. As a result of optimizing our completion methods, we have recently experienced better than anticipated early production rates from our Cardium horizontal wells. Our last 7 wells have averaged 390 boe/d (92% oil and NGLs) over their first 30 days of production which is a 43% improvement on our current type curve.
Whitecap drilled 7 (4.9 net) Cardium oil wells in the greater Pembina area of West Central Alberta in the fourth quarter of 2012 and plans to drill an additional 6 (6.0 net) wells in the first quarter of 2013. We continue to optimize our drilling and completion methods and are achieving production results that are exceeding our current type curve. The last 10 wells have an average IP(30) rate of 301 boe/d (94% oil and NGLs) which is 39% higher than our current type curve.
Whitecap continues to advance and monitor the progress of the waterflood development in its Valhalla North Montney oil play in the Peace River Arch area of Alberta since increasing the water injection from 1,600 boe/d to 5,600 boe/d in the second quarter of 2012. Production increases as a result of increased water injection are expected to be realized in the next 6 – 24 months. In the fourth quarter of 2012, Whitecap drilled 1 (0.5 net) Montney oil well and 1 (1.0 net) horizontal Dunvegan oil well and anticipates drilling an additional 2 (1.0 net) wells in the first quarter of 2013. We plan to expand the Montney waterflood area to the west in the second and third quarters of 2013.
In the Fosterton area of southwest Saskatchewan, we drilled 5 (4.7 net) development oil wells and have increased our current production to approximately 700 boe/d (90% oil) from the third quarter average production volume of 300 boe/d. These results will be monitored with the potential to increase capital allocated to the area in 2013.
Whitecap Resources Inc. is a dividend paying, oil-weighted company focused on providing sustainable monthly dividends to its shareholders and per share growth through a combination of accretive oil-based acquisitions and organic growth on existing and acquired assets. For further information about Whitecap please visit our website at www.wcap.ca.
Note Regarding Forward-Looking Statements and Other Advisories
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. Forward-looking information typically uses words such as “anticipate”, “believe”, “project”, “expect”, “goal”, “plan”, “intend” 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 and focus, plans to complete a resource evaluation, timing of filing the Company’s annual information form, forecast annual per share growth, dividend policy, planned capital expenditures, expected future production and product mix, and drilling, development and completion plans.
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; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource 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. 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 securityholders with a more complete perspective on our future operations and such information may not be appropriate for other purposes.
It should not be assumed that the present worth of estimated future cash flow 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 Whitecap’s 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.
All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein do not represent fair market value.
Finding and development costs both including and excluding acquisitions and dispositions have been presented above. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, FD&A costs have been presented because acquisitions and dispositions can have a significant impact on the Company’s ongoing reserve replacement costs and excluding these amounts could result in an inaccurate portrayal of the Company’s cost structure.
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.
Non-GAAP Measures
This press release contains the term “operating netbacks” which does not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other companies. Whitecap uses operating netbacks to analyze financial and operating performance. Whitecap believes these benchmarks are key measures of profitability and overall sustainability for the Company. These terms are commonly used in the oil and gas industry. Operating netbacks are not intended to represent operating profits nor should they be viewed as an alternative to funds from operations provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Operating netbacks are determined by deducting royalties, production expenses and transportation and selling expenses from oil and gas revenue.
“Boe” means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boe’s may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl 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.