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Whitecap Resources Inc. Announces Record Levels of Production, Increased 2018 Production Guidance and Second Quarter 2018 Results

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Whitecap Resources Inc. Announces Record Levels of Production, Increased 2018 Production Guidance and Second Quarter 2018 Results

Canada NewsWire

CALGARY, Aug. 1, 2018 /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, 2018.

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)

2018

2017

2018

2017

Petroleum and natural gas revenues

433,380

251,391

801,430

500,694

Net income (loss)

(3,615)

44,541

(11,370)

104,072


Basic ($/share)

(0.01)

0.12

(0.03)

0.28


Diluted ($/share)

(0.01)

0.12

(0.03)

0.28

Funds flow (1)

196,538

122,415

363,015

247,056


Basic ($/share) (1)

0.47

0.33

0.87

0.67


Diluted ($/share) (1)

0.47

0.33

0.86

0.67

Dividends paid or declared

32,719

25,820

64,906

51,599


Per share (1)

0.08

0.07

0.16

0.14

Total payout ratio (%) (1)

50

76

86

98

Development capital (1)

66,328

67,654

248,699

191,715

Property acquisitions

1,108

(923)

1,723

6,906

Property dispositions

(1,585)

(2,498)

(1,712)

(5,821)

Corporate acquisition

-

-

53,166

-

Net debt (1)

1,323,093

820,295

1,323,093

820,295

Operating





Average daily production






Crude oil (bbls/d)

59,786

43,204

58,886

42,817


NGLs (bbls/d)

4,461

3,333

4,233

3,259


Natural gas (Mcf/d)

69,393

58,373

68,129

60,006

 Total (boe/d)

75,813

56,266

74,474

56,077

Average realized price (2)






Crude oil ($/bbl)

75.36

57.52

70.43

57.94


NGLs ($/bbl)

38.33

26.22

37.24

27.85


Natural gas ($/Mcf)

1.24

3.26

1.80

3.24

 Total ($/boe)

62.82

49.10

59.45

49.33

Netbacks ($/boe)






Petroleum and natural gas revenues

62.82

49.10

59.45

49.33


Net blending revenue (1)

0.16

-

0.08

-


Realized hedging loss

(5.97)

(1.28)

(4.20)

(1.24)


Royalties

(10.99)

(7.16)

(10.70)

(7.14)


Net operating expenses (1)

(11.29)

(10.64)

(11.46)

(10.46)


Transportation expenses plus tariffs (1)

(2.98)

(3.07)

(2.96)

(3.06)

Operating netbacks (1)

31.75

26.95

30.21

27.43


General and administrative expenses

(1.27)

(1.31)

(1.26)

(1.32)


Interest and financing expenses excluding unrealized






gain on interest rate contracts (1

(1.99)

(1.73)

(2.02)

(1.77)

Funds flow netbacks (1)

28.49

23.91

26.93

24.34






Share information (000s)





Common shares outstanding, end of period

417,485

369,797

417,485

369,797

Weighted average basic shares outstanding

417,456

369,401

417,603

369,069

Weighted average diluted shares outstanding

420,281

371,410

419,998

371,056


Notes:


(1)     

Funds flow, funds flow per share, dividends paid or declared per share, total payout ratio, development capital, net debt, net blending revenue, net operating expenses, transportation expenses plus tariffs, operating netbacks, interest and financing expenses excluding unrealized gain on interest rate contracts and funds flow 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 an exceptional second quarter with record average production of 75,813 boe/d which was approximately 2,300 boe/d above our forecast of 73,000 - 74,000 boe/d on development capital spending of $66.3 million. Outperformance in the quarter was driven by strong results in southwest Saskatchewan and the Deep Basin Cardium program and our ability to reduce the impact of down-time due to scheduled turnarounds. We also experienced favourable weather conditions in Saskatchewan which allowed for an earlier start to drilling operations than initially anticipated.

The underlying business continues to be very robust as our funds flow netback (prior to hedges) increased 37% to $34.46/boe compared to $25.19/boe in Q2/17 and increased 25% from $27.64/boe in Q1/18. We generated record funds flow of $196.5 million ($0.47/share), invested $66.3 million to grow production per share by 4% compared to Q1/18 and returned $32.7 million in dividends to shareholders which resulted in $97.5 million of free funds flow that was intentionally applied towards debt repayment in the quarter. Net debt to funds flow for Q2 was 1.7 times, a 19% decrease compared to 2.1 times in Q1/18.

Q2/18 Highlights

  • Achieved record average production of 75,813 boe/d compared to 56,266 boe/d in Q2/17, an increase of 35% (19% per share). Whitecap's oil and NGLs weighting continued to increase with Q2/18 at 85% compared to 83% in Q2/17.

  • Realized a funds flow netback (prior to hedges) of $34.46/boe compared to $25.19/boe in Q2/17, a 37% increase. Funds flow netback was $28.49/boe compared to $23.91/boe in Q2/17, a 19% increase.

  • Generated funds flow for the quarter of $196.5 million ($0.47 per share), an increase of 61% (42% per share) from Q2/17. Higher production volumes and realized prices in Q2/18 resulted in significantly higher funds flow.

  • Generated significant free funds flow of $97.5 million in the quarter which was used to reduce bank debt.

  • Invested $66.3 million in development capital expenditures, drilling 47 (42.0 net) horizontal oil wells with a 100% success rate.
     
  • Continued to lock-in economic returns through our ongoing risk management program. Whitecap currently has approximately 55% of 2H/18, 33% of 2019, and 8% of 1H/2020 crude oil production (net of royalties) hedged using a combination of swaps and costless collars. See Note 5 to the unaudited interim consolidated financial statements for further details.

  • Renewed the normal course issuer bid ("NCIB") that allows Whitecap to purchase up to 20.9 million shares over a 12 month period commencing May 18, 2018. In Q2/18, we repurchased 0.6 million common shares at an average cost of $8.85 per share for total consideration of $5.6 million.

  • As part of our annual credit facility review, we transitioned from a borrowing-based structure with lending capacity redetermined on a semi-annual basis, to a financial covenant-based revolving facility with an extendible four year term governed by our existing leverage and interest coverage ratios.

Operational Update

In west central Saskatchewan, we drilled a total of 34 (33.3 net) horizontal Viking wells of which 53% were extended reach horizontal ("ERH") wells. Due to program efficiencies and reduced spud to rig release times, drill, complete, equip and tie-in ("DCE&T") costs are trending 5-10% below forecast with our early time production results trending at or above our type curve expectations.

In southwest Saskatchewan, our 2 drilling rig program is proceeding as expected with 11 (7.0) horizontal oil wells being drilled in the second quarter. This includes 6 (4.2 net) Atlas wells, 3 (1.6 net) Roseray wells and 2 (1.2 net) Upper Shaunavon wells. To date, these wells have added over 800 bopd of net production. More than 50% of Q2/18 capital spending was associated with enhanced oil recovery ("EOR") and waterflood optimization, expansion and maintenance which will have a significant impact on the mitigation of our base production declines on this property and, in turn, enhancing the assets growth profile.

In southeast Saskatchewan, our first drill-out re-activation program for Weyburn commenced late in the second quarter with the first 2 of 6 wells completed. This will be followed by a 4 well CO2 expansion/rollout program and a 12 well infill drilling program in the second half of the year.

In west central Alberta, we drilled 1 (0.7 net) well. The focus in the second quarter was to mitigate the impact of third party downtime as well as production optimization efforts which the team was successful at with base production maintained well above forecasts.

In northwest Alberta, we drilled 1 (1.0 net) horizontal oil well in the Deep Basin which is the first of a 3 well pad program targeting Dunvegan oil in the Karr area.

For the second half of 2018, we currently have plans to drill an additional 104 (80.3 net) wells across all of our business units with significant programs focused in southwest Saskatchewan, southeast Saskatchewan, west central Saskatchewan and the Alberta Deep Basin programs.

Outlook

With the exceptionally strong operational results that we have achieved on our assets to date, we are increasing our annual production guidance for 2018 to 74,000 –75,000 boe/d from our previous guidance of 73,600 – 74,800 boe/don an unchanged development capital program of $450 million. Our financial results are also trending higher than originally forecast as a result of improving crude oil prices, a weaker Canadian dollar and stronger production volumes; all allowing us to generate material free funds flow in 2018. We expect to generate strong free funds flow in 2H/18 and are committed to balancing debt management while enhancing our per share growth metrics with these funds.

In 2016 and 2017, Whitecap was able to execute on two very strategic and transformational acquisitions for a total purchase price of $1.5 billion. These opportunistic acquisitions have significantly reduced our corporate decline rate, increased our oil weighting, provided substantial growth inventory and enhanced financial stability to the Company in 2018 and into the future.

The southwest Saskatchewan asset was acquired in June 2016 for $595 million. The production at that time was 11,600 boe/d with operating costs of $16.71 boe and an operating netback of $15.80/boe. In Q2/18 average production was 14,900 boe/d (28% increase) with operating costs of $13.20/boe (21% decrease) and an operating netback of $37.23/boe (136% increase). Since June of 2016, the southwest Saskatchewan assets have generated operating income of approximately $250 million.

The southeast Saskatchewan asset was acquired in December 2017 for $940 million and, although we have been operating it only since the time of acquisition, it has been performing very well with production and operating costs in-line with expectations. WTI at the time of acquisition was trading at US$54.00/bbl compared to US$68.00/bbl currently, a 26% increase.

These two acquisitions were highly accretive to our per share metrics and significantly enhanced our long-term sustainability and business model. Had it not been for the lower crude oil price environment, we expect that these opportunities may not have been available or they may have been available at much higher prices.

As we continue to build our long-term business, we recognize the growing investor and stakeholder interest in environmental, social and governance information from our Company. We believe that delivering sustainable growth goes hand-in-hand with a commitment to meeting or exceeding regulators' requirements. We are proud to present Whitecap's second Corporate Sustainability Report which is available on our website www.wcap.ca under Corporate Responsibility.

Over the next three years, we will continue to target sustainable organic production per share growth of 6-8% per year, dividend growth supported by free funds flow, management of our balance sheet and a disciplined focus on value enhancing opportunities.

On behalf of the 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 Wednesday, August 1, 2018.

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.

An archived recording of the conference call will also be available approximately two hours after the completion of the call until August 15, 2018 by dialing 1-888-390-0541, passcode 014511#.

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", 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, objectives, priorities and focus; the Company's hedging program; DCE&T costs trending below forecast; financial results trending higher and the reasons therefor; the 2H/18 southeast Saskatchewan infill drilling program including the number of wells to be drilled and CO2 expansion/rollout program;  expectations on exceeding full year production guidance; expectations in respect of 2H/18 and 2018 free funds flow.

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; 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; 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, ability to market oil and natural gas successfully and our ability to access capital.

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. 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.

Oil and Gas Advisories

"Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

This press release contains metrics commonly used in the oil and natural gas industry, such as "funds flow netbacks", "operating netbacks" and "development capital". See "Non-GAAP Measures". These terms have been calculated by management and do not have a standardized meaning and may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Management uses these oil and gas metrics for its own performance measurements and to provide Shareholders with measures to compare our operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this press release, should not be relied upon for investment or other purposes.

Non-GAAP Measures

This press release includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or, alternatively, "GAAP") and, therefore, may not be comparable with the calculation of similar measures by other companies.
"Dividends paid or declared per share" represents cash dividends declared or paid per share by Whitecap.

"Development capital" represents expenditures on property, plant and equipment ("PP&E") excluding corporate and other assets.

The following table reconciles expenditures on PP&E (a GAAP measure) to development capital (a non-GAAP measure):


          Three months ended

               Six months ended


                                 June 30

June 30

($000s)

2018

2017

2018

2017

Expenditures on PP&E

66,444

67,934

249,059

192,030

Expenditures on corporate and other assets

(116)

(280)

(360)

(315)

Development capital

66,328

67,654

248,699

191,715

 

"Funds flow" represents cash flow from operating activities adjusted for changes in non-cash working capital, settlement of decommissioning liabilities and transaction costs.

"Funds flow per share" represents funds flow divided by the basic or diluted weighted average shares outstanding in the period. Management considers funds flow and funds flow per share to be key measures as they demonstrate Whitecap's ability to generate the cash necessary to pay dividends, repay debt, make capital investments, fund decommissioning liabilities and/or to repurchase common shares under the Company's NCIB. Management believes that by excluding the temporary impact of changes in non-cash operating working capital, funds flow provides a useful measure of Whitecap's ability to generate cash that is not subject to short-term movements in non-cash operating working capital.

The following table reconciles cash flow from operating activities (a GAAP measure) to funds flow and free funds flow (non-GAAP measures):


          Three months ended

                      Six months ended


                                 June 30

                                        June 30

($000s)

2018

2017

2018

2017

Cash flow from operating activities

225,933

146,526

383,495

261,624

Changes in non-cash working capital

(30,117)

(24,656)

(22,880)

(15,519)

Settlement of decommissioning liabilities

722

545

2,200

951

Transaction costs

-

-

200

-

Funds flow

196,538

122,415

363,015

247,056

Dividends paid or declared

32,719

25,820

64,906

51,599

Development capital

66,328

67,654

248,699

191,715

Free funds flow

97,491

28,941

49,410

3,742

Total payout ratio (%)

50

76

86

98

 

"Free funds flow" represents funds flow less dividends paid or declared and development capital.

"Funds flow netbacks" are determined by deducting cash general and administrative expenses and interest and financing expenses excluding unrealized gain on interest rate contracts from operating netbacks.

"Funds flow netbacks (prior to hedges)" are determined by adding realized hedging losses or deducting realized hedging gains from funds flow netbacks.

"Interest and finance expenses excluding unrealized gain on interest rate contracts" are determined by adding back (deducting) unrealized gains (losses) on interest rate contracts included in interest and finance expenses. Management believes that interest and finance expenses excluding unrealized gain on interest rate contracts provides a useful measure of Whitecap's cash interest expenditures.

"Net blending revenue" is calculated as blending revenue less blending expenses.

The following table reconciles blending revenue (a GAAP measure) to net blending revenue (a non-GAAP measure):


Three months ended

June 30

Six months ended

June 30

($000s)

2018

2017

2018

2017

Blending revenue

3,500

-

3,500

-

Blending expense

(2,407)

-

(2,407)

-

Net blending revenue

1,093

-

1,093

-

 

"Net debt to funds flow" is calculated as net debt divided by funds flow. Management believes that net debt to funds flow provides a useful measure of the Company's overall debt position and the strength of the Company's balance sheet.

"Operating netbacks" are determined by adding net blending revenue, deducting realized hedging losses or adding realized hedging gains and deducting royalties, net operating expenses and transportation expenses plus tariffs from petroleum and natural gas revenues. Operating netbacks are per boe measures used in operational and capital allocation decisions.

"Net operating expenses" are determined by deducting processing income primarily generated by processing third party volumes at processing facilities where the Company has an ownership interest. Management believes that net operating expenses provide a useful measure of the Company's operating expenses, net of related processing income.

The following table reconciles operating expenses (a GAAP measure) to net operating expenses (a non-GAAP measure):


          Three months ended

                                 June 30

                Six months ended

                                  June 30

($000s except per boe amounts)

2018

2017

2018

2017

Operating expenses

81,359

56,754

161,367

110,326

Less processing income

(3,463)

(2,267)

(6,850)

(4,143)

Net operating expenses

77,896

54,487

154,517

106,183

$ per boe

11.29

10.64

11.46

10.46

 

"Net debt" is calculated as long-term debt plus working capital surplus or deficit adjusted for risk management contracts. Net debt is used by management to analyze the financial position and leverage of Whitecap.

The following table reconciles long-term debt (a GAAP measure) to net debt (a non-GAAP measure):

($000s)

                 June 30

                      2018

                 June 30

                      2017

Long-term debt

1,281,524

760,950

Current liabilities

348,653

190,733

Current assets

(177,079)

(116,980)

Risk management contracts

(130,005)

(14,408)

Net debt

1,323,093

820,295

 

"Total payout ratio" is calculated as dividends paid or declared plus development capital, divided by funds flow.

"Transportation expenses plus tariffs" are determined by adding tariffs netted against petroleum and natural gas sales to transportation expenses. Management believes that transportation expenses plus tariffs provides a useful measure of Whitecap's cost of transporting products to market. 

The following table reconciles transportation expenses (a GAAP measure) to transportation expenses plus tariffs (a non-GAAP measure):


Three months ended

June 30

Six months ended

June 30

($000s)

2018

2017

2018

2017

Transportation expenses

16,419

7,595

28,921

13,802

Tariffs

4,106

8,114

11,040

17,242

Transportation expenses plus tariffs

20,525

15,709

39,961

31,044

 

SOURCE Whitecap Resources Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2018/01/c6060.html

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