CALGARY,
AB, Dec. 19, 2022 /CNW/ - Whitecap Resources
Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to
announce that it has entered into three definitive agreements to
dispose of certain non-strategic assets, effective October 1, 2022 for aggregate consideration of
$419 million, consisting of
$394 million in cash and producing
assets that consolidate working interest in our operated Butte,
Saskatchewan core area. Current
production from the disposed assets is approximately 11,000
boe/d1 and is expected to average approximately 10,000
boe/d in 2023 (in each case, net of acquired production). The
transactions are expected to close in January 2023, subject to customary closing
considerations. Upon closing, Whitecap will have successfully
disposed of the non-strategic assets that were marketed for
disposition.
Consistent with our return of capital framework, our Board of
Directors has approved a 32% increase to the monthly dividend as
our first net debt2 milestone of $1.8 billion will be achieved on or before the
close of the transactions. The new monthly dividend of $0.0483 per share is up from the current monthly
dividend of $0.0367 per share, which
equates to $0.58 per share annually
and is effective with the January
2023 dividend, payable in February
2023. The increased dividend represents an attractive yield
of 6% based on the December 16, 2022
closing price of $9.68 per share and
is a significant step towards us achieving our targeted annual
dividend level of $0.73 per share.
Pro forma the dispositions, our targeted dividend plus maintenance
capital remains fully funded within funds flow at US$50/bbl WTI and C$4.00/GJ AECO.
Our next net debt milestone of $1.3
billion is now expected to be achieved by mid-2023,
approximately five months earlier than initially forecasted based
on current strip prices3. Once our $1.3 billion net debt milestone is achieved, we
plan to return 75% of free funds flow back to shareholders which
includes the targeted $0.73 per share
base dividend, supplemented with share buybacks and/or special
dividends. The remaining 25% of free funds flow will be used to
continue to strengthen our balance sheet, providing us with
significant financial flexibility to consider future
opportunities.
For 2023, as a result of the asset dispositions, we are now
forecasting production to average 160,000 - 162,000 boe/d (64%
liquids) with no change to our capital budget of $900 - $950
million. The assets being disposed of are non-strategic to
Whitecap and, therefore, had minimal capital expenditures allocated
to them in 2023 and beyond.
We will now begin 2023 with an even stronger balance sheet, and
we look forward to updating shareholders on our progress throughout
the year.
NOTES
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1 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 and
Product Type Information in this press release for additional
disclosure.
|
2 Net debt is a capital
management measure. Refer to the Specified Financial Measures
section in this press release for additional
disclosures.
|
3 See Note Regarding
Forward-Looking Statements for underlying commodity price and
exchange rate assumptions.
|
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, including relating to the proposed dispositions and
the Company after completing the proposed dispositions.
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, including the rationale for, and anticipated benefits
to be derived from, the proposed dispositions.
In particular, and without limiting the generality of the
foregoing, this press release contains forward-looking information
with respect to: the anticipated terms of the proposed
dispositions, including the effective date and amount and type of
consideration to be received by the Company; the 2023 annual
average daily production forecast for the disposed assets net of
acquired production (including by product type); that the
transactions are expected to close in January 2023; that our first net debt milestone
of $1.8 billion will be achieved on
or before the close of the transactions; that our targeted annual
dividend level is $0.73 per share;
that pro forma the dispositions, our targeted annual dividend plus
maintenance capital remains fully funded within funds flow at
US$50/bbl WTI and C$4.00/GJ AECO; our expectation to reach our next
net debt milestone of $1.3 billion by
mid-2023; that we anticipate returning 75% of free funds flow back
to shareholders once our $1.3 billion
net debt milestone is reached, which is expected to include a
$0.73 per share annual dividend,
supplemented by share buybacks and/or special dividends; that the
remaining 25% of free funds flow will be used to continue to
strengthen our balance sheet, providing us with significant
financial flexibility for future opportunities; our average daily
production (including by product type) and capital expenditure
forecasts for 2023; and, that we will now begin 2023 with an even
stronger balance sheet.
The forward-looking information is based on certain key
expectations and assumptions made by our management, including:
that the parties to each of the proposed dispositions will be able
to satisfy all conditions precedent to closing the dispositions,
including the receipt of all applicable regulatory approvals, and
that the proposed dispositions will be completed on the terms and
timing contemplated herein; 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 other than as disclosed herein); 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; 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 adjust crude oil production levels and thereby manage
world crude oil prices; the impact (and the duration thereof) of
the ongoing military actions between Russia and Ukraine and related sanctions on crude oil,
NGLs and natural gas prices; the impact of rising and/or sustained
high inflation rates and interest rates on the North American and
world economies and the corresponding impact on our costs, our
profitability, and on crude oil, NGLs and natural gas prices;
future production rates and estimates of operating costs and
development capital, including as specifically set forth herein;
performance of existing and future wells; reserve volumes and net
present values thereof; anticipated timing and results of capital
expenditures / development capital, including as specifically set
forth herein; 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; future dividend levels and share
repurchase levels; the impact of increasing competition; ability to
efficiently integrate assets and employees acquired through
acquisitions or asset exchange transactions; ability to market oil
and natural gas successfully; and our ability to access capital and
the cost and terms thereof. In addition, our expectation to reach
our net debt milestone of $1.3
billion in mid-2023 is based on the following commodity
pricing and exchange rate assumptions: WTI of US$73.90/bbl, USD/CAD of $1.37 and AECO of C$4.57/GJ.
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 risk that we do not complete one or more of the
aforementioned dispositions at all or on the terms and/or on the
timing contemplated herein; the risk that we do not realize some or
all of the anticipated benefits of the proposed dispositions; the
risk that the funds that we ultimately return to shareholders
through dividends and/or share buybacks 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;
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; and the risk
that the amount of future cash dividends paid by us and/or shares
repurchased for cancellation by us, if any, will be subject to the
discretion of our Board of Directors and may vary depending on a
variety of factors and conditions existing from time to time,
including, among other things, fluctuations in commodity prices,
production levels, capital expenditure requirements, debt service
requirements, operating costs, royalty burdens, foreign exchange
rates, contractual restrictions contained in our debt agreements,
and the satisfaction of the liquidity and solvency tests imposed by
applicable corporate law for the declaration and payment of
dividends and/or the repurchase of shares – depending on these and
various other factors, many of which will be beyond our control,
our dividend policy and/or share buyback policy and, as a result,
future cash dividends and/or share buybacks, could be reduced or
suspended entirely. 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 2023 average daily production and capital
expenditures pro forma the proposed asset dispositions, the timing
of reaching our first net debt milestone of $1.8 billion, our targeted annual dividend level
and the timing thereof, the percent of free funds flow to be
returned to shareholders based on reaching our net debt milestone
of $1.3 billion, that our targeted
annual dividend plus maintenance capital remains fully funded
within funds flow at US$50/bbl WTI
and C$4.00/GJ AECO and the percent of
free funds flow to be used to strengthen our balance sheet and the
timing thereof 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 herein 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
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.
Production and 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").
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 Company's current and forecast 2023 annual average daily
production for the three dispositions and the mid-point of the
Company's forecast average daily production for the full year 2023
disclosed in this press release consists of the following product
types, as defined in NI 51-101 and using a conversion ratio of 1
Bbl : 6 Mcf where applicable:
|
Dispositions
(current)
|
Dispositions
2023
|
2023
(mid-point)
|
Light and medium oil
(bbls/d)
|
6,050
|
5,500
|
72,500
|
Tight oil/condensate
(bbls/d)
|
-
|
-
|
13,500
|
Crude oil
(bbls/d)
|
6,050
|
5,500
|
86,000
|
|
|
|
|
NGLs
(bbls/d)
|
1,000
|
900
|
17,600
|
|
|
|
|
Shale gas
(Mcf/d)
|
-
|
-
|
207,000
|
Conventional natural
gas (Mcf/d)
|
23,700
|
21,600
|
137,400
|
Natural gas
(Mcf/d)
|
23,700
|
21,600
|
344,400
|
|
|
|
|
Total
(boe/d)
|
11,000
|
10,000
|
161,000
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SPECIFIED FINANCIAL MEASURES
This press release includes various specified financial
measures, including capital management 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.
"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 nine months
ended September 30, 2022 and in the
Company's audited annual consolidated financial statements for the
year ended December 31, 2021 for
additional disclosures.
Per Share Amounts
Per share amounts noted in this press release are based on fully
diluted shares outstanding.
SOURCE Whitecap Resources Inc.