CALGARY, AB, Jan. 4, 2021 /CNW/ - Whitecap Resources Inc.
("Whitecap" or the "Company") (TSX: WCP) is pleased to announce
that it has successfully completed the previously announced
strategic combination with NAL Resources Limited ("NAL") (the "NAL
Combination"). Whitecap issued approximately 58.3 million Whitecap
common shares in exchange for all the issued and outstanding NAL
shares.
2020 has been a very challenging year on many fronts, but our
financial discipline and operational strength has allowed us to
capture significant opportunities including the NAL Combination and
the recently announced strategic combination with TORC Oil &
Gas Ltd. ("TORC") (the "TORC Combination"). Our fourth quarter
average production is now expected to be approximately 63,000 boe/d
which is 5% higher than our budget expectation of 59,000 – 61,000
boe/d. Capital spending for the quarter was approximately
$20 million which is in line with our
expectations. We have ended 2020 on a very strong operational note
and will look to build on this momentum as we move into 2021.
Over the last five years, Whitecap has significantly enhanced
our dividend and growth model through our commitment to reducing
costs and improving efficiencies in our business. This commitment,
in combination with our strategic acquisitions, has transformed
Whitecap into one of the most sustainable pure play conventional
light oil producers in Canada with
over 100,000 boe/d (78% oil and NGLs) of corporate production upon
completion of the TORC Combination in late February. Our business
today has proven to be resilient in a low commodity price
environment and also has the ability to significantly enhance free
funds flow as crude oil prices improve.
We are off to a very strong start to 2021 with a robust capital
program including six drilling rigs in operation. In the first
quarter of 2021, we expect capital expenditures of approximately
$115 - $120
million and average production of 89,000 – 91,000 boe/d. Our
capital program details for the balance of the year will be
released upon closing of the TORC Combination which is expected to
be on February 24, 2021.
The first quarter capital program consists of drilling 56 (45.9
net) horizontal wells including 39 (33.6 net) extended reach
horizontal ("ERH") wells and 2 (1.4 net) horizontal injection
wells. In addition to our drill, complete, equip and tie-in costs,
we will be investing approximately $14
million on enhanced oil recovery ("EOR") operations and
optimizations as well as health, safety, and environmental
initiatives in the first quarter. This continued focus on enhancing
our base assets through EOR capital will allow us to maintain, and
potentially improve upon, our low base production decline rate
anticipated to be approximately 17% for 2021.
Northwest Alberta and
British Columbia
In the first quarter, we anticipate drilling a total of 10 (7.0
net) oil wells in this business unit including 6 (3.5 net) Cardium
oil development wells in the Wapiti area, 3 (2.5 net) Charlie Lake horizontal oil wells in our Peace
River Arch region and 1 (1.0 net) Dunvegan horizontal oil well. In addition, we
will be participating in a non-operated (50% working interest)
Montney completion at Karr and
tying in our operated (65% working interest) 13-1 well which was
successfully completed with an optimized stimulation design in the
fourth quarter of 2020.
The Sturgeon Lake NAL assets continue to perform well above
expectations with production 50% (1,200 boe/d) higher than
forecasted at the time the NAL Combination was announced. We
see significant additional optimization opportunities as well as
follow-up drilling on the Ante Creek expansion lands and within the
primary waterflooded pool.
West Central Alberta
We will be drilling 6.0 (4.8 net) wells in west central
Alberta including 4 (3.8 net) ERH
Cardium oil wells and 1 (0.9 net) ERH Cardium injection well in the
continued re-development of our operated Pembina Cardium
waterfloods and 1 (0.2 net) Glauconite liquids rich gas well on NAL
lands.
The West Central Alberta NAL assets continue to perform above
expectations with production 4% (600 boe/d) higher than forecasted
at the time the NAL Combination was announced.
West Central
Saskatchewan
We anticipate drilling 28 (23.5 net) ERH Viking oil wells in the
first quarter, of which 4 (3.3 net) wells will be on NAL lands. Our
drilling and completion designs continue to advance with 3 (2.7
net) ERH wells having an expected horizontal length of 1.5
miles.
We are excited about the drilling and optimization opportunities
that continue to develop with our ongoing technical review of the
NAL West Central Saskatchewan assets.
Southwest
Saskatchewan
We will have one rig active in this business unit drilling 12
(10.6 net) horizontal wells including 6 (5.6 net) oil wells in the
Atlas Formation, 4 (4.0 net) Lower Shaunavon oil wells and 2 (1.0
net) Roseray wells (one producer and one injector). In addition to
the drilling capital in the first quarter, we anticipate allocating
$7 million towards optimizing our EOR
operations in this area.
Southeast
Saskatchewan
We anticipate the Southeast
Saskatchewan drilling and CO2 expansion programs
to commence in the second half of 2021. The first half program will
be limited to CO2 purchases, field level optimization
and maintenance.
TORC Combination Update
Our technical review of the TORC assets is ongoing and both
teams are fully immersed in the integration of our two companies.
Prior to closing on February 24,
2021, the TORC team will have executed on a capital program
of approximately $40 million which
includes the drilling of 22 gross (20.7 net) wells in its core
Southeast Saskatchewan area.
Capital spending plans for the remainder of the year on the TORC
assets will be provided upon closing of the TORC Combination.
Outlook
We are excited about our prospects for adding value from our
expanded asset base from the two strategic transactions entered
into in 2020. Our preliminary guidance for 2021 pro forma the NAL
Combination and TORC Combination remains unchanged with average
production of 99,000 – 101,000 boe/d on capital investments of
$280 to $300
million. We anticipate generating funds flow of
approximately $624 million with free
funds flow of approximately $334
million and a total payout ratio of 63% based on commodity
prices of US$47 WTI and C$2.50/GJ AECO.
We will continue to focus on responsibly developing our assets
including further expansion of our carbon capture utilization and
storage ("CCUS") project at Weyburn,
Saskatchewan where we currently sequester 2 million tonnes
of CO2 annually. This provides Whitecap with its net
negative emitter status and making us a leader in sustainability
with best-in-class environment, social and governance
practices.
A detailed full year 2021 budget will be provided upon closing
of the TORC Combination which is expected to be on February 24, 2021.
On behalf of our employees, management team and board of
directors, we would like to thank our shareholders for their
support as we execute on our 2021 plans and continue to pursue
opportunities to enhance returns to shareholders.
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 Whitecap's current expectations, estimates, projections
and assumptions, as applicable, that were made in light of
information available at the time the statement was made.
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 strategy, plans, focus, objectives, priorities and
position; corporate production once we close the TORC Combination;
our ability to significantly enhance free funds flow as crude oil
prices improve; our expected 2021 first quarter and full-year
capital expenditures and the allocation thereof; our expected 2021
first quarter and full-year production and the allocation thereof;
the timing, location, target and extent of future drilling
operations and the anticipated benefits therefrom; EOR projects and
anticipated benefits therefrom; our current and future base decline
rate; the anticipated benefits of the NAL Combination, including
drilling and optimization opportunities; that the TORC Combination
is expected to close on or before February
24, 2021; the TORC capital program to be completed prior to
closing, including the number and timing of wells to be drilled and
the anticipated benefits therefrom; 2021 funds flow, free funds
flow and total payout ratio; and further expansion of our CCUS
project.
The forward-looking information is based on certain key
expectations and assumptions made by Whitecap, 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) Whitecap's supply chain, including its
ability to obtain the equipment and services it requires, and (iii)
Whitecap's ability to produce, transport and/or sell its 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, ability to market oil
and natural gas successfully; access to capital; the timing of the
completion of the TORC Combination and receipt of applicable
regulatory approvals and on the terms contemplated.
Although the expectations and assumptions on which such
forward-looking information is based are believed to be reasonable,
undue reliance should not be placed on the forward-looking
information because no assurance can be given 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. 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. The above
summary of assumptions and risks related to forward-looking
information has been included in this press release in order to
provide security holders with a more complete perspective on future
operations and such information may not be appropriate for other
purposes.
Unless specifically indicated, all forward-looking information
with respect to the combined entity assumes the completion of the
TORC Combination on the terms and conditions previously publicly
announced by Whitecap.
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 expected 2021 capital expenditures, funds
flow, free funds flow and total payout ratio, 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
"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
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.
Disclosure of production on a per boe basis in this press
release consists of the constituent product types and their
respective quantities as disclosed in the following table:
|
Crude oil
(bbls/d)
|
NGLs
(bbls/d)
|
Natural
gas
(Mcf/d)
|
Total
(boe/d)
|
Q4 2020 Current
Expectation
|
48,090
|
4,620
|
10,290
|
63,000
|
Q4 2020 Budget
Expectation
|
45,553 –
47,097
|
3,833 –
3,963
|
9,614 –
9,940
|
59,000 –
61,000
|
Corporate Production
(1)
|
69,526
|
8,893
|
21,582
|
100,000
|
Q1 2021 Current
Expectation (1)
|
59,933 –
61,280
|
8,642 –
8,836
|
8,642 –
8,836
|
89,000 –
91,000
|
NAL – Sturgeon
Lake
|
413
|
237
|
550
|
1,200
|
NAL – West Central
Alberta
|
207
|
118
|
275
|
600
|
2021 Preliminary
Guidance (1)
|
68,645 –
70,193
|
8,860 –
8,991
|
128,970 –
130,896
|
99,000 –
101,000
|
Note:
|
|
|
(1)
Includes TORC Combination and NAL Combination
|
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.
"Free funds flow" represents funds flow less
expenditures on property, plant and equipment ("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.
"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.