CALGARY, AB – Whitecap Resources Inc. (“Whitecap” or the “Company”) (TSX: WCP) is pleased to present the results of our 2021 year end reserves evaluation as prepared by McDaniel & Associates Consultants Ltd. (“McDaniel”).
Our 2021 year end reserves were exceptional and are a direct result of the successful execution and development of our strategic acquisitions and the continued outperformance of our base assets. Whitecap’s high quality drilling inventory provides years of highly profitable sustainable growth and free funds flow with our reserve life index of 17.6 years representing only 51% of our total internally estimated reserves potential.
We highlight the following 2021 year end reserve report results:
- Acquisitions Drove Significant Reserve Additions. Proved developed producing (“PDP”) reserves increased 53% to 320.3 million boe, total proved (“TP”) reserves increased 50% to 545.9 million boe and total proved plus probable (“TPP”) reserves increased 51%, compared to the prior year. Our successful acquisition strategy resulted in production replacement of 372% on a PDP basis, 545% on a TP basis and over 700% on a TPP basis at very attractive finding, development and acquisition (“FD&A”) costs, increasing the profitability of our business.
- Strong FD&A Metrics. Our strategic acquisitions, together with the efficient execution of our development capital program, resulted in strong low FD&A costs. Relative to 2020, PDP FD&A costs decreased 22% to $14.95 per boe, TP FD&A costs decreased 7% to $13.67 per boe and TPP FD&A costs decreased 10% to $11.22 per boe, generating recycle ratios of 2.0x, 2.2x and 2.7x, respectively. Whitecap’s FD&A recycle ratio (TPP) increased 59% to 2.7x and our finding and development (“F&D”) recycle ratio (TPP) has increased greater than 400% to 6.4x, meaningfully increasing the long-term sustainability of our business.
- Growth in Net Present Value per Share. PDP net present value (“NPV”), using a 10% discount rate, increased by 56% to $7.51 per share, TP NPV increased by 70% to $10.80 per share and TPP NPV increased by 134% to $15.28 per share, as compared to the prior year. The NPV calculations performed by McDaniel used an average 2022-2026 WTI price of US$69.18/bbl (three consultants average) which is lower than current strip prices.
- Long Reserve Life and Low Decline Rate Reinforce Sustainability. PDP, TP and TPP reserve life index of 7.3 years, 12.5 years and 17.6 years, respectively, combined with our low base decline rate of approximately 21% and our extensive unbooked drilling inventory, underpins our ability to sustainably grow production per share and generate significant free funds flow for our shareholders.
2021 RESERVES REVIEW
Our 2021 year end reserves were evaluated by independent reserves evaluator McDaniel & Associates Consultants Ltd. (“McDaniel”) in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) as of December 31, 2021. The reserves evaluation was based on the average forecast pricing of McDaniel, GLJ Ltd. and Sproule Associates Limited and foreign exchange rates at January 1, 2022 which is available on McDaniel’s website at www.mcdan.com.
Reserves included are Company share reserves which are the Company’s total working interest reserves before the deduction of any royalties and including any royalty interests payable to the Company. Reserves related to the Central Alberta acquisition that closed subsequent to year end on January 10, 2022 are not included. Additional reserve information as required under NI 51-101 will be included in our Annual Information Form which will be filed on SEDAR on or before March 30, 2022. The numbers in the tables below may not add due to rounding.
Summary of Reserves
Reserves as at December 31, 2021
Company Share Reserves | |||
Description | Light & Medium Oil (Mbbl) |
Tight Crude Oil (Mbbl) |
Conventional
Natural Gas (MMcf) |
Proved developed producing | 222,980 | 294 | 344,425 |
Proved developed non-producing | 3,676 | – | 4,194 |
Proved undeveloped | 115,735 | 10,197 | 148,408 |
Total proved | 342,392 | 10,490 | 497,027 |
Probable | 124,403 | 8,796 | 204,802 |
Total proved plus probable | 466,796 | 19,286 | 701,829 |
Description | Shale Gas (MMcf) | Natural Gas Liquids (Mbbl) |
Total (Mboe) |
Proved developed producing | 60,039 | 29,607 | 320,291 |
Proved developed non-producing | 18,377 | 2,022 | 9,460 |
Proved undeveloped | 218,424 | 29,107 | 216,178 |
Total proved | 296,840 | 60,736 | 545,930 |
Probable | 159,771 | 29,219 | 223,180 |
Total proved plus probable | 456,611 | 89,955 | 769,110 |
Net Present Values of Future Net Revenue
Summary of Before Tax Net Present Values of Future Net Revenue (Forecast Pricing)
As at December 31, 2021
Before Tax Net Present Value ($MM) (1) | ||||||||||
Discount Rate | ||||||||||
Description | 0% | 5% | 10% | 15% | 20% | |||||
Proved developed producing | 6,506 | 5,639 | 4,686 | 4,011 | 3,532 | |||||
Proved developed non-producing | 269 | 212 | 176 | 151 | 132 | |||||
Proved undeveloped | 4,436 | 2,804 | 1,877 | 1,308 | 937 | |||||
Total proved | 11,210 | 8,655 | 6,738 | 5,469 | 4,601 | |||||
Probable | 7,850 | 4,291 | 2,796 | 2,011 | 1,540 | |||||
Total proved plus probable | 19,061 | 12,946 | 9,534 | 7,481 | 6,141 |
(1) | Includes abandonment and reclamation costs as defined in NI 51-101 for all of our facilities, pipelines and wells including those without reserves assigned. |
Future Development Costs (“FDC”)
FDC reflects the best estimate of the capital cost to develop and produce reserves. FDC associated with our TPP reserves at year end 2021 is $5.2 billion undiscounted ($3.5 billion discounted at 10%).
Also included in FDC are 1,638 (1,333.2 net) proved booked drilling locations and 286 (226.7 net) probable booked drilling locations.
($000s) | Total Proved | Total Proved plus Probable |
2022 | 518,189 | 544,431 |
2023 | 741,541 | 816,133 |
2024 | 776,803 | 888,002 |
2025 | 723,784 | 842,550 |
2026 | 628,885 | 787,562 |
Remainder | 931,497 | 1,286,778 |
Total FDC, Undiscounted | 4,320,698 | 5,165,458 |
Total FDC, Discounted at 10% | 2,973,759 | 3,522,275 |
Performance Measures (Including FDC)
The following table highlights F&D and FD&A costs and associated recycle ratios, including FDC, based on the evaluation of our petroleum and natural gas reserves prepared by McDaniel:
2021 | 2020 | 2019 | Three Year
Weighted Average |
|
Proved Developed Producing | ||||
F&D costs (1) | $16.28 | $21.87 | $14.33 | $17.31 |
F&D recycle ratio (2) | 1.8x | 0.9x | 2.1x | 1.6x |
FD&A costs (3) | $14.95 | $19.25 | $14.45 | $16.03 |
FD&A recycle ratio (2) | 2.0x | 1.1x | 2.1x | 1.8x |
Total Proved | ||||
F&D costs (1) | $5.05 | $3.61 | $17.87 | $8.29 |
F&D recycle ratio (2) | 5.9x | 5.7x | 1.7x | 4.6x |
FD&A costs (3) | $13.67 | $14.74 | $17.95 | $15.19 |
FD&A recycle ratio (2) | 2.2x | 1.4x | 1.7x | 1.8x |
Total Proved Plus Probable | ||||
F&D costs (1) | $4.63 | $19.16 | $21.00 | $13.42 |
F&D recycle ratio (2) | 6.4x | 1.1x | 1.4x | 3.5x |
FD&A costs (3) | $11.22 | $12.51 | $21.06 | $14.39 |
FD&A recycle ratio (2) | 2.7x | 1.7x | 1.4x | 2.0x |
(1) | F&D costs are calculated as the sum of development capital of $413.8 million (excluding corporate and capitalized G&A) plus the change in FDC for the period of -$58.7 million (PDP), -$298.3 million (TP) and -$317.1 million (TPP), divided by the change in reserves volumes that are characterized as development for the period. |
(2) | Recycle ratio is calculated as operating netback divided by F&D or FD&A costs. Our estimated operating netback1 in 2021 is $29.80/boe. |
(3) | FD&A costs are calculated as the sum of development capital of $413.8 million (excluding corporate and capitalized G&A) plus acquisition capital of $1,888 million plus the change in FDC for the period of -$19.2 million (PDP), $756.2 million (TP) and $1,095.6 million (TPP), divided by the change in total reserves volumes, other than from production, for the period. |
Production Replacement Ratio and Reserve Life Index
The following table highlights our production replacement ratio and reserve life index (“RLI”) based on the evaluation of our petroleum and natural gas reserves prepared by McDaniel:
2021 | 2020 | 2019 | Three Year
Weighted Average |
|
Proved Developed Producing | ||||
Production replacement (1) | 372% | 34% | 100% | 199% |
RLI (years) (2) | 7.3 | 9.0 | 8.3 | 8.1 |
Total Proved | ||||
Production replacement (1) | 545% | 101% | 133% | 302% |
RLI (years) (2) | 12.5 | 15.6 | 13.3 | 13.6 |
Total Proved Plus Probable | ||||
Production replacement (1) | 737% | 100% | 169% | 394% |
RLI (years) (2) | 17.6 | 21.8 | 18.6 | 19.1 |
(1) | Production replacement ratio is calculated as total reserve additions (including acquisitions net of dispositions) divided by annual production. Whitecap’s production averaged 112,222 boe/d in 2021. |
(2) | RLI is calculated as total Company share reserves divided by the annualized fourth quarter actual production of 120,020 boe/d. |
1 Non-GAAP financial measure. See “Specified Financial Measures”.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements and forward-looking information (collectively “forward-looking information”) within the meaning of applicable securities laws relating to the Company’s plans and other aspects of our anticipated future operations, management focus, strategies, financial, operating and production results and business opportunities. Forward-looking information typically uses words such as “anticipate”, “believe”, “continue”, “trend”, “sustain”, “project”, “expect”, “forecast”, “budget”, “goal”, “guidance”, “plan”, “objective”, “strategy”, “target”, “intend”, “estimate”, “potential”, or similar words suggesting future outcomes, statements that actions, events or conditions “may”, “would”, “could” or “will” be taken or occur in the future, including statements about our strategy, plans, focus, objectives, priorities and position. In particular, and without limiting the generality of the foregoing, this press release contains forward-looking information with respect to: the continued outperformance on our base assets; the quality of our drilling inventory; our drilling inventory providing years of highly profitable sustainable growth and free funds flow; our reserve life index calculations, including as a percentage of our total internally identified reserve potential; our belief that our acquisition strategy has provided production replacement at very attractive FD&A metrics increasing the profitability of our business; our increased recycle ratios have meaningfully increased the long-term sustainability of our business; our RLI calculations, our low decline rate and our extensive unbooked drilling inventory reflect our ability to sustainably grow production per share and generate significant free funds flow for our shareholders; the future value of our reserves; our future abandonment and reclamation costs; and our future development costs. Statements relating to “reserves” are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.
The forward-looking information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; the impact (and the duration thereof) that the COVID-19 pandemic will have on (i) the demand for crude oil, NGLs and natural gas, (ii) our supply chain, including our ability to obtain the equipment, supplies and services we require, and (iii) our ability to produce, transport and/or sell our crude oil, NGLs and natural gas; future production rates and estimates of operating costs; performance of existing and future wells; reserve volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations and performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; ability to efficiently integrate assets and employees acquired through acquisitions, including the Central Alberta acquisition; ability to market oil and natural gas successfully; and our ability to access capital and the cost and terms thereof.
Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Whitecap can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. These include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; pandemics and epidemics; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; interest rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to complete or realize the anticipated benefits of acquisitions or dispositions, including the Central Alberta acquisition; ability to access sufficient capital from internal and external sources on acceptable terms or at all; failure to obtain required regulatory and other approvals; reliance on third parties and pipeline systems; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Our actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide security holders with a more complete perspective on our future operations and such information may not be appropriate for other purposes.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect our operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
These forward-looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.