Whitecap Announces Record 2012 Third Quarter Production and Cash Flow

CALGARY, Nov. 6, 2012 /CNW/ - Whitecap Resources Inc. ("Whitecap", "we", "us", "our" or the "Company") (TSX: WCP) is pleased to announce we have filed on SEDAR our unaudited financial statements and related Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2012. Selected financial and operational information is outlined below and should be read in conjunction with Whitecap's unaudited interim financial statements and related MD&A which are available for review at www.sedar.com and on our website at www.wcap.ca.

The financial and operating results from the Compass Petroleum Ltd. ("Compass") acquisition are included from February 10, 2012 to September 30, 2012 and the financial and operating results from the Midway Energy Ltd. ("Midway") acquisition are included from April 20, 2012 to September 30, 2012 below.

FINANCIAL AND OPERATING HIGHLIGHTS

                 
    Three months ended
September 30
  Nine months ended
September 30
Financial ($000s except per share amounts)   2012   2011   2012   2011
Petroleum and natural gas sales   85,327   38,543   211,874   89,399
Funds from operations(1)   56,894   26,059   130,297   54,201
  Basic ($/share)   0.45   0.36   1.20   0.90
  Diluted ($/share)   0.44   0.35   1.18   0.88
Net income (loss)   10,678   10,063   44,892   22,284
  Basic ($/share)   0.08   0.14   0.41   0.37
  Diluted ($/share)   0.08   0.14   0.41   0.36
Development capital expenditures   74,749   44,694   178,159   85,555
Net property acquisitions   (101)   6,405   8,819   41,519
Corporate acquisitions   -   -   645,622   219,692
Bank debt and working capital(2)   366,899   137,045   366,899   137,045
Operating                
Production                
  Crude oil (bbls/d)   9,672   3,805   7,971   2,876
  NGLs (bbls/d)   1,183   355   906   253
  Natural gas (Mcf/d)   29,642   13,951   25,075   10,822
  Total (boe/d)   15,795   6,485   13,056   4,933
Average realized price                
  Crude oil ($/bbl)   83.32   89.90   84.09   92.14
  NGLs ($/bbl)   42.26   68.69   50.18   68.54
  Natural gas ($/Mcf)   2.41   3.92   2.25   4.08
  Total ($/boe)   58.72   64.60   59.23   66.38
Netback                
  Petroleum and natural gas sales   58.72   64.60   59.23   66.38
  Realized hedging gain   3.30   4.15   1.69   0.55
  Royalties   (5.80)   (7.81)   (6.72)   (8.50)
  Operating expenses   (10.84)   (11.95)   (11.41)   (11.85)
  Transportation expenses   (2.41)   (2.29)   (2.35)   (2.18)
Operating netbacks(1)   42.97   46.70   40.44   44.40
  General & administrative   (1.75)   (1.22)   (1.80)   (2.01)
  Interest & financing   (2.06)   (1.92)   (2.21)   (2.14)
Cash netbacks(1)   39.16   43.56   36.43   40.25
                 
Total wells drilled   41.0   18.0   84.0   35.0
Working interest wells   32.3   14.0   64.8   27.9
Success rate   100%   100%   100%   100%
Undeveloped land holdings (acres)                
  Gross   273,663   105,722   273,663   105,722
  Net   207,130   75,092   207,130   75,092
Weighted average shares - basic (000s)   127,094   72,167   108,334   59,921
Weighted average shares - fully diluted (000s)   129,233   74,131   110,711   61,883

Notes:

(1) Refer to Non-GAAP measures in this press release.
(2) Excludes risk management contracts.

Message to our shareholders

Whitecap is pleased to report record third quarter 2012 production and funds from operations. Our activities in the third quarter were focused primarily on efficiently executing our planned capital program on both our existing and acquired assets which we closed in the first half of 2012. We achieved our third quarter production guidance of between 15,500 to 16,000 boe/d while spending approximately $5 million less capital than anticipated, despite wet field operating conditions in July which delayed much of our program. We realized an operating netback of $42.97 per boe compared to our second quarter 2012 operating netback of $37.53 per boe, a 14% increase as we begin to achieve operating synergies from the acquired assets.

During the quarter we were 100% successful with the drilling of 41 (32.3 net) horizontal oil wells spending $74.7 million. We drilled two (1.5 net) horizontal wells at Valhalla North in the Peace River Arch area of Alberta, 12 (7.8 net) Cardium wells in greater Pembina area, seven (6.0 net) Cardium wells at Garrington on the recently acquired Midway assets, 17 (16.2 net) wells in the Lucky Hills Viking play in western Saskatchewan that were acquired in February this year and three (0.8 net) wells on our non-core assets.

The growth and capital efficiencies we have experienced from the first half acquisitions on both the Lucky Hills Viking and Garrington Cardium plays have exceeded our initial projections. We have spent less capital per well in both areas and have production rates that are better than the type curves we were anticipating. These results along with the operational performances in our other two core areas have allowed us to spend less capital, achieve our target production guidance, generate more cash flow than planned and therefore have approximately $9 million less net debt at the end of the third quarter than we were forecasting. All good!

We highlight the following accomplishments in the third quarter of 2012:

  • Grew average production 144% in the third quarter of 2012 to 15,795 boe/d (69% oil and NGLs) from 6,485 boe/d (64% oil and NGLs) in the prior year through strategic oil weighted acquisitions and organic growth on existing and acquired properties. On a fully diluted per share basis, this represents an increase of 38%.
  • Generated funds from operations of $56.9 million in the third quarter of 2012 compared to $26.1 million 2011, a 118% increase. On a fully diluted per share basis, this represents an increase of 26% despite lower average realized commodity prices.
  • Achieved an operating netback of $42.97 per boe in the third quarter of 2012 by reducing operating costs by 9% to $10.84 per boe and realizing a hedging gain of $4.8 million through our risk management program.
  • Hedged 62% of forecast production, net of royalties, for the fourth quarter of 2012 at an average floor price of $97.99/bbl for crude oil and $2.72/mcf for natural gas.
  • Invested $74.7 million in field expenditures, drilling 41 (32.3 net) wells with a 100% success rate.

Subsequent to the quarter end we continued to increase our balance sheet strength and flexibility by expanding our credit facility to $450 million and disposing of non-core assets for gross cash proceeds of $56.4 million.

Our focus remains on building a long term sustainable light oil company that can provide shareholders with superior returns on their investment. We re-emphasize our commitment to per share value growth in production, cash flow, reserves and economic returns on our capital investments. Our outlook for 2013 includes the conversion to a sustainable dividend growth strategy that we plan to discuss in more detail when we release our 2013 capital budget sometime in the next few weeks.

To our shareholders who continue to support and are interested in our Whitecap story, we thank you and look forward to providing you with value growth into 2013 and beyond.

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. 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. In particular, this press release contains forward-looking information relating to our ongoing business plan, strategy and targets, industry conditions, commodity prices, capital spending, production and cash flow, exit production rate, anticipated fourth quarter annualized debt to cash flow, drilling inventory or development and drilling plans, potential growth and our planned dividend strategy.

The forward-looking information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices, 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 and resource 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.

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.

Non-GAAP Measures

This press release contains the terms "funds from operations", "operating netbacks" and "and cash netbacks", which do not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other companies. Whitecap uses funds from operations, operating netbacks and cash netbacks to analyze financial and operating performance. Whitecap believes these benchmarks are key measures of profitability and overall sustainability for the Company. Both of these terms are commonly used in the oil and gas industry. Funds from operations, operating netbacks and cash netbacks are not intended to represent operating profits nor should they be viewed as an alternative to cash flow provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Funds from operations are calculated as cash flows from operating activities excluding transaction costs less changes in non-cash working capital. Operating netbacks are determined by deducting royalties, production expenses and transportation and selling expenses from oil and gas revenue. Cash netbacks are determined by deducting general and administrative and interest and financing expenses from the operating netback. The Company calculates funds from operations per share using the same method and shares outstanding that are used in the determination of earnings per share.

         
    Three months ended
September 30
  Nine months ended
September 30
($000s)   2012   2011   2012   2011
  Cash flow from operating activities   44,099   24,909   89,846   51,496
  Changes in non-cash working capital   12,524   1,076   36,433   1,360
  Transaction costs   147   53   3,361   1,324
  Settlement of decommissioning liabilities   124   21   657   21
  Funds from operations   56,894   26,059   130,297   54,201
                   

"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.

 

SOURCE: Whitecap Resources Inc.

For further information:

Grant Fagerheim, President and CEO
or
Thanh Kang, VP Finance and CFO

Whitecap Resources Inc.
500, 222 - 3 Avenue SW
Calgary, AB T2P 0B4

Main Phone (403) 266-0767
Fax (403) 266-6975