Whitecap Resources Inc. announces 2014 second quarter results

CALGARY, Aug. 7, 2014 /CNW/ - Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to announce that we have filed on SEDAR our unaudited interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2014. Selected financial and operational information is outlined below and should be read in conjunction with Whitecap's unaudited interim consolidated 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 acquisition of certain strategic light oil assets focused primarily in Whitecap's Pembina Cardium / West Central core area, as well as at Boundary Lake in northeast B.C and the concurrent disposition of certain Nisku natural gas production and related facilities located in the Pembina area ("Acquisition") are included from May 1, 2014 to June 30, 2014.

FINANCIAL AND OPERATING HIGHLIGHTS

  Three months ended June 30       Six months ended June 30
Financial ($000s except per share amounts) 2014 2013 2014 2013
Petroleum and natural gas sales 219,560 105,320 400,585 205,560
Funds from operations(1) 117,429 65,676 218,336 129,831
  Basic ($/share) 0.51 0.47 1.02 0.96
  Diluted ($/share) 0.51 0.46 1.01 0.95
Net income (loss) 195,045 20,143 199,585 25,730
  Basic ($/share) 0.85 0.14 0.93 0.19
  Diluted ($/share) 0.84 0.14 0.92 0.19
Dividends paid or declared 41,993 21,644 76,003 41,155
       Per share 0.18 0.15 0.35 0.30
Basic payout ratio (%)(1) 36 33 35 32
Development capital expenditures 51,764 27,905 182,345 102,491
Property acquisitions (net) 678,056 116,585 682,164 118,723
Corporate acquisitions - 66,450 397,482 66,450
Net debt outstanding(1) 752,882 357,974 752,882 357,974
Operating        
Average daily production        
  Crude oil (bbls/d) 19,516 10,912 18,092 10,998
  NGLs (bbls/d) 2,328 1,500 2,266 1,410
  Natural gas (Mcf/d) 52,384 32,983 49,166 32,059
  Total (boe/d) 30,574 17,909 28,552 17,752
Average realized price(2)        
  Crude oil ($/bbl) 104.02 88.87 100.71 86.81
  NGLs ($/bbl) 47.80 41.13 54.23 45.94
  Natural gas ($/Mcf) 5.14 3.79 5.43 3.59
  Total ($/boe) 78.91 64.42 77.51 63.98
Netback ($/boe)        
       Petroleum and natural gas sales 78.91 64.62 77.51 63.98
       Realized hedging gain (loss) (8.34) 0.38 (8.26) 0.79
       Royalties (10.18) (8.14) (10.01) (7.62)
       Operating expenses (11.35) (10.07) (10.54) (10.42)
       Transportation expenses (2.95) (2.63) (2.74) (2.41)
Operating netbacks(1) 46.09 44.16 45.96 44.32
       General & administrative (1.50) (1.76) (1.50) (1.76)
       Interest & financing (2.39) (2.12) (2.21) (2.16)
Cash netbacks(1) 42.20 40.28 42.25 40.40
         
Share information (000s)        
Common shares outstanding, end of period 245,316 149,073 245,316 149,073
Weighted average basic shares outstanding 229,680 140,239 213,964 134,987
Weighted average diluted shares outstanding 232,180 142,162 216,211 136,972

Note:  
(1)  Funds from operations, payout ratio, net debt, operating netbacks and cash netbacks do not have a
standardized meaning under GAAP. Refer to non-GAAP measures in this press release.
(2)  Prior to the impact of hedging activities.
   

MESSAGE TO OUR SHAREHOLDERS

Whitecap is pleased to report its operational and financial results for the second quarter of 2014. We have successfully closed and integrated the previously announced acquisition of properties focused primarily in Whitecap's Pembina Cardium / West Central core area, as well as at Boundary Lake. Production from all regions is meeting or exceeding budget expectations. With the assets now integrated, we continue to focus on capital efficiencies, drill to on-stream times, and production optimization in each of our core areas. We were able to slightly exceed the high end of our quarterly production guidance of 30,574 boe/d (71% oil and NGLs) despite the third party facility turnarounds taking more time to complete than originally forecast which, if they had occurred as scheduled, would have resulted in our production being approximately 580 boe/d higher for the quarter.  Our current corporate production rate is approximately 34,800 boe/d (73% oil and NGLs).

During the quarter we spent $51.8 million, which is $3.7 million less than anticipated, drilling and completing 8 (6.9 net) horizontal oil wells and on facility and tie-in capital. Our drilling activity included 1 (1.0 net) Cardium oil well at Ferrier and 4 (4.0 net) Cardium oil wells at Garrington where we continue to improve our capital efficiencies by drilling monobore horizontal wells which have resulted in a 7% reduction in drilling and completion costs per well. On the recently acquired West Pembina lands we drilled our first horizontal well with initial results demonstrating better production volumes than anticipated. We also drilled 2 (0.9 net) successful Viking horizontal oil wells at Lucky Hills. To date in 2014 at Lucky Hills and Whiteside we have experienced improved drilling and completion efficiencies increasing the frac stages in our wells from 14 to 20 while maintaining capital at $0.75 million per well. The higher density fracs are resulting in approximately a 9% increase in production recoveries over the first 90 days of production.

In the second quarter we continued to execute on our business plan of providing our shareholders with a sustainable platform of per share growth and dividend income with record funds from operations of $117.4 million, development capital spending of $51.8 million and dividend payments of $42 million which resulted in a total payout ratio of 80%.

We highlight the following accomplishments in the second quarter of 2014:

  • Production increased to 30,574 boe/d (71% oil and NGLs) compared to 17,909 boe/d (69% oil and NGLs) in the second quarter of 2013, an increase of 71% on an absolute basis and 5% on a fully diluted share basis.
  • Generated funds from operations of $117.4 million ($0.51 per fully diluted share) compared to $65.7 million ($0.46 per fully diluted share) in the second quarter of 2013, an increase of 79% on an absolute basis and 11% on a fully diluted share basis.
  • Realized a cash netback of $42.20/boe in the second quarter of 2014 compared to $40.28/boe in the second quarter of 2013, a 5% increase.
  • Invested $51.8 million in capital expenditures in the second quarter of 2014 which includes the drilling of 8 (6.9 net) wells with a 100% success rate.
  • Closed and successfully integrated the acquisition of 6,500 boe/d of low decline, high netback light oil assets focused primarily in Whitecap's Pembina Cardium / West Central core area, as well as at Boundary Lake in northeast B.C., which is located just northwest of our core Valhalla area.  Total net purchase price of those assets was approximately $678 million.
  • Increased our bank line to $1 billion which includes an additional $200 million of 5 year term debt financing at an effective interest rate of 4.7%.
  • Increased our monthly dividend by 10% to $0.0625 per share from $0.0567 per share starting with our May dividend paid on June 15, 2014.

OUTLOOK

Subsequent to the quarter end, we successfully disposed of approximately 475 boe/d (88% natural gas) of non-core production from our recent acquisition for proceeds of $44 million. We are pleased to advise that despite selling the production effective July 1 we are maintaining our second half production forecast of 34,000 - 35,000 boe/d (74% oil and NGLs) and full year forecast of 31,600 boe/d. Our strong capital efficiencies in all of our core areas have allowed us to offset the disposed production without increasing our full year capital budget of $307 million. At the same time we are able to reduce our year end net debt to an anticipated $650 million on our $1 billion credit facility which further increases our financial strength and flexibility.

For the balance of 2014, we anticipate spending approximately $125 million drilling an additional 78 gross horizontal wells including 6 extended reach horizontal wells which will bring total wells drilled in 2014 to 163 gross wells. Of the 78 remaining wells 14 are anticipated to be Cardium, of which 7 are on the newly acquired West Pembina lands, 60 on the Viking oil play in western Saskatchewan, and 4 in the Dunvegan Deep Basin oil play.

We continue to take a disciplined approach to our dividend policy with the objective of providing shareholders with meaningful and consistent long-term dividends with the continued opportunity for potential increases in the future. Whitecap has determined that outside of material events, the company will review its dividend on a quarterly basis with the objective of maintaining our conservative approach and ensuring appropriate allocation of free cash flow.

Thank you once again to our shareholders who continue to support us and we look forward to keeping you informed on our progress.

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, objectives, 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 addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding our second half production forecast, full year 2014 production forecast, full year 2014 capital program, anticipated year end net debt, wells anticipated to be drilled in 2014, our approach to our dividend policy and the opportunity for potential dividend increases in the future.

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, and our ability to market oil and natural gas successfully.

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. 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 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.

"Funds from operations" represents cash flow from operating activities adjusted for changes in non-cash working capital, transaction costs and settlement of decommissioning liabilities. Management considers funds from operations and funds from operations 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 from operations 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. Refer to the "Funds from Operations, Basic payout ratio and Dividends" section of this report for the reconciliation of cash flow from operating activities to funds from operations.

The following table reconciles cash flow from operating activities (a GAAP measure) to funds from operations (a non-GAAP measure):

     
  Three months ended Six months ended
  June 30 June 30
($000s) 2014 2013 2014 2013
Cash flow from operating activities 143,682 55,903 229,472 115,241
Changes in non-cash working capital (27,595) 9,221 (12,826) 13,972
Settlement of decommissioning liabilities 273 230 426 296
Transaction costs 1,069 322 1,264 322
Funds from operations 117,429 65,676 218,336 129,831
Cash dividends declared 41,993 21,644 76,003 41,155
Basic payout ratio 36% 33% 35% 32%
           

"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.

"Cash netbacks" are determined by deducting cash general and administrative and interest expense from Operating netbacks.

"Free cash flow" is calculated as funds from operations minus development capital and cash dividends declared.

"Cash dividends per share" represents cash dividends declared per share by Whitecap.

"Basic payout ratio" is calculated as cash dividends declared divided by funds from operations.

"Total payout ratio" is calculated as development capital plus cash dividends declared divided by funds from operations.

"Net debt" is calculated as bank debt plus working capital deficiency adjusted for risk management contracts and the flow-through share liability. Net debt is used by management to analyze the financial position and leverage of Whitecap.

The following table reconciles bank debt (a GAAP measure) to net debt (a non-GAAP measure):

     
($000s) June 30
2014
December 31
2013
Bank debt 723,458       382,899
Current liabilities 200,702       113,773
Current assets  (112,523)       (66,795)
Risk management contracts (58,755)       (28,700)
Net Debt 752,882       401,177
     

"Boe" means barrel of oil equivalent on the basis of 6 Mcf of natural gas to 1 bbl of oil. Boes 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