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
Press Release: FINANCING AGREEMENTS – 6 hours ago
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") (WCP.TO) 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.
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.
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.
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.