CALGARY, AB – Whitecap Resources Inc. (“Whitecap” or the “Company”) (TSX: WCP) is pleased to provide shareholders with an operational update on our successful capital program thus far in 2021 allowing us to increase 2021 production guidance with no change to our capital program, resulting in increased free funds flow. In addition, we continue to enhance our financial strength by extending our credit facility maturity to May 31, 2025 and maintaining our low cost of debt.
The start of 2021 has been exceptional with the seamless integration of both NAL Resources Limited and TORC Oil & Gas Ltd. and our strong operational performance to date on the combined assets. Improvements to our base production decline, in combination with outstanding results from our first quarter drilling program, are expected to drive first quarter average production of approximately 94,000 – 95,000 boe/d compared to our prior forecast of 90,000 – 92,000 boe/d, a 4% improvement.
In Eastern Saskatchewan, our operated Weyburn CO2 flood is outperforming expectations, where optimization work and CO2 utilization has resulted in significant production enhancements and further decline rate mitigation. The Frobisher multi-leg horizontal wells drilled in the first quarter are achieving IP(30) rates that are 22% better than our budget expectations.
In Western Saskatchewan, we continue to make improvements to our legacy light oil Viking assets, where on average, the first quarter capital program is achieving 33% higher IP(30) rates than our budget expectations. In addition, many of our properties’ base declines are seeing the benefits of increased waterflood support and reduced line pressures due to a slower development pace.
In Central Alberta, the capital program was executed as expected and well performance is in line with budget expectations.
In Northern Alberta and British Columbia, we have completed the drilling and completion of 9 (6.1 net) wells with most wells expected to come on production within the next couple of weeks. Of note, our non-operated (50% working interest) Karr Montney well came on production on March 22, 2021 and is still cleaning up but inflow is better than expected. Our operated (65% working interest) Karr Montney well is currently being tied in and is expected to be on production in early April.
INCREASED PRODUCTION GUIDANCE
As a result of our better than anticpated operational results, we are now expecting 2021 production to average 102,000 – 103,000 boe/d from the previous 100,000 boe/d, an increase of 3% with no increase to our previously released full year capital budget of $280 – $300 million. The production increase provides for an incremental $16 – $24 million of free funds flow based on our current funds flow netback of approximately $22/boe, based on US$60/bbl WTI and C$2.50/GJ AECO.
Whitecap’s credit facility is a secured, covenant-based credit facility with an extendible four-year term and not subject to annual redeterminations, providing us with stable and committed credit capacity across commodity price cycles. Whitecap has extended the maturity date on its credit facility to May 31, 2025 and with strong support from its banking syndicate, has maintained its cost of debt at pre-pandemic levels. Whitecap’s current cost of variable bank debt is 2.5% reflecting its ability to generate significant free funds flow and strong credit metrics.
Our balance sheet remains in excellent shape, and we remain committed to allocating the first $200 million in free funds flow towards continued strengthening of the balance sheet. Based on current strip prices, we are expected to generate in excess of $200 million of discretionary funds flow after capital investments and dividend payments in the first half of 2021 which will allow us to achieve our 2021 debt reduction target of $200 million. Whitecap’s current credit capacity is $2 billion and our expected debt to EBITDA ratio is 1.2x at the end of 2021. We also have the ability to increase this capacity to $3.4 billion without lender consent, providing us with significant financial flexibility.
We remain excited about 2021 and both constructive and optimistic on the outlook for crude oil prices which positions our shareholders well for the increased return of capital in the latter part of the year. Our priority continues to be maximizing free funds flow to enhance the return of capital to shareholders through disciplined capital deployment and dividend growth.
We look forward to reporting back to our shareholders on our progress throughout the year.