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 for the three and nine months ended September 30, 2020 which are available at www.sedar.com and on our website at www.wcap.ca.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended September 30 |
Nine months ended September 30 |
|||
Financial ($000s except per share amounts) |
2020 |
2019 |
2020 |
2019 |
Petroleum and natural gas revenues |
248,283 |
331,317 |
663,067 |
1,049,286 |
Net income (loss) |
12,835 |
42,277 |
(2,176,924) |
48,073 |
Basic ($/share) |
0.03 |
0.10 |
(5.33) |
0.12 |
Diluted ($/share) |
0.03 |
0.10 |
(5.33) |
0.12 |
Funds flow |
119,320 |
154,306 |
329,231 |
491,064 |
Basic ($/share) |
0.29 |
0.37 |
0.81 |
1.19 |
Diluted ($/share) |
0.29 |
0.37 |
0.80 |
1.18 |
Dividends paid or declared |
17,454 |
35,171 |
69,808 |
103,323 |
Per share |
0.04 |
0.09 |
0.17 |
0.25 |
Expenditures on property, plant and equipment (“PP&E”) |
14,075 |
153,848 |
174,173 |
305,215 |
Total payout ratio (%) (1) |
26 |
122 |
74 |
83 |
Property acquisitions |
71 |
2,020 |
5,355 |
3,606 |
Property dispositions |
– |
(89) |
– |
(712) |
Corporate acquisition |
268 |
– |
18,417 |
– |
Net debt |
1,151,409 |
1,241,579 |
1,151,409 |
1,241,579 |
Operating |
||||
Average daily production |
||||
Crude oil (bbls/d) |
51,456 |
53,245 |
54,042 |
54,526 |
NGLs (bbls/d) |
4,693 |
4,399 |
5,018 |
4,401 |
Natural gas (Mcf/d) |
63,191 |
63,663 |
67,441 |
65,450 |
Total (boe/d) (2) |
66,681 |
68,255 |
70,300 |
69,835 |
Average realized price (3) |
||||
Crude oil ($/bbl) |
47.67 |
65.07 |
40.58 |
66.71 |
NGLs ($/bbl) |
19.57 |
14.85 |
14.89 |
21.70 |
Natural gas ($/Mcf) |
2.44 |
1.12 |
2.25 |
1.69 |
Total ($/boe) |
40.47 |
52.76 |
34.42 |
55.04 |
Netbacks ($/boe) |
||||
Petroleum and natural gas revenues |
40.47 |
52.76 |
34.42 |
55.04 |
Tariffs |
(0.49) |
(0.51) |
(0.46) |
(0.50) |
Processing & other income |
0.99 |
1.22 |
0.75 |
0.76 |
Marketing revenue |
0.91 |
1.16 |
0.94 |
1.21 |
Petroleum and natural gas sales |
41.88 |
54.63 |
35.65 |
56.51 |
Realized hedging gain (loss) |
1.65 |
(0.49) |
4.17 |
(0.93) |
Royalties |
(5.61) |
(10.05) |
(4.49) |
(10.11) |
Operating expenses |
(12.02) |
(12.56) |
(11.80) |
(12.56) |
Transportation expenses |
(2.44) |
(2.23) |
(2.38) |
(2.21) |
Marketing expenses |
(0.96) |
(1.13) |
(0.93) |
(1.18) |
Operating netbacks (1) |
22.50 |
28.17 |
20.22 |
29.52 |
Share information (000s) |
||||
Common shares outstanding, end of period |
408,286 |
410,562 |
408,286 |
410,562 |
Weighted average basic shares outstanding |
408,250 |
411,815 |
408,339 |
412,816 |
Weighted average diluted shares outstanding |
412,405 |
414,464 |
412,967 |
415,360 |
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) |
Disclosure of production on a per boe basis in this press release consists of the constituent product types and their respective quantities disclosed in this table. |
(3) |
Prior to the impact of hedging activities and tariffs. |
MESSAGE TO SHAREHOLDERS
Whitecap’s third quarter results reflect solid financial and operational performance as we continue to focus on reducing and managing costs to generate free funds flow and maintaining our balance sheet strength. Production for the quarter averaged 66,681 boe/d which was significantly higher than our expectation of 62,000 – 63,000 boe/d due to outperformance on base production, which was primarily driven by lower production decline rates on our waterflood assets.
In the third quarter, we delivered strong financial improvements, generating funds flow of $119.3 million compared to $78.1 million in the second quarter, an increase of 53%. Capital investments remained restricted at $14.1 million, resulting in free funds flow of $105.2 million. In addition, we paid dividends of $17.5 million, achieving a total payout ratio of 26%.
Whitecap’s balance sheet remains in excellent shape as we reduced net debt by $87.5 million to $1.15 billion in the third quarter on total credit capacity of $1.77 billion. Our debt ratios are well below the financial covenants in our credit facilities and we maintain ample liquidity to manage through the current volatility and uncertainty created by the COVID-19 pandemic.
On August 31, 2020, we announced the strategic combination with NAL Resources Limited (“NAL”) in an all-stock transaction valued at approximately $155 million (the “Transaction”). Our team is working diligently on the efficient integration of technical expertise, operations, accounting and IT systems of the two companies and look forward to closing the Transaction on January 4, 2021.
We highlight the following third quarter financial results:
- Focus on sustainability. Funds flow of $119.3 million ($0.29 per share) and capital investment of $14.1 million resulted in free funds flow of $105.2 million. This provided significant free funds flow to support dividend payments of $17.5 million in the quarter.
- Reduce and manage cost structure. Operating expenses per boe decreased 4% to $12.02/boe, general & administrative expenses per boe decreased 23% to $0.80/boe and interest and financing expenses per boe decreased 5% to $1.71/boe compared to the prior year quarter.
- Prudent risk management. Realized commodity hedging gains of $10.1 million in the quarter and $80.3 million for the nine months ended September 30, 2020.
- Capital discipline, operational excellence and asset performance. Maintained production at 66,681 boe/d compared to 68,255 boe/d in the prior year quarter with limited capital expenditures. Capital spending decreased 91% to $14.1 million compared to $153.8 million in the prior year quarter.
- Maintain balance sheet strength. Reduced net debt by $87.5 million to $1.15 billion on total credit capacity of $1.77 billion. The Company’s credit facilities have two financial covenants being debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) not exceeding 4.0 times and EBITDA to interest not less than 3.5 times. Whitecap’s third quarter debt to EBITDA ratio was 2.0 times and EBITDA to interest ratio was 12.5 times. For additional details refer to Note 11(a) “Bank Debt” in the unaudited interim consolidated financial statements for the period ended September 30, 2020.
- Enhance shareholder returns. On August 31, 2020, we announced the strategic combination with NAL in an all-stock transaction valued at approximately $155 million. The Transaction is accretive to key 2021 per share metrics including funds flow, production, reserves and net asset value. The Transaction is expected to close on January 4, 2021.
Outlook
Whitecap’s base production and associated production decline rate continue to perform exceptionally well despite the significant reduction to our capital program. As a result, we are increasing average production guidance for 2020 to 67,500 – 68,000 boe/d from 65,000 – 67,000 boe/d previously. There is no change to our 2020 capital budget of approximately $190 million.
Our preliminary expectations for 2021, pro forma the Transaction as press released on August 31, 2020, was average production of 81,000 – 83,000 boe/d on capital expenditures of $250 – $300 million. We are now expecting capital expenditures at the low end of the guidance at $250 – $270 million with no change to average production in 2021 of 81,000 – 83,000 boe/d. We look forward to closing the Transaction on January 4, 2021 and providing shareholders with a detailed 2021 budget at that time.
We are excited about creating further value for Whitecap shareholders and while we anticipate continued volatility, we remain disciplined as we build strong momentum into 2021. We are also optimistic the world economy will return to growth over the next year and look forward to updating our shareholders as we progress through the balance of this year and into 2021.
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, October 29, 2020.
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.