CALGARY, ALBERTA--(Marketwired - Feb. 23, 2016) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX VENTURE:WCP) is pleased to announce that as a result of the encouraging results obtained from the consolidation of its working interest at Boundary Lake in northeast British Columbia it has increased its 2016 production guidance and has entered into a $95 million bought deal equity financing (the "Financing").
Whitecap's Boundary Lake asset which is currently under waterflood was originally acquired in May 2014 and was producing 1,150 boe/d at that time. The property is a conventional waterflood asset which requires lower capital cost open-hole completions resulting in excellent capital efficiencies. The waterflood has been maintained since 1965 resulting in a very low and predictable annual decline rate of less than 5%.
In late December of 2015, Whitecap consolidated its interest at Boundary Lake for total consideration of approximately $93.4 million, which increased our average working interest to 90% and added 1,700 boe/d of low decline, high netback production, 8.6 MMboe of total proved reserves and 11.5 MMboe of total proved plus probable reserves which are included in Whitecaps independent year end reserves report as at December 31, 2015 and 29 net locations, increasing our drilling inventory at Boundary Lake to 100.3 net locations.
Since Whitecap completed the Boundary Lake acquisition, its drilling program results have exceeded expectations. Whitecap drilled three wells in the area, with an average IP(30) rate of 190 bopd, significantly higher than our initial forecast, resulting in total current production of 4,600 boe/d at Boundary Lake which includes production from the three wells. Whitecap has also drilled two additional wells in Q1/2016 at Boundary Lake which are still under completion. Average drill, complete and equip and tie-in cost per horizontal well is estimated at $2.2 million. The results from the initial five well drilling program are very encouraging and underpin the quality of our inventory in this area.
Financing
Whitecap has entered into a bought deal financing agreement with a syndicate of underwriters led by National Bank Financial Inc. and including TD Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., GMP Securities L.P., RBC Capital Markets, FirstEnergy Capital Corp., Peters & Co. Limited, BMO Capital Markets, and Cormark Securities Inc. (collectively, the "Underwriters"). Pursuant to the Financing, Whitecap will issue 13,770,000 common shares ("Common Shares") at a price of $6.90 per Common Share for gross proceeds of $95.0 million. Members of the Whitecap Board of Directors, management team and employees are expected to participate in the Financing.
The net proceeds from the Financing will be used to initially reduce indebtedness, which was partially incurred to fund the Boundary Lake acquisition. The Financing will be completed by way of short form prospectus in certain provinces of Canada (excluding Quebec), and on a private placement basis in the United States pursuant to exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended. Completion of the Financing is subject to normal regulatory approvals, including the approval of the Toronto Stock Exchange, and is expected to close on or about March 15, 2016.
Increased 2016 Guidance
Whitecap remains extremely disciplined in its approach to acquisitions as reflected in the results at Boundary Lake with a focus on consolidating assets within our core areas which meet our strict criteria towards long term shareholder value creation within the current commodity price environment.
As a result of the recent results at Boundary Lake, Whitecap has increased its production guidance for 2016, by 5% to 38,800 boe/d from the previous 37,000 boe/d. Based on WTI US$37.65, CAD/USD 0.72, and AECO C$2.00/GJ we anticipate generating $253 million of funds flow on an unchanged aggregate capital program of $70 million. Pro-forma the acquisition and Financing our total payout ratio is 86% and free funds flow after capital spending and dividend payments is $34 million. We anticipate having $455 million of unutilized credit capacity on our current bank lines of $1.2 billion.
Whitecap remains well positioned to not only weather the current low commodity price environment with our strong balance sheet and high quality suite of lower decline high netback production and inventory but to also provide our shareholders with significant upside when commodity prices improve.
Note Regarding Forward-Looking Statements and Other Advisories
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. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding decline rates, anticipated netbacks, drilling inventory, estimated average drill, complete and equip and tie-in costs, anticipated potential of the Boundary Lake assets, expected insider and employee participation in the Financing, the closing and timing of closing of the Financing, 2016 production guidance, total payout ratio, free funds flow, anticipated dividend payments, capital spending and unutilized credit capacity. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. Statements relating to reserves are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described exist in the quantities predicted or estimated and can profitably be produced in the future. Estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.
The forward-looking information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices and differentials, exchange rates, interest rates, applicable royalty rates and tax laws, future production rates and estimates of operating costs, performance of existing and future wells, reserve volumes, anticipated timing and results of capital expenditures, 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, the impact of increasing competition, ability to efficiently integrate assets and employees acquired through acquisitions, ability to market oil and natural gas successfully and our ability to access capital and our ability to complete the Financing on the terms and timing contemplated.
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. 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 securityholders 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 prospective results of operations, funds flow, debt, total payout ratio, free funds flow, unutilized credit capacity and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. 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. Whitecap disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. 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.
Drilling Locations
This press release discloses drilling inventory in three categories: (i) proved locations; and (iii) unbooked locations. Proved locations are derived from McDaniel's reserves evaluation effective December 31, 2015 and account for drilling locations that have associated proved reserves. 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. Of the 100.3 net total drilling locations identified at Boundary Lake, 35.3 net are proved locations and 65.0 net are unbooked locations. Unbooked locations 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 unbooked 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 actually 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 Rates
Any references in this news release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Whitecap.
Non-GAAP Measures
This press release includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or, alternatively, "GAAP") and therefore may not be comparable with the calculation of similar measures by other companies.
"Cash netbacks" are determined by deducting cash general and administrative and interest expense from operating netbacks.
"Free funds flow" is determined by deducting development capital and dividend payments from funds from operations.
"Funds flow" represents funds flow from operating activities adjusted for changes in non-cash working capital, transaction costs, settlement of decommissioning liabilities and termination fees received. Management considers funds flow and funds flow per share to be key measures as they demonstrate Whitecap's ability to generate the cash necessary to pay dividends, repay debt, fund settlement of decommissioning liabilities and make capital investments. Management believes that by excluding the temporary impact of changes in non-cash operating working capital, funds flow provides a useful measure of Whitecap's ability to generate cash that is not subject to short-term movements in non-cash operating working capital.
"Net debt to funds flow" is calculated as net debt divided by funds flow.
"Operating netbacks" are determined by deducting royalties, production expenses and transportation and selling expenses from oil and gas revenue. Operating netbacks are per boe measures used in operational and capital allocation decisions.
"Total payout ratio" is calculated as development capital plus cash dividends declared divided by funds flow.
"Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6: 1, utilizing a conversion on a 6: 1 basis may be misleading as an indication of value.
