CALGARY, Nov. 7, 2013 /CNW/ – Whitecap Resources Inc. (“Whitecap” or the “Company”) (TSX: WCP) is pleased to announce that we have filed on SEDAR our unaudited interim financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2013. Selected financial and operational information is outlined below and should be read in conjunction with Whitecap’s unaudited interim financial statements and related MD&A which are available for review at www.sedar.com and on our website at www.wcap.ca.
The financial and operating results from the Invicta Energy Corp. (“Invicta”) acquisition are included from April 30, 2013 to September 30, 2013, the financial and operating results from the Eagle Lake Viking Unit acquisition are included from May 22, 2013 to September 30, 2013 and the financial and operating results from the working interest consolidation of Whitecap’s Valhalla and Garrington properties from July 31, 2013 to September 30, 2013.
FINANCIAL AND OPERATING HIGHLIGHTS
| Three months ended September 30 | Nine months ended September 30 | |||||
| Financial ($000s except per share amounts) | 2013 | 2012 | 2013 | 2012 | ||
| Petroleum and natural gas sales | 139,350 | 85,327 | 344,910 | 211,874 | ||
| Funds from operations(1) | 82,332 | 56,894 | 212,162 | 130,297 | ||
| Basic ($/share) | 0.51 | 0.45 | 1.48 | 1.20 | ||
| Diluted ($/share) | 0.51 | 0.44 | 1.46 | 1.18 | ||
| Net income (loss) | 16,168 | 10,678 | 41,897 | 44,892 | ||
| Basic ($/share) | 0.10 | 0.08 | 0.29 | 0.41 | ||
| Diluted ($/share) | 0.10 | 0.08 | 0.29 | 0.41 | ||
| Dividends paid or declared | 24,977 | – | 66,131 | – | ||
| Per share | 0.15 | – | 0.15 | – | ||
| Basic payout ratio (%)(1) | 30 | – | 31 | – | ||
| Development capital expenditures | 65,515 | 74,749 | 168,006 | 178,159 | ||
| Property acquisitions (net) | 199,279 | (101) | 318,001 | 8,819 | ||
| Corporate acquisitions | – | – | 66,450 | 645,622 | ||
| Net debt outstanding(1) | 398,578 | 366,899 | 398,578 | 366,899 | ||
| Operating | ||||||
| Average daily production | ||||||
| Crude oil (bbls/d) | 12,870 | 9,672 | 11,629 | 7,971 | ||
| NGLs (bbls/d) | 1,864 | 1,183 | 1,563 | 906 | ||
| Natural gas (mcf/d) | 40,281 | 29,642 | 34,830 | 25,075 | ||
| Total (boe/d) | 21,448 | 15,795 | 18,997 | 13,056 | ||
| Average realized price | ||||||
| Crude oil ($/bbl) | 102.26 | 83.32 | 92.57 | 84,09 | ||
| NGLs ($/bbl) | 49.70 | 42.26 | 47.49 | 50.18 | ||
| Natural gas ($/mcf) | 2.60 | 2.41 | 3.20 | 2.25 | ||
| Total ($/boe) | 70.62 | 58.72 | 66.50 | 59.23 | ||
| Netback ($/boe) | ||||||
| Petroleum and natural gas sales | 70.62 | 58.72 | 66.50 | 59.23 | ||
| Realized hedging gain (loss) | (4.82) | 3.30 | (1.34) | 1.69 | ||
| Royalties | (9.17) | (5.80) | (8.21) | (6.72) | ||
| Operating expenses | (9.13) | (10.84) | (9.93) | (11.41) | ||
| Transportation expenses | (2.29) | (2.41) | (2.36) | (2.35) | ||
| Operating netbacks(1) | 45.21 | 42.97 | 44.66 | 40.44 | ||
| General & administrative | (1.60) | (1.75) | (1.70) | (1.80) | ||
| Interest & financing | (1.89) | (2.06) | (2.06) | (2.21) | ||
| Cash netbacks(1) | 41.72 | 39.16 | 40.90 | 36.43 | ||
| Share information (000’s) | ||||||
| Common shares outstanding, end of period | 166,635 | 127,098 | 166,635 | 127,098 | ||
| Weighted average basic shares outstanding | 160,657 | 127,094 | 143,638 | 108,334 | ||
| Weighted average diluted shares outstanding | 162,235 | 129,233 | 145,444 | 110,711 | ||
| Note: | |
| (1) | Funds from operations, payout ratio, net debt, operating netbacks and cash netbacks do not have a standardized meaning under GAAP. Refer to non-GAAP measures in this press release. |
MESSAGE TO OUR SHAREHOLDERS
Whitecap is pleased to report record production and funds from operations in the third quarter of 2013. During the quarter our activities focused primarily on the efficient execution of our capital program and the integration of our complementary property acquisitions completed in the quarter. Our third quarter average production of 21,448 boe/d and capital spending of $65.5 million exceeded our forecasted capital efficiency expectations. We realized an operating netback of $45.21/boe and a cash flow netback of $41.72/boe which is a direct result of our team’s attention to minimizing costs and maximizing the realized price on our production.
During the quarter we were 100% successful with the drilling of 35 (27.0 net) horizontal oil wells. We drilled 21 (15.7 net) horizontal Viking oil wells at Lucky Hills in western Saskatchewan, 5 (3.3 net) Cardium oil wells at Garrington, 6 (5.5 net) horizontal Cardium wells in the greater Pembina area, and 3 (2.5 net) horizontal Dunvegan wells in the Deep Basin area of western Alberta.
Operational results in the third quarter have provided our shareholders with an excellent return on investment and these results continue to outperform our expectations. The strong initial production rates from our Viking horizontal drilling program in combination with lower well costs have significantly improved our capital efficiencies. The results from our 3 extended reach horizontal wells (“ERH”) at Garrington have also been significantly better than our initial forecast, providing payout of our capital per well in less than 5 months. The results from these two areas have allowed us to exceed our third quarter 2013 production guidance and generate more cash flow than initially forecasted.
We highlight the following accomplishments in the third quarter of 2013:
Subsequent to the quarter end we continued to increase our balance sheet strength and flexibility by expanding our credit facility to $600 million which included $200 million of term debt for five years at an effective interest rate of 5.3%. In addition we closed $90 million of additional property acquisitions consisting of Cardium production and light oil drilling opportunities in the Garrington area and a working interest addition in our Eagle Lake Viking Unit.
2014 GUIDANCE
For 2014, Whitecap is pleased to announce that our Board of Directors has approved a $210 million capital program which will be funded entirely through internally generated cash flow from our existing light oil assets. In each of our core operating areas the funds from operations we forecast for 2014 are in excess of the forecasted capital spending which enables us to not only grow production but distribute excess funds from operations to our shareholders.
In west central Saskatchewan we will be spending 30% of our capital budget drilling approximately 75 (55.1 net) light oil Viking horizontal wells of which 67 are in Lucky Hills and 8 are in the Eagle Lake Viking Unit, which is currently under waterflood. This is a high growth, strong cash flow netback area where we continue to achieve excellent capital efficiencies and economics with payout of invested capital in under one year. Our low risk development inventory in this area remains robust at greater than six years.
In the Garrington area of west central Alberta we have allocated 23% of our 2014 capital program drilling approximately 16 (13.4 net) horizontal Cardium oil wells of which 3 are ERH wells, following up on the successful results from our first 3 ERH wells completed in 2013. The 2014 drilling program represents approximately 10% of our current inventory of low risk oil locations, providing long term sustainability.
In the greater Pembina area of west central Alberta we will be spending 23% of our capital budget drilling approximately 18 (13.6 net) horizontal Cardium wells in our Pembina, Willesden Green and Ferrier areas of which 4 will be ERH wells. 2014 will see an increased focus in the Ferrier area where we were able to construct and consolidate facilities in 2013 providing for stable and adequate oil and gas handling infrastructure for production growth in 2014. In Greater Pembina we currently have a development inventory which provides greater than 10 years of low risk future oil growth.
For 2014 in the Valhalla North Montney waterflood, we will focus on optimizing and re-pressurizing the waterflood allocating only 9% of our capital expenditure budget in this area. We anticipate drilling 3 (3.0 net) vertical infill wells in the existing flood areas and converting 3 wells to injection which includes expanding the waterflood further to the southeast and west of the existing areas under waterflood. This program is aimed at continuing to improve our corporate production decline rate as historically wells drilled within flooded areas have exhibited minimal decline and in the majority of situations, rates have increased with time thereby providing us with significant free cash flow.
In 2014 the Deep Basin Dunvegan oil capital program will consist of drilling 7 (5.4 net) horizontal wells including at least 1 ERH well. This increased activity in the Dunvegan play is a direct result of our 2013 well results. To date in 2013, we have drilled a total of 4 Dunvegan wells, 3 of which are currently on production at rates at, or greater than, our type curve expectations. We expect to spend approximately 10% of our total capital program on the Dunvegan while significantly growing the production from this high netback light oil play.
In our southwest Saskatchewan area, the capital comprises approximately 3% of our total capital program and includes the drilling of 4 (3.7 net) horizontal oils wells, 2 injector conversions and 14 recompletions and workovers in Fosterton as part of our waterflood expansion.
2014 summary guidance is as follows:
| 2014 Budget | 2013 Forecast | % Change | ||
| Average production (boe/d) | 23,500 – 23,900 | 19,650 | 21% | |
| Per MM shares (fully diluted) | 134 | 129 | 4% | |
| % Oil + NGLs | 70% | 69% | 1% | |
| Funds from operations ($ mm) | 326 – 332 | 282 | 17% | |
| Per share ($ fully diluted) | 1.86 | 1.85 | 1% | |
| Cash flow netback ($/boe) | 38.00 | 39.30 | (3%) | |
| Development capital spending ($ mm) | 210 | 188 | 12% | |
| Wells drilled (gross #) | 124 | 100 | 24% | |
| Net debt to funds from operations | 1.3x | 1.5x | (13%) | |
| Edmonton Par (C$/bbl) | 93.00 | 93.56 | (1%) | |
| AECO gas price (C$/GJ) | 3.50 | 2.98 | 17% | |
| CAD/USD exchange rate | 0.96 | 0.97 | (1%) | |
OUTLOOK FOR THE FUTURE
2013 has been a successful year for Whitecap’s transition from a high growth energy company to a dividend-growth energy company with the objective of generating cash flow in excess of the capital required to grow our asset base on a per share basis and paying meaningful dividends to our shareholders without the use of a dividend reinvestment program.
For 2014 we continue to look to provide our shareholders with a sound and reliable total shareholder return in excess of 10% per year through a combination of per share growth and monthly dividend payments. We remain diligent in our attention to the three key factors in executing a successful long term dividend-growth strategy: i) corporate decline rate, ii) capital efficiencies and iii) cash flow netback optimization.
As with 2013, we anticipate experiencing commodity price volatility in 2014 as well as volatility in the Edmonton par differential to WTI. Our light oil production attracts a premium price and a much tighter price differential than heavy oil and we remain active on both our commodity hedging program where we have 74% of our 2014 oil production hedged at an average WTI price of C$94.56/bbl. This will assist in mitigating price fluctuations and maintaining our focus on maximizing our cash flow netbacks in each of our core areas.
With respect to our dividend strategy, Whitecap carefully reviews its dividend policy in the context of the prevailing commodity price environment and diligently monitors the Company’s anticipated cash flows, dividends and capital expenditures to ensure we maintain a strong balance sheet with a debt to cash flow ratio of less than 1.5 times. We continue to focus on the sustainability of our business and consistent generation of shareholder value as we evaluate future opportunities for dividend growth. As a result of the high commodity price volatility we are currently experiencing, we have elected to prudently defer increasing our dividend at this time to ensure we maintain a total payout ratio of under 100% long term.
On behalf of our Board of Directors and our entire team I would like to thank you for your support of Whitecap.
Grant B. Fagerheim
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. In particular, this press release contains forward-looking information relating to our ongoing business plan, strategy and focus, payout ratio, future dividends and dividend policy, industry conditions, commodity prices and differentials, capital spending, production, funds from operations, and cash flow, anticipated netbacks, risk management program, drilling inventory or development and drilling plans, the source of funding our capital program, potential growth, future decline rates, anticipated debt levels, the benefits to be obtained from the Invicta, Eagle Lake Viking Unit acquisitions and our working interest consolidation of our Valhalla North and Garrington oil properties.
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.
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 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.
“Funds from operations” represents cash flow from operating activities adjusted for changes in non-cash working capital, transaction costs, asset retirement settlements and termination fees received. Management considers funds from operations and funds from operations per share to be key measures as they demonstrate Whitecap’s ability to generate the cash necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments. Management believes that by excluding the temporary impact of changes in non-cash operating working capital, funds from operations provides a useful measure of Whitecap’s ability to generate cash that is not subject to short-term movements in non-cash operating working capital. Refer to the “Funds from Operations, Basic payout ratio and Dividends” section of this report for the reconciliation of cash flow from operating activities to funds from operations.
The following table reconciles cash flow from operating activities (a GAAP measure) to funds from operations (a non-GAAP measure):
| Three months ended September 30, |
Nine months ended September 30, |
|||
| ($000s) | 2013 | 2012 | 2013 | 2012 |
| Cash flow from operating activities | 85,345 | 44,099 | 200,585 | 89,846 |
| Changes in non-cash working capital | (1,976) | 12,524 | 11,996 | 36,433 |
| Settlement of decommissioning liabilities | 163 | 124 | 459 | 657 |
| Transaction costs | – | 147 | 322 | 3,361 |
| Termination fee received | (1,200) | – | (1,200) | – |
| Funds from operations | 82,332 | 56,894 | 212,162 | 130,297 |
| Cash dividends declared | 24,977 | – | 66,131 | – |
| Basic payout ratio | 30% | – | 31% | – |
“Operating netbacks” are determined by deducting royalties, production expenses and transportation and selling expenses from oil and gas revenue. Operating netbacks are per boe measures used in operational and capital allocation decisions.
“Cash netbacks” are determined by deducting cash general and administrative and interest expense from Operating netbacks.
“Cash dividends per share” represents cash dividends declared per share by Whitecap.
“Basic payout ratio” is calculated as cash dividends declared divided by funds from operations.
“Total payout ratio” is calculated as development capital plus cash dividends declared divided by funds from operations.
“Net debt” is calculated as bank debt plus working capital deficiency adjusted for risk management contracts and the flow-through share liability. Net debt is used by management to analyze the financial position and leverage of Whitecap.
The following table reconciles bank debt (a GAAP measure) to net debt (a non-GAAP measure):
| ($000s) | September 30, 2013 |
December 31, 2012 |
| Bank debt | 387,251 | 310,700 |
| Current liabilities | 135,148 | 104,903 |
| Flow-through share liability | (1,819) | – |
| Current assets | (96,192) | (82,272) |
| Risk management contracts | (25,810) | 10,663 |
| Net Debt | 398,578 | 343,994 |
“Boe” means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boes 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.
SOURCE Whitecap Resources Inc.
Grant Fagerheim, President and CEO
or
Thanh Kang, VP Finance and CFO
Whitecap Resources Inc.
500, 222 – 3 Avenue SW
Calgary, AB T2P 0B4
Main Phone (403) 266-0767
Fax (403) 266-6975