CALGARY, AB, Oct. 29, 2020 /CNW/ - Whitecap Resources Inc.
("Whitecap" or the "Company") (TSX: WCP) is pleased to report its
operating and unaudited consolidated financial results for the
three and nine months ended September 30,
2020.
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.
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; the expected closing date of the Transaction;
Whitecap's base production and associated production decline rate
continued performance; ability to maintain ample liquidity to
manage through the current volatility and uncertainty created by
the COVID-19 pandemic; that the Transaction is accretive to key
2021 per share metrics including funds flow, production, reserves
and net asset value; our 2020 average production and capital
expenditures; our 2021 pro forma the Transaction average production
and capital expenditures; anticipated continued economic
volatility; and that the world economy will return to growth over
the next year.
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 and services we require, and (iii) our ability
to produce, transport and/or sell our crude oil, NGLs and natural
gas; the ability of OPEC+ nations and other major producers of
crude oil to reduce crude oil production and thereby arrest and
reverse the steep decline in world crude oil prices; 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, the timing of the
completion of the Transaction and receipt of applicable regulatory
approvals and on the terms contemplated; 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. 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; ability to access sufficient capital from internal
and external sources; 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,
production curtailment, 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.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Whitecap's prospective capital expenditures, all of
which are subject to the same assumptions, risk factors,
limitations, and qualifications as set forth in the above
paragraphs. The actual results of operations of Whitecap and the
resulting financial results will likely vary from the amounts set
forth in this presentation and such variation may be material.
Whitecap and its management believe that the FOFI has been prepared
on a reasonable basis, reflecting management's best estimates and
judgments. However, because this information is subjective and
subject to numerous risks, it should not be relied on as
necessarily indicative of future results. Except as required by
applicable securities laws, Whitecap undertakes no obligation to
update such FOFI. FOFI contained in this press release was made as
of the date of this press release and was provided for the purpose
of providing further information about Whitecap's anticipated
future business operations. Readers are cautioned that the FOFI
contained in this press release should not be used for purposes
other than for which it is disclosed herein.
Oil and Gas Advisories
References to crude oil or natural gas production in this press
release refer to the light and medium crude oil and conventional
natural gas, respectively, product types as defined in National
Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities ("NI 51-101").
"Boe" means barrel of oil equivalent based on 6 mcf of natural
gas to 1 bbl of oil. Boe may be misleading, particularly if used in
isolation. A boe conversion ratio of 6:1 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.
Production
|
Crude oil
(bbls/d)
|
NGLs
(bbls/d)
|
Natural
gas
(Mcf/d)
|
Total
(boe/d) (1)
|
Q3 2020
Guidance
|
48,980 –
49,770
|
3,720 –
3,780
|
55,800 –
56,700
|
62,000 –
63,000
|
2020 Guidance –
Revised
|
53,325 –
53,720
|
4,050 –
4,080
|
60,750 –
61,200
|
67,500 –
68,000
|
2020 Guidance –
Prior
|
51,350 –
52,930
|
3,900 –
4,020
|
58,500 –
60,300
|
65,000 –
67,000
|
2021
Guidance
|
55,450 –
57,050
|
6,800 –
7,000
|
113,000 –
114,000
|
81,000 –
83,000
|
|
Note:
|
|
|
(1)
|
Disclosure of
production on a per boe basis of amounts in the above table in this
press release consists of the constituent product types and their
respective quantities disclosed in this table.
|
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. See the Company's Management's
Discussion and Analysis of financial condition and results of
operation for the period ended September 30,
2020 for a reconciliation of the non-GAAP measures.
"Free funds flow" represents funds flow less
expenditures on PP&E. Management believes that free funds flow
provides a useful measure of Whitecap's ability to increase returns
to shareholders and to grow the Company's business. Previously,
Whitecap also deducted dividends paid or declared in the
calculation of free funds flow. The Company believes the change in
presentation better allows comparison with both dividend paying and
non-dividend paying peers.
"Operating netbacks" are determined by adding marketing
revenue and processing & other income, deducting realized
hedging losses or adding realized hedging gains and deducting
tariffs, royalties, operating expenses, transportation expenses and
marketing expenses from petroleum and natural gas revenues.
Operating netbacks are per boe measures used in operational and
capital allocation decisions. Presenting operating netbacks on a
per boe basis allows management to better analyze performance
against prior periods on a comparable basis.
"Total payout ratio" is calculated as dividends paid
or declared plus expenditures on PP&E, divided by funds flow.
Management believes that total payout ratio provides a useful
measure of Whitecap's capital reinvestment and dividend policy, as
a percentage of the amount of funds flow.
SOURCE Whitecap Resources Inc.