CALGARY,
AB, Aug. 31, 2022 /CNW/ - Whitecap Resources
Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to
announce that it has successfully closed the previously announced
acquisition of XTO Energy Canada (the "Acquisition").
The closing of the Acquisition adds production1 of
approximately 32,000 boe/d (30% condensate and NGLs) and over 2,000
top tier Montney and Duvernay drilling locations2 that
will provide decades of long-term sustainable production and free
funds flow growth. The Acquisition also includes 100% ownership of
the 15-07 gas processing facility which is a shallow cut facility
with 165 mmcf/d of total capacity. The facility currently processes
the acquired Duvernay volumes
along with third-party volumes from area producers.
Whitecap is also pleased to announce that in conjunction with
completion of the Acquisition, Whitecap has closed the issuance of
a $705 million 4-year term loan and
increased its existing credit facility by $395 million which results in total credit
capacity of $3.1 billion. The term
loan is repayable at any time with no penalty and uses the same
pricing grid as our existing credit facility. On current strip
pricing, Whitecap is expected to reach its net debt3
milestone of $1.8 billion by year
end, which would represent a debt to EBITDA ratio4 of
0.7 times and leave the company with $1.3
billion of unused credit capacity.
With the Acquisition now closed, along with continued
outperformance on our base production, we are increasing our 2022
average production guidance by 4,000 boe/d to 142,000 – 144,000
boe/d and our capital spending guidance by $60 million to $670
- $690 million. The increased capital
program will allow us to retain our current field services through
the winter drilling season to maintain our strong capital
efficiencies for the balance of 2022 and into 2023. There is no
change to our 2023 preliminary plans for production to average
168,000 – 174,000 boe/d on capital spending of $900 million to $1.1
billion and we plan to release our formal 2023 budget on
September 28, 2022.
Integration of the acquired assets is well underway and expected
to be seamless given Whitecap's technical expertise in the area and
our ability to effectively acquire, integrate and optimize our
historical acquisitions. As our portfolio of opportunities has
increased significantly, we are advancing initiatives to achieve
our net debt milestones and thereby further advance our return of
capital strategy sooner than currently forecasted.
We are excited about the future potential of our consolidated
portfolio and look forward to the achievement of our objectives
over the next several months.
NOTES
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.
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2
|
Refer to the Drilling
Locations section in this press release for additional disclosure
and assumptions.
|
3
|
Net debt is a capital
management measure. Refer to the Specified Financial Measures
section in this press release for additional disclosure and
assumptions.
|
4
|
Debt to EBITDA ratio is
a specified financial measure that is calculated in accordance with
the financial covenants in our credit agreements.
|
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 Acquisition and the
Company after completing the Acquisition. 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: the acquired assets being top tier Montney and Duvernay assets; the number of acquired top
tier drilling locations in the Montney and the Duvernay; that the acquired drilling locations
represent decades of long-term sustainable production and free
funds flow growth; our expectation to reach our net debt milestone
of $1.8 billion by year end based on
current strip pricing; our expected debt to EBITDA ratio and unused
credit capacity at year end based on reaching our $1.8 billion net debt milestone based on current
strip pricing; our average daily production volume and capital
expenditure forecasts for 2022 and 2023; that the increased capital
program will allow us to retain our current field services through
the winter drilling season to maintain our strong capital
efficiencies for the balance of 2022 and into 2023; our plans to
release our formal budget on September 28,
2022, our expectation that integration of the acquired
assets will be seamless; and, that we are advancing initiatives to
achieve our net debt milestones and thereby further advance our
return of capital strategy sooner than currently forecasted.
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; 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, including our assumptions regarding the number
of drilling locations obtained through the Acquisition; 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; the impact of increasing competition; ability to
efficiently integrate assets and employees acquired through
acquisitions, including the Acquisition; ability to market oil and
natural gas successfully; our ability to access capital and the
cost and terms thereof, including as specifically contemplated
herein. In addition, our expectation to reach our net debt
milestone of $1.8 billion by year end
is based on the following current strip pricing: August 31 – December 31,
2022 WTI of US$90.09/bbl,
CAD/USD of 1.31 and AECO of C$6.26/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 realize some or all of the
anticipated benefits of the Acquisition; the risk that we are not
able to advance our return of capital strategy sooner than
currently forecasted or that it is otherwise delayed or amended;
the risk that any of our material assumptions prove to be
materially inaccurate, including our 2022 and 2023 forecasts; 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, including the Acquisition; failure to complete or
realize the anticipated benefits of acquisitions or dispositions,
including the Acquisition; 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; 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 forecast production volumes for the acquired assets,
our net debt and debt to EBITDA ratio at 2022 year-end, Whitecap's
2022 and 2023 average daily production volumes and 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 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.
Drilling Locations
This press release discloses drilling inventory in three
categories: (i) proved locations; (ii) probable locations; and
(iii) unbooked locations. Proved locations and probable locations
are derived from the reserves evaluation prepared by McDaniel &
Associates Consultants Ltd. in respect of the reserves attributed
to the Acquisition effective May 1,
2022 and account for drilling locations that have associated
proved and/or probable reserves, as applicable. The reserves
evaluation used the three consultant average price deck as at
April 1, 2022 with WTI averaging
US$80.78/bbl and AECO averaging
C$3.70/GJ (2022 – 2026). Unbooked
locations are internal estimates based on our prospective acreage
and an assumption as to the number of wells that can be drilled per
section based on industry practice and internal review. Unbooked
locations do not have attributed reserves or resources.
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Acquisition
Total
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Gross
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Net
|
Proved
Locations
|
|
|
|
|
|
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148
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130
|
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|
|
|
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Probable
Locations
|
|
|
|
|
|
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89
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83
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|
|
|
|
|
|
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Unbooked
Locations
|
|
|
|
|
|
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1,787
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1,697
|
|
|
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|
|
|
|
|
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Total
Locations
|
|
|
|
|
|
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2,024
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1,910
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Unbooked locations consist of drilling locations that have been
identified by management as an estimation of our multi-year
drilling activities based on evaluation of applicable geologic,
seismic, engineering, production and reserves information. There is
no certainty that we will drill all of these drilling locations and
if drilled there is no certainty that such locations will result in
additional oil and gas reserves, resources or production. The
drilling locations on which we drill wells will ultimately depend
upon the availability of capital, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and
other factors. While certain of the unbooked drilling locations
have been de-risked by drilling existing wells in relative close
proximity to such unbooked drilling locations, other unbooked
drilling locations are farther away from existing wells where
management has less information about the characteristics of the
reservoir and therefore there is more uncertainty whether wells
will be drilled in such locations and if drilled there is more
uncertainty that such wells will result in additional oil and gas
reserves, resources or production.
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 forecast current average daily production for the
Acquisition and for the Company for the full years 2022 and 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:
|
Acquisition
|
|
2022
|
|
2023
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Light and medium oil
(bbls/d)
|
-
|
|
78,830 –
79,970
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80,750 –
81,750
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Tight oil/condensate
(bbls/d)
|
7,100
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6,780 –
6,840
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13,800 –
14,400
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Crude oil
(bbls/d)
|
7,100
|
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85,610 –
86,810
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94,550 –
96,150
|
|
|
|
|
|
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NGLs
(bbls/d)
|
2,700
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|
12,820 –
13,120
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15,400 –
15,960
|
|
|
|
|
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Shale gas
(Mcf/d)
|
133,200
|
|
109,290 –
110,170
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195,400 –
210,440
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Conventional natural
gas (Mcf/d)
|
-
|
|
152,130 –
154,250
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|
152,900 –
160,900
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Natural gas
(Mcf/d)
|
133,200
|
|
261,420 –
264,420
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348,300 –
371,340
|
|
|
|
|
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Total
(boe/d)
|
32,000
|
|
142,000 –
144,000
|
|
168,000 –
174,000
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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 six months
ended June 30, 2022 and in the
Company's audited annual consolidated financial statements for the
year ended December 31, 2021 for
additional disclosures.
SOURCE Whitecap Resources Inc.