Upon closing of the XTO acquisition on
Since
Our net debt target of
Whitecap is in a very healthy position with our strong balance sheet and a balanced portfolio of high-quality drilling opportunities. Our East Division (~90,000 boe/d) generates significant operating free funds flow1 through its low decline and high netback assets, and our West Division (~70,000 boe/d), with our
As operator and 65.3% working interest owner of the
- Acquisition Payout.
The Weyburn Project currently produces approximately 15,000 boe/d4 (net to Whitecap) of 30-degree API crude oil and generates an annual operating netback1 of over$200 million atUS$75 /bbl WTI. By the end of 2023, we forecast that the asset will have generated over$800 million of cumulative operating free funds flow to Whitecap, leading to a forecasted full payout1 of the$940 million purchase price in 2024 at current strip prices5 which is less than 7 years after acquiring the asset. - Long Life Reserves. A reliable source of CO2 supply is integral to the
Weyburn Project maintaining a decline rate of below 5% as well as increasing the recovery factor of an asset that was first discovered in the early 1950's. To date, the asset has recovered over 500 million barrels of oil, with our year-end 2022 independent reserve evaluation3 indicating the asset is expected to produce for the next 50 years and recover a total of over 700 million barrels of oil. By utilizing CO2 to enhance the recovery factor of the Weyburn oil pool, we are minimizing the surface impact required to replace production declines of a product that continues to see an increase in global demand. - Carbon Sequestration. Since first injection in the year 2000, the Weyburn project has safely sequestered over 40 million tonnes of CO2. Our internal modelling suggests that the ultimate CO2 storage capacity of this partially depleted oil reservoir is 115 million tonnes, which at our current injection rate of approximately 2 million tonnes per year, provides for over 35 more years of CO2 injection capability.
- Project Benefits.
The Weyburn Project provides significant economic benefits to the Province ofSaskatchewan with a direct impact of 120 jobs and annual economic benefits of approximately$350 million 6. Whitecap is proud to be associated with a project that has led the way for carbon capture, utilization and storage ("CCUS") projects, and we expect that knowledge gained from this project will provide significant benefits to future CCUS projects both inCanada and around the world.
Whitecap has released our 2023 ESG report which can be found on our website at www.wcap.ca/sustainability/esg-report. Our 2022 results, discussion of objectives and commitments, and performance against our established targets are all provided in this full comprehensive report. Whitecap is proud of our recent accomplishments and will continue to advance our ESG performance in the years to come.
On behalf of our employees, management team and Board of Directors, we would like to thank our shareholders for their support and look forward to the remainder of 2023 and beyond.
NOTES | |
1 | Net debt is a capital management measure. Full payout and operating free funds flow are supplementary financial measures. Operating netback and free funds flow are non-GAAP financial measures. Refer to the Specified Financial Measures section in this press release for additional disclosure and assumptions. |
2 | Debt to EBITDA ratio is a specified financial measure that is calculated in accordance with the financial covenants in our credit agreement. |
3 | Refer to the Oil and Gas Advisories section for additional disclosure regarding how we calculate net asset value and for reserves information. |
4 | Disclosure of production on a per boe basis in this press release consists of the constituent product types and their respective quantities disclosed herein. Refer to Barrel of Oil Equivalency and Production & Product Type Information in this press release for additional disclosure. |
5 | Based on the following strip commodity pricing and exchange rate assumptions for Sep- |
6 | Gross capital expenditures prior to CO2 purchases plus operating expenses and royalties. |
This press release contains forward-looking statements and forward-looking information (collectively "forward-looking information") within the meaning of applicable securities laws. 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: our expectation to reach our
The forward-looking information is based on certain key expectations and assumptions made by our management, including: that we will continue to conduct our operations in a manner consistent with past operations except as specifically noted herein (and for greater certainty, the forward-looking information contained herein excludes the potential impact of any acquisitions or dispositions that we may complete in the future); the general continuance or improvement in current industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; expectations and assumptions concerning prevailing and forecast commodity prices, exchange rates, interest rates, inflation rates, applicable royalty rates and tax laws, including the assumptions specifically set forth herein; that going forward the COVID-19 virus will not have a material impact 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 adjust crude oil production levels and thereby manage world crude oil prices; the impact (and the duration thereof) of the ongoing military actions between
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, and by its very nature it involves inherent risks and uncertainties. These include, but are not limited to: the risk that the funds that we ultimately return to shareholders through dividends and/or share repurchases is less than currently anticipated and/or is delayed, whether due to the risks identified herein or otherwise; the risk that any of our material assumptions prove to be materially inaccurate, including our 2023 forecasts (including for commodity prices and exchange rates); the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, including the risk that weather events such as wildfires, flooding or extreme hot or cold temperatures forces us to shut-in production or otherwise adversely affects our operations; 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; risks associated with increasing costs, whether due to high inflation rates, high interest rates, supply chain disruptions or other factors; health, safety and environmental risks; commodity price and exchange rate fluctuations; interest rate fluctuations; inflation 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 on acceptable terms or at all; failure to obtain required regulatory and other approvals; reliance on third parties and pipeline systems; changes in legislation, including but not limited to tax laws, production curtailment, royalties and environmental regulations; the risk that we do not successfully defend against previously disclosed and ongoing reassessments received from the
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 our forecast to reach our
Reserves
Estimates in this press release in respect of the
Barrel of Oil Equivalency
"Boe" means barrel of oil equivalent. All boe conversions in this press release are derived by converting gas to oil at the ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("Bbl") of oil. Boe may be misleading, particularly if used in isolation. A Boe conversion rate of 1 Bbl : 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 Bbl : 6 Mcf, utilizing a conversion ratio of 1 Bbl : 6 Mcf may be misleading as an indication of value.
Oil and Gas Metrics
This press release contains metrics commonly used in the oil and natural gas industry which have been prepared by management, such as "net asset value". This term does 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.
"Net asset value" is determined by subtracting net debt and asset retirement obligations (if not otherwise deducted) at the applicable date from the total proved or total proved plus probable before tax net present value of future net revenue discounted at 10% as provided in the McDaniels Reserves Report.
Management uses 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.
Production & Product Type Information
References to petroleum, crude oil, natural gas liquids ("NGLs"), natural gas and average daily production in this press release refer to the light and medium crude oil, tight crude oil, conventional natural gas, shale gas and NGLs product types, as applicable, as defined in National Instrument 51-101 ("NI 51-101"), except as noted below.
NI 51-101 includes condensate within the NGLs product type. The Company has disclosed condensate as combined with crude oil and separately from other NGLs since the price of condensate as compared to other NGLs is currently significantly higher and the Company believes that this crude oil and condensate presentation provides a more accurate description of its operations and results therefrom. Crude oil therefore refers to light oil, medium oil, tight oil and condensate. NGLs refers to ethane, propane, butane and pentane combined. Natural gas refers to conventional natural gas and shale gas combined.
The current average daily production from the
East Division | West Division | Weyburn (net to | |
Light and medium oil (bbls/d) | 62,000 | 13,000 | 14,500 |
Tight oil (bbls/d) | - | 11,500 | - |
Crude oil (bbls/d) | 62,000 | 24,500 | 14,500 |
NGLs (bbls/d) | 11,500 | 6,000 | 500 |
Shale gas (Mcf/d) | - | 198,000 | - |
Conventional natural gas (Mcf/d) | 99,000 | 39,000 | - |
Natural gas (Mcf/d) | 99,000 | 237,000 | - |
Total (boe/d) | 90,000 | 70,000 | 15,000 |
This press release includes various specified financial measures, including non-GAAP financial measures, capital management measures and supplementary financial measures as further described herein. These financial measures are not standardized financial measures under International Financial Reporting Standards ("IFRS" or, alternatively, "GAAP") and, therefore, may not be comparable with the calculation of similar financial measures disclosed by other companies.
"Free funds flow" is a non-GAAP financial measure calculated as 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. Free funds flow is not a standardized financial measure under IFRS and, therefore, may not be comparable with the calculation of similar financial measures disclosed by other entities. The most directly comparable financial measure to free funds flow disclosed in the Company's primary financial statements is cash flow from operating activities. Refer to the "Cash Flow from Operating Activities, Funds Flow and Payout Ratios" section of our management's discussion and analysis for the three and six months ended
Three months ended | Six months ended | |||
($ millions) | 2023 | 2022 | 2023 | 2022 |
Cash flow from operating activities | 414.9 | 676.8 | 883.5 | 1,067.3 |
Net change in non-cash working capital items | 0.2 | (0.1) | (20.4) | 115.0 |
Funds flow | 415.1 | 676.6 | 863.1 | 1,182.3 |
Expenditures on PP&E | 217.8 | 87.9 | 471.4 | 299.4 |
Free funds flow | 197.3 | 588.7 | 391.7 | 882.9 |
Total payout ratio (%) | 74 | 21 | 75 | 34 |
Funds flow per share, basic | 0.69 | 1.09 | 1.43 | 1.90 |
Funds flow per share, diluted | 0.68 | 1.08 | 1.41 | 1.88 |
"Net Debt" is a capital management measure that management considers to be key to assessing the Company's liquidity. See Note 5(e)(i) "Capital Management – Net Debt and Total Capitalization" in the Company's unaudited interim consolidated financial statements for the three and six months ended
Net Debt ($ millions) | ||||
Long-term debt | 1,259.5 | 1,844.6 | ||
Accounts receivable | (357.5) | (480.2) | ||
Deposits and prepaid expenses | (28.1) | (22.7) | ||
Accounts payable and accrued liabilities | 458.1 | 549.1 | ||
Dividends payable | 29.2 | 22.3 | ||
Net Debt | 1,361.2 | 1,913.1 |
"Operating free funds flow" is a supplementary financial measure calculated as petroleum and natural gas revenues plus other income, less tariffs, royalties, operating expenses, transportation expenses and expenditures on property, plant and equipment ("PP&E") on an asset level. Management believes that operating free funds flow provides a useful measure of Whitecap's ability to grow the Company's business on an asset specific level.
"Operating netback" is a non-GAAP financial measure determined by adding marketing revenues and processing & other income, deducting realized losses on commodity risk management contracts or adding realized gains on commodity risk management contracts and deducting tariffs, royalties, operating expenses, transportation expenses and marketing expenses from petroleum and natural gas revenues. The most directly comparable financial measure to operating netback disclosed in the Company's primary financial statements is petroleum and natural gas sales. Operating netback is a measure used in operational and capital allocation decisions. Operating netback is not a standardized financial measure under IFRS and, therefore, may not be comparable with the calculation of similar financial measures disclosed by other entities. For further information, refer to the "Operating Netbacks" section of our management's discussion and analysis for the three and six months ended
Three months ended | Six months ended | |||
Operating Netbacks ($ millions) | 2023 | 2022 | 2023 | 2022 |
Petroleum and natural gas revenues | 797.9 | 1,262.0 | 1,681.6 | 2,265.9 |
Tariffs | (6.7) | (5.1) | (14.3) | (11.4) |
Processing & other income | 14.4 | 7.4 | 26.2 | 14.2 |
Marketing revenues | 67.8 | 85.4 | 132.5 | 144.1 |
Petroleum and natural gas sales | 873.4 | 1,349.6 | 1,826.0 | 2,412.8 |
Realized gain (loss) on commodity contracts | 11.9 | (116.3) | 21.0 | (194.1) |
Royalties | (128.2) | (241.7) | (288.9) | (439.1) |
Operating expenses | (203.0) | (186.6) | (398.1) | (350.9) |
Transportation expenses | (29.8) | (27.0) | (59.6) | (51.9) |
Marketing expenses | (68.0) | (84.5) | (132.2) | (142.8) |
Operating netbacks | 456.3 | 693.6 | 968.2 | 1,234.0 |
"Full payout" is a supplementary financial measure and is determined when operating free funds flow is greater than the acquisition price. Management believes that full payout provides a useful measure of Whitecap's acquisition strategy.
Per Share Amounts
Per share amounts noted in this press release are based on fully diluted shares outstanding unless noted otherwise.
SOURCE
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