Whitecap Resources Inc. Announces 2013 Second Quarter Results

Aug 06, 2013, 19:00 ET from Whitecap Resources Inc.

CALGARY, Aug. 6, 2013 /CNW/ - Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to announce that we have filed on SEDAR our unaudited interim financial statements and related Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2013. 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 Invicta Energy Corp. ("Invicta") acquisition are included from April 30, 2013 to June 30, 2013 and the financial and operating results from the Eagle Lake Viking unit acquisition are included from May 22, 2013 to June 30, 2013 below. The results below do not include the working interest consolidation of Whitecap's Valhalla and Garrington properties that closed on July 31, 2013.

      Three months ended June 30   Six months ended June 30
Financial ($000s except per share amounts)     2013 2012   2013 2012
Petroleum and natural gas sales     105,320 69,565   205,560 126,547
Funds from operations(1)     65,676 40,132   129,831 73,403
  Basic ($/share)     0.47 0.34   0.96 0.74
  Diluted ($/share)     0.46 0.33   0.95 0.72
Net income (loss)     20,143 26,536   25,730 34,214
  Basic ($/share)     0.14 0.22   0.19 0.35
  Diluted ($/share)     0.14 0.22   0.19 0.34
Dividends paid or declared     21,644 -   41,155 -
  Per share     0.15 -   0.30 -
Payout ratio (%)(1)     33 -   32 -
Development capital expenditures     27,905 39,667   102,491 103,414
Property acquisitions (net)     116,585 3,087   118,723 8,920
Corporate acquisitions     66,450 523,069   66,450 645,622
Net debt outstanding(1)     357,974 347,639   357,974 347,639
Average daily production              
  Crude oil (bbls/d)     10,912 8,057   10,998 7,112
  NGLs (bbls/d)     1,500 1,073   1,410 765
  Natural gas (mcf/d)     32,983 26,573   32,059 22,766
  Total (boe/d)     17,909 13,559   17,752 11,672
Average realized price              
  Crude oil ($/bbl)     88.87 80.88   86.81 84.35
  NGLs ($/bbl)     41.13 52.07   45.94 56.36
  Natural gas ($/mcf)     3.79 2.04   3.59 2.14
  Total ($/boe)     64.42 56.31   63.98 59.38
Netback ($/boe)              
  Petroleum and natural gas sales     64.62 56.38   63.98 59.58
  Realized hedging gain (loss)     0.38 2.08   0.79 0.59
  Royalties     (8.14) (6.72)   (7.62) (7.18)
  Operating expenses     (10.07) (11.94)   (10.42) (11.80)
  Transportation expenses     (2.63) (2.27)   (2.41) (2.31)
Operating netbacks(1)     44.16 37.53   44.32 38.88
  General & administrative     (1.76) (1.89)   (1.76) (1.84)
  Interest & financing     (2.12) (2.81)   (2.16) (2.31)
Cash netbacks(1)     40.28 32.83   40.40 34.73
Share information (000's)              
Common shares outstanding, end of period     149,073 127,091   149,073 127,091
Weighted average basic shares outstanding     140,239 118,730   134,987 98,851
Weighted average diluted shares outstanding     142,162 120,915   136,972 101,210
(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.

Message to our shareholders

Whitecap is pleased to report strong second quarter operational and financial results for our second reporting period as a dividend-growth company. From an operational perspective we continue to focus on capital program execution with attention to capital efficiencies and drill to on-stream times. Despite some delays from the regular seasonal spring break-up weather we were able to achieve better than projected production volumes at 17,909 boe/d while realizing strong operating and cash netbacks of $44.16 per boe and $40.28 per boe respectively.

During the quarter we were once again 100 percent successful with our capital program drilling 12 (8.8 net) horizontal oil wells while spending approximately $3.0 million less than projected at a total cost of $27.9 million. Our drilling activity included 6 (5.1 net) Cardium oil wells at Garrington including 2 extended reach horizontal wells that have provided better than anticipated production results to date. We also drilled 1 (1.0 net) Cardium well in the greater Pembina area and 3 (1.3 net) successful Viking oil wells at Lucky Hills. Our current cost to drill and complete our Viking horizontal wells at Lucky Hills is now less than $800,000 per well. Lastly, we drilled 2 (1.4 net) wells in the Peace River Arch area of Alberta, 1 horizontal Montney well at Valhalla North and 1 Dunvegan oil well at Elmworth.

In the second quarter we continued to execute on our dividend-growth strategy with funds from operations of $65.7 million, development capital spending of $27.9 million and dividend payments of $21.6 million which results in a total payout ratio of 75 percent without the use of a dividend reinvestment plan. We anticipate our second half 2013 total payout ratio to be 86 percent. We are pleased to report that we also strengthened the long term sustainability of the dividend growth strategy by successfully closing the Invicta corporate Viking acquisition and the Eagle Lake Viking unit asset acquisition in the second quarter. Subsequent to the quarter end we were also successful in closing the working interest consolidation of our Valhalla North and Garrington oil properties on July 31, 2013. With each of these acquisitions we anticipate spending less than 60 percent of each asset's annual cash flow to grow the production 5 - 10 percent, generating significant excess free cash flow and providing our shareholders with the potential for dividend increases longer term.

We highlight the following accomplishments in the second quarter of 2013:

  • Grew average second quarter 2013 production to a record 17,909 boe/d from 13,559 boe/d in the second quarter of 2012, an increase of 32 percent. On a fully diluted per share basis, this represents an increase of 12 percent.
  • Generated funds from operations of $65.7 million ($0.46 per fully diluted share) compared to $40.1 million ($0.33 per fully diluted share) in the second quarter of 2012, an increase of 64 percent. On a fully diluted per share basis, this represents an increase of 39 percent.
  • Realized an operating netback of $44.16 per boe and a cash netback of $40.28 per boe in the second quarter of 2013. The strong cash netback is attributed to the increased realized price per boe, continued reduction in G&A per boe and field optimizations to reduce operating costs.
  • Increased our Viking oil presence by successfully closing the acquisition of Invicta for $0.2 million in cash, the issuance of 4.8 million common shares and successfully closing the acquisition of the Eagle Lake Viking unit acquisition for $110.0 million.
  • Invested $27.9 million in field expenditures, drilling 12 (8.8 net) wells with a 100 percent success rate.
  • Continued to strengthen our price risk management program and mitigate price volatility:
    • Our forecasted crude oil production net of royalties is currently 85 percent hedged at an average floor price of C$97.46 per barrel for the remainder of 2013, 74 percent at an average floor price of C$94.34 per barrel for 2014 and 15 percent at an average floor price of C$90.52 per barrel for 2015.
    • Our forecasted natural gas production net of royalties is currently 43 percent hedged at an average floor price of C$3.33 per Mcf for the remainder of 2013 and 12 percent at an average floor price of C$3.69 per Mcf for 2014.
  • Whitecap maintained monthly dividends of $0.05 per share, totaling $0.15 per share for the second quarter, and our board of directors approved a 5 percent increase to the monthly dividend to $0.0525 per share starting with our October 2013 dividend.

Subsequent to the quarter end, we successfully closed the previously announced working interest consolidation of our Valhalla and Garrington properties for $173.6 million in cash, funded partially through a bought deal financing of $170.0 million and the issuance of 17.2 million common shares. This complementary acquisition adds a significant amount of longer term, low risk, high netback upside potential in the Montney and Cardium light oil core areas that we currently operate.

Thank-you once again to our shareholders who continue to support us as we advance our disciplined approach to providing consistent long-term total shareholder returns through production and cash flow growth along with a meaningful monthly dividend.

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 focus, payout ratio, future dividends and dividend policy, industry conditions, commodity prices, capital spending, production and cash flow, risk management program, drilling inventory or development and drilling plans, potential growth, the benefits to be obtained from the Invicta,  Eagle Lake Viking unit acquisitions and our working interest consolidation of our Valhalla North and Garrington oil properties.

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 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 asset retirement settlements. 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 asset retirement obligations 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.

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

  Three months ended
June 30,
  Six months ended
June 30,
($000s) 2013    2012    2013   2012
Cash flow from operating activities 55,903   10,828   115,241   45,748
Changes in non-cash working capital 9,221   26,588   13,972   23,908
Transaction costs 322   2,650   322   3,214
Settlement of decommissioning liabilities 230   66   296   533
Funds from operations 65,676   40,132   129,831   73,403
Cash dividends declared 21,644   -   41,155   -
Payout ratio 33%   -   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.

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

"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. 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,
  December 31,
Bank debt                    369,680        310,700
Current liabilities                    92,136        104,903
Current assets                    (92,609)        (82,272)
Risk management contracts                     (11,233)        10,663
Net Debt                    357,974        343,994

"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.