CALGARY, Aug. 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 and six months ended June 30, 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 June 30 |
Six months ended June 30 |
||||
Financial ($000s except per share amounts) |
2019 |
2018 |
2019 |
2018 |
|
Petroleum and natural gas revenues |
374,730 |
433,380 |
717,969 |
801,430 |
|
Net income (loss) |
58,357 |
(3,615) |
5,796 |
(11,370) |
|
Basic ($/share) |
0.14 |
(0.01) |
0.01 |
(0.03) |
|
Diluted ($/share) |
0.14 |
(0.01) |
0.01 |
(0.03) |
|
Funds flow |
175,537 |
195,816 |
336,758 |
360,615 |
|
Basic ($/share) |
0.42 |
0.47 |
0.81 |
0.86 |
|
Diluted ($/share) |
0.42 |
0.47 |
0.81 |
0.86 |
|
Dividends paid or declared |
34,686 |
32,719 |
68,152 |
64,906 |
|
Per share |
0.08 |
0.08 |
0.17 |
0.16 |
|
Expenditures on PP&E |
26,463 |
66,444 |
151,367 |
249,059 |
|
Total payout ratio (%) (1) |
35 |
51 |
65 |
87 |
|
Property acquisitions |
196 |
1,108 |
1,586 |
1,723 |
|
Property dispositions |
44 |
(1,585) |
(623) |
(1,712) |
|
Corporate acquisition |
– |
– |
– |
53,166 |
|
Net debt |
1,189,750 |
1,323,093 |
1,189,750 |
1,323,093 |
|
Operating |
|||||
Average daily production |
|||||
Crude oil (bbls/d) |
55,155 |
59,786 |
55,177 |
58,886 |
|
NGLs (bbls/d) |
4,417 |
4,461 |
4,402 |
4,233 |
|
Natural gas (Mcf/d) |
66,231 |
69,393 |
66,358 |
68,129 |
|
Total (boe/d) |
70,611 |
75,813 |
70,639 |
74,474 |
|
Average realized price (2) |
|||||
Crude oil ($/bbl) |
71.40 |
75.36 |
67.52 |
70.43 |
|
NGLs ($/bbl) |
22.50 |
38.33 |
25.18 |
37.24 |
|
Natural gas ($/Mcf) |
1.22 |
1.24 |
1.97 |
1.80 |
|
Total ($/boe) |
58.32 |
62.82 |
56.15 |
59.45 |
|
Netbacks ($/boe) |
|||||
Petroleum and natural gas revenues |
58.32 |
62.82 |
56.15 |
59.45 |
|
Tariffs |
(0.43) |
(0.60) |
(0.50) |
(0.82) |
|
Processing income |
0.54 |
0.50 |
0.53 |
0.51 |
|
Blending revenue |
0.61 |
0.51 |
1.24 |
0.26 |
|
Petroleum and natural gas sales |
59.04 |
63.23 |
57.42 |
59.40 |
|
Realized hedging loss |
(1.81) |
(5.97) |
(1.15) |
(4.20) |
|
Royalties |
(10.96) |
(10.99) |
(10.14) |
(10.70) |
|
Operating expenses |
(12.45) |
(11.79) |
(12.56) |
(11.97) |
|
Transportation expenses |
(2.20) |
(2.38) |
(2.20) |
(2.15) |
|
Blending expenses |
(0.62) |
(0.35) |
(1.20) |
(0.18) |
|
Operating netbacks (1) |
31.00 |
31.75 |
30.17 |
30.20 |
|
Share information (000s) |
|||||
Common shares outstanding, end of period |
412,907 |
417,485 |
412,907 |
417,485 |
|
Weighted average basic shares outstanding |
413,192 |
417,456 |
413,324 |
417,603 |
|
Weighted average diluted shares outstanding |
416,626 |
420,281 |
416,081 |
419,998 |
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
We are pleased to report strong 2019 second quarter operating and financial results. Production averaged 70,611 boe/d which was higher than our forecast of 68,000 – 70,000 boe/d on limited capital expenditures of $26.5 million which was below our $30 – $50 million anticipated spend.
Whitecap’s objective in the first half of 2019 was to increase free funds flow while maintaining production with limited capital expenditures. This disciplined approach to capital spending was intended to further strengthen our balance sheet going into a year of significant uncertainty around Canadian crude oil prices and differentials. Production in December 2018 averaged 70,599 boe/d and in June 2019 averaged 70,464 boe/d. We were able to maintain our production levels by spending only $151.4 million in the first six months of 2019, less than half our funds flow for the period. The low maintenance capital nature of our asset base allowed us to maintain production and fund our dividends in a low commodity price environment, demonstrating the sustainability of our long-term business model.
In the first half of 2019, we generated funds flow of $336.8 million, spent $151.4 million on capital to maintain production, and paid dividends of $68.2 million, resulting in $117.2 million of free funds flow or a total payout ratio of 65%. This includes our 5.6% dividend increase in May of this year.
With US$WTI at approximately $55.00/bbl, Canadian light oil differentials at US$5.00/bbl and a weak Canadian dollar, our assets generate robust operating netbacks and strong drilling economics. Whitecap’s objective in the second half of 2019 is to increase average production in the fourth quarter to 77,000 boe/d on capital spending of $300 million. We also anticipate funds flow in the second half of 2019 to approximate capital spending and dividend payments.
Whitecap remains in an enviable position with premium assets that can generate significant free funds flow in the current commodity price environment and with a top tier balance sheet. We have reduced net debt by $106.6 million or 8% in the first six months of 2019, and net debt at the end of the second quarter was $1.2 billion on debt capacity of $1.77 billion, providing significant financial flexibility. Second quarter debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio was 1.6x and we anticipate reducing this further in the second half of 2019 as we increase production to 77,000 boe/d.
Whitecap is a leader in environmental stewardship, community engagement, technical innovation and entrepreneurship. We have made great strides in reducing our environmental footprint and increasing our long-term sustainability with the acquisition of the Weyburn asset in late 2017. We operate this world class enhanced oil recovery project in southeast Saskatchewan which injects and stores more CO2 annually than the direct and indirect CO2 emissions from our Company’s total operations combined.
APPOINTMENT OF NEW DIRECTOR
As a continuation of our commitment to high standards of ESG performance, we are pleased to announce that Brad Wall has been appointed to the Whitecap Board of Directors effective July 30, 2019 and will serve as a member of the Health & Safety Committee and the newly created Sustainability & Advocacy Committee.
Mr. Wall has 18 years of political experience and served as the Premier of Saskatchewan from November 2007 until February 2018. During his tenure as Premier, Mr. Wall helped lead the province to a period of strong population and economic growth, export expansion, record infrastructure investment and tax reductions while helping to earn the province’s first ever AAA credit rating.
The newly created Sustainability & Advocacy Committee will focus on environmental stewardship and performance in addition to being a strong voice for the Canadian oil and natural gas industry and the importance of delivering more of our products to world markets and the impact that has on reducing greenhouse gas emissions globally.
QUARTERLY FINANCIAL HIGHLIGHTS
- Capital discipline and strong operational execution resulted in a total payout ratio after capital spending and dividend payments of 35% in Q2/19 and 65% year to date in 2019. This compares to a Q2/18 total payout ratio of 51% and 87% for the first six months of 2018.
- Generated free funds flow of $114.4 million in Q2/19 and $117.2 million year to date, after capital expenditures and dividend payments compared to $46.7 million for the first six months of 2018, an increase of 151%.
- Production averaged 70,611 boe/d on limited capital expenditures of $26.5 million in Q2/19 compared to 75,813 boe/d on capital expenditures of $66.4 million in Q2/18. Capital expenditures for 1H/19 were $151.4 million compared to $249.1 million for the prior period, a decrease of 39%.
- Operating netbacks remained strong at $31.00/boe compared to $31.75/boe in Q2/18 despite a 7% decrease to average realized prices. This was primarily due to lower realized hedging losses compared to Q2/18.
- Funds flow for the quarter was $175.5 million ($0.42/share) compared to $195.8 million ($0.47/share) in Q2/18, a 10% decrease, mainly due to lower capital expenditures and the resulting decrease in average production.
- Continued to mitigate price volatility and protect economic returns through our risk management strategy. See Note 5 of the Q2/19 unaudited interim consolidated financial statements for details of our hedge positions.
OUTLOOK
With the first half of 2019 behind us, we are now getting started on a very active capital program for the remainder of the year where we anticipate drilling 174 (151.3 net) wells as part of our $300 million second half capital program.
In Northwest Alberta and British Columbia, we plan to drill 17 (15.8 net) wells in the Deep Basin including an extensional well with significant reserve and productivity upside as well as initiation of a gas flood enhanced oil recovery pilot in our Wapiti Cardium oil pool. At Boundary Lake, we will be recommencing the redevelopment of the oil pool with the drilling of 3 (3.0 net) wells in the fourth quarter.
The second half program in West Central Alberta includes the drilling of 5 (4.9 net) Cardium horizontal wells of which 4 (4.0 net) will be in Ferrier.
In West Central Saskatchewan, we plan to drill 95 (87.1 net) Viking oil wells including 21 (20.9 net) wells focused on improving oil recovery in our waterfloods and 5 (5.0 net) wells that are focused on expanding our inventory into a new area.
For the second half of 2019, we intend to drill 49 (37.4 net) wells in Southwest Saskatchewan which includes 11 (9.3 net) wells in the Lower Shaunavon to further delineate and solidify our identified inventory of over 200 Lower Shaunavon locations.
In Southeast Saskatchewan, we will recommence our development program in Weyburn with the drilling of 5 (3.1 net) infill horizontal oil wells. Performance of the pool is meeting and, in some areas exceeding expectations, after recovering from abnormal CO2 supply issues and associated production downtime in the first quarter.
Whitecap remains a fundamentally strong business focused on return on capital employed and delivering stable funds flow for our shareholders. We are in an enviable position where we can self-fund our production growth and dividends while generating a significant amount of free funds flow in the current commodity price environment. We are on track to meeting our annual production guidance of 70,000 – 72,000 boe/d on capital expenditures of $425 – $475 million.
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 Thursday, August 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.