Whitecap announces record 2012 production and cash flow

CALGARY, March 20, 2013 /CNW/ - Whitecap Resources Inc. ("Whitecap", "we", "us", "our" or the "Company") (TSX: WCP) is pleased to announce that we have filed on SEDAR our audited financial statements and related Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2012. Selected financial and operational information is outlined below and should be read in conjunction with Whitecap's audited financial statements and related MD&A and Annual Information Form ("AIF") 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 December 31, 2012 and the financial and operating results from the Midway Energy Ltd. ("Midway") acquisition are included from April 20, 2012 to December 31, 2012 below.

FINANCIAL AND OPERATING HIGHLIGHTS      
  Three months ended
December 31
  Twelve months ended
December 31
Financial ($000s except per share amounts) 2012 2011   2012 2011
Petroleum and natural gas sales 93,896 48,033   305,770 137,432
Funds from operations(1) 63,588 32,962   193,885 87,163
  Basic ($/share) 0.50 0.46   1.71 1.38
  Diluted ($/share) 0.49 0.44   1.68 1.34
Net income (loss) 7,579 3,228   52,741 25,512
  Basic ($/share) 0.06 0.04   0.46 0.40
  Diluted ($/share) 0.06 0.04   0.45 0.39
Development capital expenditures 67,563 54,839   245,726 140,384
Net property acquisitions (4,977) (136)   3,842 41,373
Corporate acquisitions - -   645,622 219,692
Net debt outstanding(1) 343,994 158,811   343,994 158,811
             
Operating          
Production          
  Crude oil (bbls/d) 10,520 4,474   8,612 3,279
  NGLs (bbls/d) 1,274 474   998 309
  Natural gas (mcf/d) 31,341 17,150   26,650 12,417
  Total (boe/d) 17,018 7,806   14,052 5,657
Average realized price          
  Crude oil ($/bbl) 81.31 95.26   83.22 93.20
  NGLs ($/bbl) 46.01 74.49   48.76 70.84
  Natural gas ($/mcf) 3.37 3.38   2.58 3.84
  Total ($/boe) 59.97 66.89   59.46 66.55
Netback          
  Petroleum and natural gas sales 59.97 66.89   59.46 66.55
  Realized hedging gain 4.32 2.51   2.49 1.23
  Royalties (7.04) (6.85)   (6.82) (7.93)
  Operating expenses (9.95) (12.02)   (10.97) (11.91)
  Transportation expenses (2.38) (1.59)   (2.36) (1.97)
Operating netbacks(1) 44.92 48.94   41.80 45.97
  General & administrative (1.78) (1.23)   (1.80) (1.74)
  Interest & financing (2.53) (1.80)   (2.31) (2.02)
Cash netbacks(1) 40.61 45.91   37.69 42.21
           
Total wells drilled 30.0 25.0   114.0 60.0
Working interest wells 26.2 19.9   91.0 47.7
Success rate 100% 100%   100% 100%
Undeveloped land holdings (acres)          
  Gross 255,186 98,770   255,186 98,770
  Net 198,581 70,014   198,581 70,014
Weighted average shares - basic (000s) 127,303 72,175   113,102 63,009
Weighted average shares - fully diluted (000s) 129,806 74,277   115,484 65,007

Note:
(1)  Funds from operations, net debt, operating netbacks and cash netbacks do not have a standardized meaning under GAAP. Refer to non-GAAP measures in this press release.


Year in review

2012 was an exceptional year for Whitecap shareholders which culminated with the announcement of our transition to a sustainable high netback dividend-paying company in 2013. Our energies over the past year were focused on providing value added per share growth in production, reserves and cash flow; the results of which were 40 percent per share growth in production, 36 percent per share growth in reserves, and 25 percent per share growth in cash flow, all on a fully diluted basis. We generated cash flow of $194 million in 2012 which was driven by our 68 percent light oil and NGL weighting and enviable cash flow netback of $37.69 per boe.

These achievements can be directly attributed to our employees' dedication and tireless efforts to meet or exceed the operational and financial guidance provided. Their ingenuity and commitment allows us to continually increase our capital and operational efficiencies and be strong stewards of our shareholders' capital. I am happy to report our annual objectives were exceeded!

In 2012 we executed on two significant corporate acquisitions which provided us with an initial entry into the Viking light oil resource play at west central Dodsland, Saskatchewan and expanded our Cardium presence into the Garrington area of Alberta, which complements our existing east Pembina Cardium light oil resource play. The acquired assets significantly expand our development drilling inventory for future organic growth. With these acquisitions now fully integrated we have three major light oil areas that allow us to provide long term per share growth and sustainable dividend payments.

We drilled a record 114 (91.0 net) wells in 2012 with a 100 percent success rate, a significant increase from the 60 (47.7 net) wells drilled in 2011. Our drilling activity included 37 (27.1 net) horizontal Cardium oil wells in the greater Pembina area of west central Alberta, 10 (7.3 net) horizontal wells at Valhalla North in northwest Alberta, 5 (4.7 net) wells at Fosterton in southwest Saskatchewan, 4 (0.9 net) wells in our minor areas as well as 41 (35.2 net) horizontal Viking oil wells on the newly acquired west central Dodsland, Saskatchewan properties and 17 (15.8) net) horizontal Cardium oil wells on the properties acquired at Garrington, Alberta. Our $245.7 million light oil targeted development capital program provided us with production growth to exit the year at approximately 17,000 boe/d and positions each of our core areas for additional growth in the future.

In early 2012 our team made a purposeful and committed effort to advance Whitecap towards the goal of transitioning to a long term sustainable dividend-growth model. Throughout the year we executed on a number of initiatives including two corporate acquisitions, nine tuck-in property acquisitions, a $245.7 million capital budget, mitigated price volatility by implementing a three year rolling hedge program and disposed of three non-core properties, which have positioned us for a successful transition to a dividend-growth company. We have analyzed and stress tested our five year business plan assumptions to ensure that we can provide meaningful and sustainable dividends but also have the objective to increase our dividend over time. Our 2012 initiatives allowed us to announce late in the year that we were transitioning from a pure energy growth company to a dividend-growth company, with an initial monthly dividend of $0.05 per share and targeting 3 to 5 percent per share growth while maintaining a prudent level of debt. Our transition to this more sustainable model has been seamless as a result of the clear focus and exceptional performance of our employees along with the strict financial discipline of our entire team.

We highlight the following accomplishments in 2012:

  • Achieved record average production of 17,018 boe/d in the fourth quarter of 2012, an increase of 25 percent per fully diluted share compared to the fourth quarter of 2011. Average production of 14,052 boe/d for the full 2012 year represents a 40 percent increase per fully diluted share compared to 2011. We have been able to consistently deliver and remain focused on per share growth.
  • Generated record funds from operations ("FFO") of $63.6 million ($0.49 per fully diluted share) in the fourth quarter of 2012, an increase of 11 percent per fully diluted share compared to the fourth quarter of 2011. FFO for the full 2012 year was $193.9 million ($1.68 per fully diluted share), an increase of 25 percent per fully diluted share compared to 2011. Our predictable and stable light oil production base continues to generate significant FFO for efficient capital re-investment and dividend payments in 2013 and beyond.
  • Mitigated price volatility through the implementation of a rolling 3 year price risk management program.
    • Our forecasted crude oil production net of royalties is currently 68 percent hedged at an average floor price of C$97.48 per barrel for 2013, 65 percent at an average floor price of C$92.94 per barrel for 2014 and 16 percent at an average floor price of C$92.52 per barrel for 2015.
    • Our forecasted natural gas production net of royalties is currently 52 percent hedged at an average floor price of C$3.28 per mcf for 2013 and 16 percent at an average floor price of C$3.69 per mcf for 2014.
  • Realized hedging gains of $12.8 million in 2012 which resulted in a fourth quarter 2012 operating netback of $44.92 per boe and a cash netback of $40.61 per boe.
  • Invested $243.7 million in field expenditures which includes the drilling of 114 (91.0 net) wells with a 100 percent success rate. In addition, we successfully closed and integrated two significant corporate acquisitions, nine tuck-in property acquisitions and disposed of three non-core properties (one of which closing is scheduled for March 2013).
  • Increased proved plus probable reserves by 127 percent to 87.5 MMboe (69 percent oil and NGLs) and proved reserves by 138 percent to 60.9 MMboe (70 percent oil and NGLs). On a per fully diluted share basis increased proved plus probable reserves by 30 percent and proved reserves by 36 percent.
  • Achieved finding and development ("F&D") costs of $18.07 per proved plus probable boe and finding, development and acquisition ("FD&A") costs of $20.94 per proved plus probable boe, including changes in future development costs. This results in an F&D recycle ratio of 2.3x and an FD&A recycle ratio of 2.0x based on our 2012 operating netback of $41.80 per boe.
  • Maintained a strong balance sheet with annualized fourth quarter 2012 debt to cash flow of 1.4x on bank lines of $450 million. Our unutilized bank line at the end of 2012 was $106 million.
  • Increased our unbooked development well inventory to 836 locations providing us with greater than 10 years' of sustainable per share growth.

OUTLOOK

We are optimistic about the upcoming year and with our transition to a dividend-growth energy company now complete we expect to continue to provide robust financial returns for our shareholders. Our strategy remains focused on the cost effective development and optimization of our assets and realizing the highest cash flow netback on our production. We remain financially disciplined in our approach while we strive to deliver meaningful dividends and per share growth in cash flow, production and reserves for our shareholders.

We believe the current economic environment is supportive of strong crude oil prices for the foreseeable future. Light oil-weighted energy producers in western Canada will continue to benefit from higher prices; however our diligence will remain high with respect to the Canadian crude oil price differential volatility that we have experienced over the past year. The options for transporting western Canadian crude oil are in the process of being expanded through pipeline alterations and expansions as well as with the rapidly expanding use of rail for transportation to refining and export points. This ultimately will assist to reduce the frequency and intensity of the pricing differentials in western Canada, thereby allowing us a higher realized price for our crude oil on a more stable basis.

At this time, the producing energy sector in general is experiencing higher than normal levels of debt relative to the cash flow being generated and as a result many assets have been put into the market for sale in the western Canadian basin. At Whitecap we have been able to assemble an enviable suite of high quality assets without being over-levered. We will look to expand in our core areas through acquisition only if it strengthens our company and we can demonstrate increased value for our shareholders including the potential to increase our dividend over time while maintaining a prudent level of debt.

Subsequent to the year-end we announced the acquisition of Invicta Energy Corp. ("Invicta") which has lands and production immediately offsetting those of Whitecap in the Viking light oil resource play at the Lucky Hills area of west central Saskatchewan. Through the acquisition, we continue to increase our low risk, high netback light oil drilling inventory and it further strengthens the sustainability of our dividend growth strategy.

I would like to thank our valued employees for their hard work and dedication, our Board of Directors for their guidance, and our shareholders for your support of our company. We are excited about the future potential of Whitecap and look forward to reporting back to you on our progress. Thank you!

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 "net debt", "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. Net debt is calculated as bank debt plus working capital deficiency excluding risk management contracts.

  Three months ended
December 31
  Twelve months ended
December 31
($000s) 2012 2011   2012 2011
Cash flow from operating activities 83,688 27,512   173,535 79,008
Changes in non-cash working capital (21,695) 5,343   14,737 6,702
Transaction costs 1,055 61   4,416 1,386
Settlement of decommissioning liabilities 540 46   1,197 67
Funds from operations 63,588 32,962   193,885 87,163


"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


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