Whitecap Resources Inc. Announces Transition to a Sustainable Intermediate Light Oil Dividend-and-Growth Company and 2013 Guidance
CNW GroupPress Release: Whitecap Resources Inc. – 17 hours ago
Symbol Price Change
WCP.TO 8.58 -0.30
CALGARY , Nov. 20, 2012 /CNW/ - Whitecap Resources Inc. ("Whitecap", "we", "us", "our" or the "Company") (WCP.TO) is pleased to announce its plans to transition to a pre-eminent intermediate size light oil producer focused on paying sustainable dividends and delivering long term per share growth.
Since inception Whitecap has delivered 33 percent compounded annual production growth on a fully diluted per share basis. We have strategically acquired and integrated light oil assets that have predictable production profiles, shallow declines, strong netbacks, and large repeatable light oil development drilling inventories. All these factors allow us to seamlessly transition to a dividend-and-growth model that can support sustainable dividend payments to our shareholders and also provide continuing annual per share growth of 3 to 5 percent.
Our assets currently under management provide high operating netbacks and, when combined with our low corporate cost structure, generate strong cash flow netbacks which will allow us to fully fund our planned dividend payments and capital program through internally generated funds from operations. Our basic payout ratio for 2013 is expected to be 32 percent and we anticipate total capital spending and dividend payments to represent less than 95 percent of our funds from operations.
We at Whitecap believe we have the key attributes to successfully transition to a sustainable income plus dividend-and-growth model.
Sustainability Criteria Whitecap Resources Inc.
Strong Capital Efficiencies
Strong production replacement costs and recycle ratios
Light oil focused capital program driving drill bit capital efficiencies of $25,000 to $30,000 per boe/d
Oil-weighted production generates high operating netbacks of $43.00 /boe and cash flow netbacks of $39.00 /boe (2013 estimate)
71 percent oil and NGL weighting
Low Decline Rate
Base decline of 31 percent in 2013 to support dividend and reinvestment in core light oil resource areas
Base decline forecast to decrease with the change in growth profile; 27 percent in 2014 and 23 percent in 2015
Significant Drilling Inventory
Large inventory of oil-weighted, highly economic drilling locations
>850 (10+ years) low risk light oil development drilling locations
Strong Hedging Program
Strong hedging program to mitigate risks associated with fluctuation in commodity prices which in turn provides greater predictability over funds from operations and dividend payments
Currently hedged 49 percent of 2013 crude oil production, net of royalties at an average floor price of C$99.77/bbl
Currently hedged 38 percent of 2013 natural gas production, net of royalties at an average floor price of C$3.26/mcf
We anticipate hedging up to 75 percent of volumes, net of royalties using a rolling 3 year price risk management program
Clean Balance Sheet
Clean balance sheet to provide financial and operational flexibility
Expect to exit 2012 with net debt of $335 million on a $450 million credit facility
2013 estimated debt to funds from operations of 1.2x - 1.3x
Strong Management Team
A disciplined and experienced management team with a track record of sustained per share growth, operational efficiency and value creation
2013 will be a transitional year for Whitecap as we advance from a high growth energy company to a dividend-and-growth entity with focus on sustainable dividend payments while maintaining emphasis on per share growth in production, reserves and funds from operations.
For 2013, Whitecap is pleased to announce that our Board of Directors has approved a $152 million capital program and an initial monthly dividend policy of $0.05 per share commencing January 2013 with the first dividend payment in February 2013 , all of which is anticipated to be funded through funds from operations. Our dividend policy is reviewed monthly and is based on a number of factors including current and future commodity prices, foreign exchange rates, our commodity hedging program, current operations and future investment opportunities. Each dividend declaration will be confirmed by a monthly press release.
In each of our core operating areas the funds from operations we forecast for 2013 are in excess of the forecasted capital spending in these areas which enables us to not only grow production but distribute excess funds from operations to our shareholders. The 2013 capital program will focus on advancing the development of our core areas, specifically targeting the Cardium, Viking and Montney oil reservoirs, which make up 97% of our current production and opportunities. We have demonstrated a track record of success in these plays which we will continue to execute in the new model.
We plan to drill between 70 - 75 (65 - 70 net) light oil wells for the year including five (3.5 net) wells to advance the Valhalla North Montney waterflood project, 32 (31.4 net) horizontal Cardium oil wells split equally between the Garrington and greater Pembina areas of Alberta, 33 (30.1 net) horizontal Viking oil wells in the Lucky Hills area in western Saskatchewan, and two (1.8 net) oil wells in the Fosterton area of southwest Saskatchewan.
2013 summary guidance as follows:
2013 Budget 2012 Forecast % Change
Average production (boe/d) 16,800 - 17,000 14,000 21%
Per MM shares (fully diluted) 124 115 8%
% Oil + NGLs 71% 69% 2%
Exit production (boe/d) 17,000 - 17,400 16,900 - 17,100 3%
Funds from operations ($mm) 240 - 245 190 29%
Per share ($fully diluted) 1.77 - 1.80 1.56 15%
Operating netback ($/boe) 43.00 42.00 2%
Cash flow netback ($/boe) 39.00 37.50 4%
Development capital spending ($mm) 150 - 155 235 - 240 (35%)
Wells drilled (gross #) 70 - 75 105 - 110 (32%)
Net debt to funds from operations 1.2x - 1.3x 1.8x (33%)
Edmonton Par (C$/bbl) 85.00 86.35 (2%)
AECO gas price (C$/GJ) 3.30 2.31 43%
CAD/USD exchange rate 1.0 1.0 -
As with 2012, we anticipate experiencing commodity price volatility in 2013 and continue to believe that crude oil should average between $80 - $95 WTI. We also expect the differential between WTI and Edmonton Par to continue to be volatile while transportation alternatives are continually being developed either by pipeline or rail out of western Canada. Our light oil production attracts a much tighter price differential than heavy oil and we remain active on mitigating negative price differentials while optimizing our realized commodity price and cash flow netbacks.
OUTLOOK FOR THE FUTURE
Since we initially contemplated dividend payments in February 2012 we have done a significant amount of stress testing on our modeling assumptions; considering commodity prices, decline rates, capital efficiencies, and debt levels to ensure long-term sustainability. We believe that over the next three years we are capable of providing a reliable and sustainable dividend of $0.60 per share per year with the objective to increase the dividend paid over time while providing 3 - 5 percent annual per share growth.
On behalf of our Board of Directors and our entire team, I would like to thank you for your support of Whitecap to date. We also look forward to the transition to a dividend-and-growth company and reporting back to you with our progress in 2013 and beyond.