Here's the NR. An increase in both guidance and dividend plus a reduction in decline rates. What's not to like? GLTA

Whitecap Resources Inc. Consolidates Working Interests in Its Valhalla and Garrington Light Oil Core Areas, Announces $170Million Financing, Dividend Increase and Provides Increased 2013 Guidance
Thursday, June 27, 2013
Whitecap Resources Inc. Consolidates Working Interests in Its Valhalla and Garrington Light Oil Core Areas, Announces $170Million Financing, Dividend Increase and Provides Increased 2013 Guidance
08:01 EDT Thursday, June 27, 2013
CALGARY, ALBERTA--(Marketwired - June 27, 2013) -
NOT FOR DISSEMINATION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.
Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX:WCP) is pleased to announce that it has entered into an agreement to purchase certain strategic light oil assets located predominantly in its core Valhalla and Garrington operated areas of Alberta for total consideration of $173.6 million (the "Acquisition"). The Acquisition adds 2,900 boe/d (56 percent oil and NGLs) of high netback, low base decline production (16 percent current decline rate) in areas where Whitecap already operates 96 percent of the production.
The Acquisition will be funded through a concurrent $170 million bought deal financing (the "Financing") and Whitecap's existing credit facilities.
STRATEGIC RATIONALE
The light oil Acquisition continues to solidify and strengthen Whitecap's long-term sustainability while maintaining focus on our current core areas. The Acquisition consists of increasing our working interest in existing operated oil pools and associated infrastructure in areas where we have significant technical expertise and have provided our shareholders with a high return on investment. Whitecap will add no additional personnel with this Acquisition. In 2014, we estimate that production from the Acquisition will increase to an average of 3,200 boe/d from its current 2,900 boe/d and after planned capital expenditures on the acquired assets of $22.0 million, will generate total cash flow of $40.9 million, leaving significant accretive free cash flow of $18.9 million to Whitecap.
Valhalla
The Acquisition includes the remaining 50 percent working interest in the Valhalla Montney C waterflood that has been a key, underpinning asset for Whitecap since inception as well as various surrounding producing and undeveloped lands. Control of this asset at a 100 percent working interest will enable Whitecap to further advance and optimize the Montney C waterflood expansion where we have experienced a great deal of success as well as efficiently accelerate the implementation of waterfloods in certain surrounding oil pools.
Whitecap's recent results in Valhalla have been above expectations and include the following:
  • The last four horizontal multi-fractured wells within the Montney C waterflood have an average IP(30) of 470 boe/d which is 89 percent higher than previously forecasted.
  • Over the last 36 months we have seen new and incremental waterflood response on 11 producing wells with oil production on average increasing by 70 percent per well.
  • In the second quarter of 2013 Whitecap drilled and successfully tested a horizontal multi-fractured well that proved up an extension of the Montney C pool which will add 11.5 (net) additional locations to our current oil development inventory.
With further oil weighted drilling programs and increased waterflood response, Whitecap expects both the oil weighting and the associated cash flow netback in the area to increase over time.
Garrington
The assets being purchased in Garrington increase our working interest to 91 percent in existing wells and the offsetting undeveloped lands will add 7.7 (net) high quality Cardium drilling locations. These drilling locations are immediately offsetting our existing lands where production results have been above our type curve expectations. The majority of the acquired lands are in an area of the Cardium trend which exhibit better than average reservoir characteristics which are anticipated to generate top tier results.
In summary, the highlighted benefits of the Acquisition for Whitecap shareholders are as follows:
  • Accretive to both 2013 and 2014 cash flow, production, reserves and net asset value per fully diluted share.
  • Decreases our forecast base decline to 29 percent in 2013 and 24 percent in 2014.
  • Reduces our total payout ratio and increases our pro forma free cash flow.
  • Increases our working interest in the Valhalla Montney C waterflood to 100 percent and the working interest in the acquired Garrington production to 91 percent.
  • Increases our light oil inventory by 19.2 (net) drilling locations and along with our previous working interest brings us to an average 96 percent working interest in the key asset areas.
The Acquisition generates free cash flow and further strengthens the sustainability of our dividend-growth strategy. We estimate the Acquisition will positively impact Whitecap's 2013 and 2014 forecasts as follows:
  2013 (1) 2014
Average production (boe/d) 1,300 3,200
Cash flow ($MM) (2) (3) $16.6 $40.9
Development capital ($MM) $10.0 $22.0
Free cash flow ($MM) (3) $6.6 $18.9
 
Note: the impact on 2013 is based on a closing date of August 1, 2013 and therefore 2013 numbers do not represent full year 2013 average production, cash flow, development capital spending and free cash flow.
SUMMARY OF THE TRANSACTION
The Acquisition has the following characteristics:
Total purchase price   $173.6 million
Current production   2,900 boe/d (56% light oil and NGLs)
Proved reserves (4)   11,068 Mboe (74% light oil and NGLs)
Proved NPV10 (5)   $174.5 million
Proved plus probable reserves (4)   15,256 Mboe (73% light oil and NGLs)
Proved plus probable NPV10 (5)   $217.1 million
Proved plus probable RLI (6)   14.4 years
Operating netback (2) (3)   $35/boe
 
Acquisition metrics are as follows:
Current production $59,900/boe/d
2014 production $54,300/boe/d
2014 cash flow multiple 4.2x
Proved reserves $15.69/boe
Proved plus probable reserves $11.38/boe
Recycle ratio 3.1x
 
DIVIDEND INCREASE
Since converting to a dividend-growth strategy in January 2013 our objective has been to maximize total shareholder return through a combination of sustainable dividends and per share growth in cash flow, production and reserves. Our balanced portfolio of both profitable low decline and high growth properties allows us to pay a meaningful dividend, while continuing to grow our business on a per share basis and also maintaining low leverage with a debt to cash flow ratio of under 1.5 times. As a result of our continuing operational success in conjunction with the Acquisition and Financing we anticipate our pro forma 2014 decline to be 24 percent, production and cash flow per share growth of 7 percent and an average 2014 debt to cash flow ratio of 1.0 times. Based on our improved decline profile, per share cash flow growth and Whitecap's financial strength, our board of directors has approved a 5 percent increase to our monthly dividend to $0.0525 per share starting with our October 2013 dividend payable in November 2013.
INCREASED 2013 GUIDANCE AND PRELIMINARY 2014 GUIDANCE
The Company's increased guidance for 2013, after giving effect to the Acquisition, Financing and dividend increase is as follows:

2013 Guidance
  Whitecap
Pre-Acquisition
  Whitecap
Post-Acquisition
 
%
Increase
Average production (boe/d)   17,800 - 18,000   19,100 - 19,300   7%
  Per share (fully diluted)   124   126   2%
  % oil + NGLs   71   70   (1%)
Development capital ($MM)   $170   $180   6%
Cash flow netback ($/boe) (2) (3)   $40.00   $39.50   (1%)
Cash flow ($MM) (2) (3)   $260 - 265   $275 - 280   6%
  Per share (fully diluted)   $1.80   $1.82   1%
Net debt to cash flow   1.3x   1.3x   -
 
 

2013 Sustainability
  Whitecap
Pre-Acquisition
  Whitecap
Post-Acquisition
 
%
Increase
Cash flow ($MM) (2) (3)   $262   $277   6%
Development capital ($MM)   $170   $180   6%
Dividends ($MM)   $86   $91   5%
Free cash flow ($MM) (3)   $6   $6   -
Total payout   98%   98%   -
 
As a result of the Acquisition, Whitecap is increasing its capital program by $10 million to incorporate the additional 50 percent working interest in the 2013 Valhalla Montney Development program as well as accelerate certain components of the waterflood expansion and drill additional Cardium wells at Garrington.
The Company's preliminary guidance for 2014, after giving effect to the Acquisition, Financing and dividend increase is as follows:

2014 Estimate
  Whitecap
Pre-Acquisition
  Whitecap
Post-Acquisition
 
%
Increase
Average production (boe/d)   19,200   22,400   17%
  Per share (fully diluted)   129   135   5%
  % oil + NGLs   72%   71%   (1%)
Development capital ($MM)   $180   $202   12%
Cash flow netback ($/boe) (2) (3)   $40.00   $39.50   (1%)
Cash flow ($MM) (2) (3)   $280   $323   15%
  Per share (fully diluted)   $1.88   $1.94   3%
Net debt to cash flow   1.2x   1.0x   (17%)
 
 

2014 Sustainability
  Whitecap
Pre-Acquisition
  Whitecap
Post-Acquisition
 
%
Increase
Cash flow ($MM) (2) (3)   $280   $323   15%
Development capital ($MM)   $180   $202   12%
Dividends ($MM)   $89   $105   15%
Free cash flow ($MM) (3)   $11   $16   45%
Total payout   96%   95%   (1%)
 
The Acquisition provides Whitecap shareholders with a dividend increase of 5 percent starting in the fourth quarter of 2013, cash flow and production per share growth of 7 percent year over year in 2014, increased sustainability by reducing our total payout ratio and at the same time reducing our average 2014 debt to cash flow ratio to 1.0 times. Whitecap will continue to maintain and build on our significant free cash flow surplus of over $16 million in 2014 (after accounting for the dividend increase). We have the option to apply the surplus towards (a) continued debt reduction and increasing our financial strength (b) additional dividend increases over time or (c) increasing our cash flow and production per share growth through an increased capital program