CALGARY, AB – Whitecap Resources Inc. (“Whitecap” or the “Company”) (TSX: WCP) is pleased to announce that it has successfully closed the previously announced acquisition of Kicking Horse Oil & Gas Ltd. (“Kicking Horse”). Whitecap acquired all of the issued and outstanding common shares of Kicking Horse for consideration consisting of 34.5 million Whitecap common shares, $56 million in cash and also assumed Kicking Horse’s net debt (the “Acquisition”).
Montney Resource Play Update
- On the Kakwa, Alberta lands acquired, we currently have two rigs drilling the final two wells of a four well pad (2.6 net). This four well pad will be completed in the third quarter and is expected to be on production in the fourth quarter. We will also start a 6 (4.4 net) well drilling program in the third quarter. This program will utilize a single drilling rig from two separate pads. We anticipate 3 (2.4 net) wells from the six well program to be completed and on production by year-end 2021 with the remaining 3 (2.0 net) wells coming on production in the first quarter of 2022.
- On our previously owned Karr, Alberta lands, we are seeing the benefits of our optimized completions re-design and fracture stimulations. Our operated 13-1 (0.7 net) well has been on production since early April and is currently producing at a rate of 2,300 boe/d (70% oil and NGLs). Our non-operated well (0.5 net) has been on production since late March and is currently producing at 1,000 boe/d (75% oil and NGLs). These wells are above our budget expectations, partially due to an accelerated completion clean-up and associated decline in water cuts.
- Whitecap’s tier 1 Montney inventory at Karr and Kakwa has very robust economics consisting of high productivity wells (IP365 1,100 – 1,400 boe/d) which drive quick project payouts (less than 1 year) and long term net asset value growth (NPV10 per well greater than $12 million) at US$55/bbl WTI and C$2.50/GJ AECO.
- Whitecap now owns 168 (118 net) sections of Alberta Montney rights in some of the most prolific Montney acreage in the basin. Our 696 (437.4 net) drilling locations include over ten years of tier 1 inventory.
With the exceptional Montney wells results, outperformance from our existing assets, along with commodity prices higher than our US$60/bbl WTI forecast, we are confident in our ability to generate significant free funds flow in 2021 and beyond. We are forecasting discretionary funds flow after capital and dividends in excess of $200 million in the first half of 2021 which will be used to further strengthen our balance sheet.
Return of capital to shareholders is a priority for Whitecap, and our board of directors has approved an 8% increase to our monthly dividend. The monthly dividend will be increased from $0.01508 to $0.01625 per common share which equates to $0.195 per common share annually and will be effective beginning with the June dividend, payable in July 2021. Including the dividend increase, Whitecap’s 2021 dividend will equate to only 12% of funds flow based on current strip pricing.
In 2022, with preliminary forecasted corporate production of 120,000 boe/d and our expectations of benchmark commodity prices between US$55 – $65/bbl WTI and C$2.50/GJ AECO, Whitecap anticipates annual funds flow of $950 million – $1.1 billion and discretionary funds flow (after capital and dividends) of $250 – $400 million. Under these scenarios, the increased dividend represents only 11% – 13% of funds flow and when combined with our strong balance sheet and high netback/low decline asset base, our sustainability remains firmly intact. Discretionary funds flow will be used for further returns to shareholders, debt repayment or opportunistic acquisitions within our core areas.
Whitecap also confirms that a cash dividend of $0.01508 per common share in respect of May operations will be paid on June 15, 2021 to shareholders of record on May 31, 2021. This dividend is an eligible dividend for the purposes of the Income Tax Act (Canada).
Whitecap plans to release its 2021 Environmental, Social and Governance (ESG) report in mid-June 2021 which will include 2020 results. In addition, our first ESG newsletter was published on our website today which provides more details on priority initiatives across the Company.
Whitecap is pleased to announce that the Toronto Stock Exchange (the “TSX”) has accepted the notice of Whitecap’s intention to commence a normal course issuer bid (the “NCIB”). Whitecap previously purchased an aggregate of 2,501,800 common shares at a weighted average price per share of $4.15 under a normal course issuer bid that runs between May 21, 2020 to May 20, 2021.
The NCIB allows Whitecap to purchase up to 29,894,096 common shares (representing 5% of its 597,881,930 outstanding common shares as of May 10, 2021) over a period of twelve months commencing on May 21, 2021. The NCIB will expire no later than May 20, 2022. Under the NCIB, common shares may be repurchased in open market transactions on the TSX and other alternative trading platforms in Canada and in accordance with the rules of the TSX governing NCIB’s. The total number of common shares Whitecap is permitted to purchase is subject to a daily purchase limit of 913,135 common shares, representing 25% of the average daily trading volume of 3,652,542 common shares on the TSX calculated for the six-month period ended April 30, 2021, however, Whitecap may make one block purchase per calendar week which exceeds the daily repurchase restrictions. Any common shares that are purchased under the NCIB will be cancelled upon their purchase by Whitecap.