CALGARY, May 1, 2019 /CNW/ – Whitecap Resources Inc. (“Whitecap” or the “Company”) (TSX: WCP) is pleased to report its operating and unaudited financial results for the three months ended March 31, 2019.
Selected financial and operating information is outlined below and should be read with Whitecap’s unaudited interim consolidated financial statements and related Management’s Discussion and Analysis (“MD&A”) which are available at www.sedar.com and on our website at www.wcap.ca.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31 |
||||||
Financial ($000s except per share amounts) |
2019 |
2018 |
||||
Petroleum and natural gas revenues |
343,239 |
368,050 |
||||
Net loss |
(52,561) |
(7,755) |
||||
Basic ($/share) |
(0.13) |
(0.02) |
||||
Diluted ($/share) |
(0.13) |
(0.02) |
||||
Funds flow |
161,221 |
164,799 |
||||
Basic ($/share) |
0.39 |
0.39 |
||||
Diluted ($/share) |
0.39 |
0.39 |
||||
Dividends paid or declared |
33,466 |
32,187 |
||||
Per share |
0.08 |
0.08 |
||||
Total payout ratio (%) (1) |
98 |
130 |
||||
Expenditures on PP&E |
124,904 |
182,615 |
||||
Property acquisitions |
1,390 |
615 |
||||
Property dispositions |
(667) |
(127) |
||||
Corporate acquisition |
– |
53,166 |
||||
Net debt |
1,297,412 |
1,414,606 |
||||
Operating |
||||||
Average daily production |
||||||
Crude oil (bbls/d) |
55,199 |
57,976 |
||||
NGLs (bbls/d) |
4,386 |
4,002 |
||||
Natural gas (Mcf/d) |
66,486 |
66,852 |
||||
Total (boe/d) |
70,666 |
73,120 |
||||
Average realized price (2) |
||||||
Crude oil ($/bbl) |
63.60 |
65.29 |
||||
NGLs ($/bbl) |
27.90 |
36.02 |
||||
Natural gas ($/Mcf) |
2.72 |
2.40 |
||||
Total ($/boe) |
53.97 |
55.93 |
||||
Netbacks ($/boe) |
||||||
Petroleum and natural gas revenues |
53.97 |
55.93 |
||||
Tariffs |
(0.56) |
(1.05) |
||||
Processing income |
0.51 |
0.51 |
||||
Blending revenue |
1.87 |
– |
||||
Petroleum and natural gas sales |
55.79 |
55.39 |
||||
Realized hedging loss |
(0.48) |
(2.34) |
||||
Royalties |
(9.32) |
(10.39) |
||||
Operating expenses |
(12.68) |
(12.16) |
||||
Transportation expenses |
(2.20) |
(1.90) |
||||
Blending expenses |
(1.79) |
– |
||||
Operating netbacks (1) |
29.32 |
28.60 |
||||
Share information (000s) |
||||||
Common shares outstanding, end of period |
413,158 |
417,255 |
||||
Weighted average basic shares outstanding |
413,458 |
417,751 |
||||
Weighted average diluted shares outstanding |
415,933 |
419,953 |
||||
Notes: |
|
(1) |
Total payout ratio and operating netbacks do not have a standardized meaning under GAAP. Refer to non-GAAP measures in this press release for additional disclosure and assumptions. |
(2) |
Prior to the impact of hedging activities and tariffs. |
MESSAGE TO SHAREHOLDERS
Whitecap is pleased to report continued strong operational and financial performance in the first quarter of 2019. Average production of 70,666 boe/d was higher than our forecast of 69,000 boe/d which resulted in strong funds flow of $161.2 million ($0.39/share). As a result of the wide Canadian crude oil price differentials experienced in the fourth quarter of 2018, Whitecap elected for a defensive first quarter capital program. Capital spending in the first quarter was only $124.9 million, representing approximately 28% of our capital budget for 2019. This compares to $182.6 million invested in the first quarter of 2018, representing 41% of the capital budget for 2018. Whitecap’s commitment to capital discipline and strong operational performance resulted in a total payout ratio of 98% after capital spending and dividend payments during the quarter.
Whitecap continues to have a strong balance sheet with net debt at $1.3 billion on debt capacity of $1.7 billion. On strip pricing, we anticipate net debt to annualized fourth quarter funds flow to be 1.3x as we ramp up production to 77,000 – 79,000 boe/d. Our priority is to continue to strengthen our balance sheet to provide us with the flexibility to capitalize on future opportunities.
QUARTERLY FINANCIAL HIGHLIGHTS
- Funds flow for the quarter was $161.2 million ($0.39/share) compared to $138.8 million ($0.33/share) in Q4/18, an increase of 16% (18% per share). Operating netbacks (prior to hedges) increased 55% to $29.80/boe compared to $19.26/boe in Q4/18. The increase in funds flow and operating netbacks (prior to hedges) was primarily driven by the significant narrowing of Canadian crude oil price differentials and the resulting higher realized crude oil prices.
- Average production of 70,666 boe/d with capital expenditures of $124.9 million in Q1/19 compared to 73,120 boe/d with capital expenditures of $182.6 million in Q1/18. Average production decreased 3% and capital expenditures decreased by 32%.
- Capital discipline and strong operational execution resulted in a total payout ratio after capital spending and dividend payments of 98% compared to 130% in Q1/18.
- Further strengthened the balance sheet by reducing net debt by $117 million or 8% compared to Q1/18.
- Continued to layer on additional hedges mainly with costless collars for downside price protection and upside participation. Forty-two percent of the Company’s 2H19 crude oil production (net of royalties) and 12% of 2020 crude oil production (net of royalties) are hedged using a combination of swaps and costless collars. See Note 5 to the first quarter financial statements for further details.
OPERATIONAL UPDATE
We executed on a defensive capital program in the first quarter investing $124.9 million in the drilling of 56 (52.1 net) wells of which 6 (5.1 net) were waterflood injection wells, continuing our strategy of mitigating corporate production declines through the optimization of our enhanced oil recovery (“EOR”) projects. We achieved excellent capital efficiencies from our first quarter capital program and delivered average production higher than our forecast despite February being one of the coldest winters on record which negatively impacted our production in some of our operating areas.
Northwest Alberta and British Colombia
In the first quarter, we drilled 5 (5.0 net) wells in the Deep Basin, all of which are now on production. Early results are encouraging and are anticipated to meet or exceed expectations. We realized 10% cost savings on our Wapiti Cardium completions compared to our prior programs by utilizing new completion strategies and anticipate further savings with the larger second half 2019 program. We have 18 (18.0 net) wells planned for the remainder of the year in the Deep Basin.
First quarter capital activity in Boundary Lake was focused on waterflood optimization with our drilling program anticipated to start in the fourth quarter of 2019 with the drilling of 2 (2.0 net) wells.
West Central Alberta
In West Pembina we drilled 5 (4.5 net) horizontal wells, including 3 (2.6 net) injection wells to enhance production and recovery in our operated waterfloods. We have an additional 9 (8.3 net) horizontal production wells planned for the second half of 2019 in West Pembina.
In Ferrier we drilled 4 (4.0 net) horizontal wells in the quarter with an average IP30 rate of 562 boe/d, 88% higher than our production forecasts. We have another 4 (3.3 net) horizontal oil wells planned in Ferrier for the remainder of 2019. We had similar success in Willesden Green where we drilled 2 (2.0 net) wells in the quarter with an IP30 rate of 717 boe/d for the one well that has more than 30 days of production. This compares to our production expectation of 351 boe/d.
West Central Saskatchewan
We drilled a total of 23 (22.9 net) Viking horizontal wells in the first quarter including two targeted horizontal water injection wells in Kerrobert. Results from both our drilling and waterflood optimization programs are exceeding expectations. This improved performance positively impacted our first quarter production by over 10% compared to our budget forecast for this area. We have an additional 77 (71.3 net) horizontal wells planned for the remainder of the year.
Southwest Saskatchewan
We drilled a total of 17 (13.7 net) wells in the first quarter including 9 (8.0 net) horizontal oil wells in the Atlas, 1 (0.5 net) in the Success, 1 (0.7 net) in the Upper Shaunavon, 5 (4.0 net) in the Lower Shaunavon and 1 (0.5 net) horizontal injector. Drilling results on average have met expectations with the exception being the Lower Shaunavon program. This program has exceeded productivity expectations with an average IP60 rate of 122 boe/d, 39% higher than our production expectation of 88 boe/d. This is another significant step in de-risking and improving the economics of our Lower Shaunavon inventory of more than 200 locations.
We have a further 49 (34.3 net) wells planned for the remainder of the year including 7 (5.4 net) in the Lower Shaunavon.
Southeast Saskatchewan
Capital spending in the first quarter was focused on maintenance, optimization and CO2 purchases. Our 2018 infill and CO2 roll-out programs continue to perform at or above our expectations, and we anticipate commencing our next Weyburn drilling program in the second half of 2019.
OUTLOOK
We are off to an exceptional start to the year and confident that we will be able to achieve our full year production target of 70,000 – 72,000 boe/d and fourth quarter average production of 77,000 – 79,000 boe/d, 5-8% growth over the fourth quarter of 2018.
The WTI price has continued to improve in the second quarter and in combination with currently narrow Canadian crude oil price differentials and a weak Canadian dollar, our funds flow is significantly higher than budgeted. Despite the increase to our funds flow, we remain disciplined in our approach to capital spending and our capital budget for 2019 remains unchanged at $425 to $475 million. Priority for our free funds flow for the balance of 2019 will be towards further strengthening our balance sheet with the first $100 million of free funds flow being used to reduce existing bank debt.
DIVIDEND INCREASE
Our business model is strong, and we remain committed to sustainable production growth and dividends within funds flow. With the excellent operational results to date, combined with significantly higher realized crude oil prices, our Board of Directors has approved a 5.6% increase to the monthly dividend to $0.0285 per share ($0.342 per share annualized) from $0.027 per share ($0.324 per share annualized) effective for the May 2019 dividend, payable in June. The dividend increase represents 3% of our anticipated free funds flow in 2019 and demonstrates confidence in our ability to generate free funds flow along with our commitment to return cash to shareholders.
On behalf of our Board of Directors and the Whitecap management team, we would like to thank our shareholders for their ongoing support.
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, May 1, 2019.
The conference call dial-in number is: 1-888-390-0605 or (587) 880-2175 or (416) 764-8609
A live 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 for approximately 14 days.