CALGARY, June 20, 2012 /CNW/ - Whitecap Resources Inc. ("Whitecap",
"we", "us", "our" or the "Company") (TSX: WCP) is pleased to provide an
operations update along with a revised outlook for 2012 based on a
reduced capital program for the balance of the year. It is Whitecap's
plan to remain conservative in its spending in the near term until a
more stable commodity price environment is experienced.
With the integration of both Compass Petroleum Ltd. ("Compass") and
Midway Energy Ltd. ("Midway") now complete, we continue to focus on
operational and capital efficiencies in our portfolio of high netback
oil assets. We are pleased to report that our drilling and completion
results to date have met or exceeded our type curve expectations in all
of our operated areas and our capital investments are providing sound
economic returns. Our extensive drilling inventory in our light oil
resource plays is validated and allows us flexibility to accelerate our
drilling program with a more stable oil price outlook.
West Central Alberta - Garrington (Cardium Light Oil)
Whitecap closed the acquisition of Midway on April 20, 2012, and since
then has drilled 5 wells. We have fracture stimulated 6 wells utilizing
the foamed water frac system compared to the hydrocarbon system which
was used previously. The foamed water frac system has allowed us to
reduce completion costs by 36% from $1.1 million to $0.7 million
bringing our total drilling and completion ("D&C") costs to $2.25
million from $2.7 million. Production results continue to meet or
exceed our type curve and we have not seen a difference in productivity
between the two completion methods. In addition to increased capital
efficiencies we have reduced our average spud to on production time by
42% from 55 days to 32 days.
The integration of Midway's Cardium assets has been seamless as they are
very similar technically and operationally to our existing Pembina
Cardium assets. Moving forward we anticipate having one drilling rig
working continuously on our Garrington assets for the balance of the
year drilling 21 (17.9 net) wells in 2012.
West Central Saskatchewan (Viking Light Oil)
Since the closing of the Compass acquisition on February 10, 2012 we
have operated the drilling of eight wells (only two wells post break-up
due to wet conditions). In this short time frame we have implemented
several operational and technical optimizations which have resulted in
improvements to project economics. We have reduced our average D&C
costs by 11% to $1.0 million from $1.12 million and at the same time
increased average well productivity IP(30) by 55% to 59 boe/d from 38
boe/d. The increase in productivity can be partly attributed to our
completion efficiency whereby we are now placing 98% of our fracs
compared to 90% previously.
The Compass assets are now fully integrated into our existing operations
and have performed at or above our average type curves. We anticipate
having one drilling rig working continuously in west central
Saskatchewan for the balance of the year and drilling 41 (34.8 net)
wells in 2012.
West Central Alberta - Greater Pembina (Cardium Light Oil)
We are seeing continued success in our Pembina Cardium drilling program
from both productivity and cost perspectives. Our average well
productivity IP(30) rates for our 2012 wells to date is 237 boe/d (90%
oil and NGLs) which is 7% above our average type curve expectation of
222 boe/d. D&C costs continue to improve with average drilling costs of
$1.3 million and completion costs of $0.8 million using our foam water
frac system, approximately $100,000/well lower than in 2011.
We anticipate have one drilling rig working continuously on our Pembina
assets for the balance of the year and drilling 29 (21.8 net) wells in
Peace River Arch (Valhalla)
We have now completed the first phase of the Valhalla waterflood
expansion. Daily water injection has increased from 1,600 to 7,000 bbls
of water per day and we have seen excellent waterflood response in this
pool to date which will be further enhanced with injection into new
areas of the Montney pool. We have commenced drilling the first of two
horizontal wells in this area and the application for phase two of the
waterflood will be submitted shortly.
After significant delays due to pipeline approvals and wet weather in
the quarter, our two horizontal wells that were drilled in the first
quarter, including our first middle Montney horizontal well, have been
brought on production in Valhalla this week.
We anticipate drilling a total of 9 (6.3 net) wells in 2012.
2012 CAPITAL SPENDING UPDATE
We have experienced a dramatic drop in realized oil prices as a result
of a 24% drop in WTI prices from March at US$106/bbl to the 2012
forward strip pricing at this time in the US$85/bbl range. In addition
we have also experienced a widening of the Edmonton Par differential to
WTI with a high of US$19.85/bbl in March and currently trading in the
US$10/bbl to US$14/bbl range. The Edmonton Par price averaged C$95/bbl
in the second half of 2011 compared to our current internal forecast of
C$75/bbl, a 20% decrease.
In light of the significant decrease in our realized oil price and
continuing volatility in the crude oil markets, we are proactively
reducing our development capital program by $40 - $45 million, a 17%
reduction. This reduces our full year 2012 development capital program
to $220 - $225 million from $265 million. Our second quarter
development capital spending will be reduced by approximately $10
million, primarily due to wet weather with the remaining $30 - $35
million being reduced in the second half of 2012. We have revised our
2012 average production guidance down by 5% to 14,200 boe/d from our
previous guidance of 15,000 boe/d and anticipate exiting the year in
excess of 17,000 boe/d (> 70% oil and NGLs) from our previous guidance
of 18,000 to 19,000 boe/d. Even with the reduction in our production
estimates for 2012, our production growth per fully diluted share over
2011 is 37%.
The changes to our capital program consist mainly of the following:
deferral of eight Cardium wells by now utilizing only two rigs
continuously for the balance of the year in Garrington and Pembina,
rather than four rigs previously contemplated;
deferral of two Montney horizontal wells in Valhalla which will allow
for additional time to evaluate the waterflood performance post
expansion and to incorporate new data to optimize future expansions;
deferral of three wells in southwest Saskatchewan to allow for an
extensive analysis of the battery expansion performance (July 2012
installation) and the associated existing well optimizations.
The revised development capital spending for 2012 will enable us to
effectively apply operational and reservoir findings and efficiencies
to future programs in addition to allowing Whitecap to maintain a
strong balance sheet with a fourth quarter annualized debt to cash flow
ratio of less than 1.7 times, in the lower commodity price environment.
We have the flexibility to accelerate our capital spending at any time
as all of the necessary regulatory approvals are in place.
Whitecap maintains an ongoing risk management program to reduce the
volatility of revenues in order to fund capital expenditures and
protect project economics as necessary. Our hedging policy allows us to
hedge up to 65% of our average daily production in the preceding
quarter, net of royalties. In the second half of 2012 we have hedged
approximately 50% of our forecasted oil and NGL production, net of
royalties, at an average WTI floor price of C$99.06/bbl and
approximately 32% of our forecasted natural gas production, net of
royalties, at an average AECO fixed price of $2.63/GJ. In 2013 we have
hedged 1,745 bbls/d at an average WTI price of C$103.56/bbl and 7,500
GJ/d at an average AECO price of $2.98/GJ. We will continue to monitor
the commodity price environment to layer on incremental risk management
contracts over time.
Our business plan is to continue to build a high quality light oil asset
base while retaining a responsible level of debt and focusing on per
share growth in production, reserves, cash flow and net asset value. We
continue to analyze the potential of advancing to a sustainable
dividend-growth strategy at the appropriate time and will report back
as to our progress at a later date.
As our industry is experiencing extreme commodity price volatility at
this time, we will continue to be disciplined with our capital
allocation by investing in our high netback oil assets at a more
measured pace and will retain the flexibility to increase our capital
spending profile when the economic environment improves.
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 (including the review
of a dividend policy), strategy and targets, industry conditions,
commodity prices, capital spending, waterflood plans, production and
cash flow, hedging strategies, drilling inventory or development and
drilling plans and potential growth.
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.
"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
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