Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to report its operating and unaudited financial results for the three months ended March 31, 2017.
Selected financial and operating information is outlined below and should be read with Whitecap's unaudited interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A") which are available at www.sedar.com and on our website at www.wcap.ca.
Message to our shareholders
In the first quarter of 2017, Whitecap efficiently executed one of its most active capital programs to date drilling 92 (81.2 net) wells with a 100 percent success rate. Development capital spending of $124.1 million was 17% below our budget of $145 - $150 million. We realized exceptional capital efficiencies and production additions which were partially offset by unseasonably warm weather in February and lack of service sector availability which delayed the completion of 11 wells. These drilled but uncompleted wells are now scheduled to be on production by the end of Q2/17. Despite the delays, we were able to achieve record production of 55,886 boe/d (82% oil and NGLs) which was at the high end of our 55,000 – 56,000 boe/d guidance.
Record production volumes and improving commodity prices resulted in funds flow of $124.2 million in Q1/17 compared to $67.7 million in Q1/16, an increase of 84%. Funds flow per share also increased by 50% from $0.22 per share for the comparable period to $0.33 per share in Q1/17.
Whitecap continues to maintain a strong balance sheet with unutilized credit capacity of $452 million and a net debt to funds flow ratio of 1.7 times at the end of the quarter. On strip pricing, we anticipate achieving a net debt to funds flow ratio of under 1.5 times in Q2/17 and anticipate that our total payout ratio in 2017 will be approximately 75% after capital spending and dividend payments. In addition, we were able to diversify our capital structure through the issuance of $200 million senior secured notes which have an annual coupon rate of 3.46% and mature on January 5, 2022.
We continued to build off our strong Q4/16 drilling program in southwest Saskatchewan drilling an additional 12 (7.9 net) horizontal oil wells in Q1/17 including 7 (4.2 net) Atlas wells, 3 (2.7 net) Upper Shaunavon wells, 1 (0.5 net) Roseray well and 1 (0.5 net) Success well.
The Atlas capital program continued to deliver strong results with average IP(60) rates of 138 boe/d which was 70% above our budget type curve. Drill, complete and equip and tie-in costs averaged $0.96 million per well and were 18% below budget. Since closing the southwest Saskatchewan asset acquisition in June 2016, we have increased production from 11,400 boe/d to current production in excess of 14,000 boe/d by spending only $28.2 million of development capital. Operating costs per boe have decreased from $16.71/boe on acquisition to approximately $14.75/boe in Q1/17.
In the Upper Shaunavon, two wells are on production and trending within our budget type curve and one additional well will be completed and on production in Q2/17. Initial results from the Roseray and Success are positive but will need additional drilling results to support any changes to our current expectations.
In addition to completing the 1 (1.0 net) Upper Shaunavon well from our Q1/17 program, we plan on drilling another 21 (10.8 net) wells in southwest Saskatchewan for the remainder of the year as well as potentially increasing the program to leverage the better than anticipated results we have had to date.
West Central Saskatchewan
We had an active capital program in west central Saskatchewan with 3 rigs drilling a total 52 (48.3 net) Viking horizontal oil wells in Q1/17. This included 35 (34.0 net) extended reach horizontal ("ERH") wells and 1 (1.0 net) ERH water injection well in Kerrobert. Well productivity and costs for our Q1/17 program were as expected.
Timing delays due to unseasonably warm weather in February and limited fracture stimulation service availability in the Kindersley area resulted in 9 wells that were drilled but not completed in Q1/17. In addition to completing these 9 wells drilled in Q1/17, we plan on drilling 53 (48.3 net) wells over the remainder of the year. We will also continue to move forward on our waterflood expansion/optimization plans by converting 17 vertical wells and 8 horizontal wells to injection across our Viking fairway.
West Central Alberta
In West Pembina, during the quarter we were active drilling 14 (12.2 net) Cardium horizontals wells of which 4 (3.8 net) were ERH wells. Results were predictable and in-line with our current type curve for both production and capital costs. In addition, we re-initiated a suspended waterflood offsetting the actively waterflooded units by converting an existing horizontal producer to an injector. We plan on drilling an additional 8 (7.0 net) Cardium horizontal oil wells in West Pembina which will focus on redevelopment of one of our legacy waterflood units.
In Ferrier, we focused on redeveloping this light oil waterflood asset by drilling 4 (4.0 net) Cardium horizontal wells. The initial production rates and development capital expenditures were in line with expectation and set the stage for continued optimization and re-development of this proven legacy waterflood asset.
In the Elnora Nisku light oil pool, we drilled 2 (2.0 net) horizontal development wells and 1 (1.0 net) vertical extension well in Q1/17. The vertical extension well encountered approximately 24 meters of net pay that significantly extended the pool boundaries and potentially increased the pool size by 15-20%. Production results from existing and new wells in combination with our reservoir simulation model has indicated that a more conservative withdrawal rate of the reserves in combination with optimized injection patterns will lead to increased recoveries and value. As a result, we have curtailed the pool production rates by approximately 20%.
We anticipate additional injection and maintenance capital to optimize the pool to remain low at approximately $3 - $6 million per year moving forward.
Deep Basin Alberta
At Wapiti, we drilled 3 (3.0 net) Cardium horizontal oil wells as a continuation of our Q4/16 program for a total of 6 (6.0 net) wells to date. As part of this 6 well program we focused on redesigning and optimizing our well placement and stimulation which has resulted in average IP(30) rates of 370 barrels of oil per day, 49% higher than our type curve expectations. These results will have significant implications for the development of the remaining 101 (41.6 net) locations of which 78% are un-booked locations. We plan to drill an additional 3 (3.0 net) Cardium horizontal wells at Wapiti over the balance of the year.
At the end of the quarter, we successfully drilled 1 (0.5 net) and completed 2 (1.0 net) two-mile horizontal Dunvegan wells in Karr. Initial production rates on these two-mile wells are encouraging with average IP(30) rates of 450 barrels of oil per day. Break-up conditions have limited our ability to perform a full evaluation of the Karr horizontal wells as these wells are producing at approximately 50% of anticipated full capability. We also participated in 1 (0.5 net) non-operated Dunvegan horizontal well in Q1/17 which will be completed in Q2/17. We plan to drill an additional 5 (4.4 net) Dunvegan horizontal oil wells in the Deep Basin in 2017.
Boundary Lake British Columbia
In Boundary Lake, we drilled 2 (1.8 net) Triassic horizontal oil wells as a continuation of our successful Q4/16 program for a total of 6 (5.6 net) wells. The 5 (4.5 net) horizontal wells in this program had an average IP(60) rate of 228 boe/d, a 33% increase compared to the Q1/16 program average IP(60) rate of 171 boe/d. In addition to drilling 4 (3.7 net) horizontal wells over the balance of the year, we have also allocated $5 million of our 2017 capital towards waterflood optimization and expansion to further increase reserve recovery which will result in further mitigating production declines at Boundary Lake.
We are excited with the results from our Q1/17 capital program, and post break-up, will move quickly to complete the wells that were deferred into Q2/17. We currently have one rig operating in West Pembina and will continue to do so through break-up. Post break-up we intend to have two drilling rigs operational in west central Saskatchewan and as we enter Q3/17 to add an additional 3-4 drilling rigs to complete our capital program in southwest Saskatchewan, the Deep Basin and Boundary Lake.
We anticipate Q2/17 production volumes to be 57,000 – 59,000 boe/d and with the exceptional Q1 results, we remain on track to meet our full year guidance of 57,000 boe/d on $300 million of development capital.
Crude oil prices continue to be volatile heading into the OPEC meeting on May 25, 2017 as the market balances the potential for continued production cuts among OPEC and non-OPEC members with concerns over growing U.S. production output. Our business remains solid despite the volatility and we believe, at times, our prevailing share price does not reflect the underlying value of our assets. As such, Whitecap intends to make an application to implement a normal course issuer bid ("NCIB") through the facilities of the Toronto Stock Exchange and alternate Canadian trading platforms, pursuant to which Whitecap would have an option to repurchase its common shares for cancellation. The NCIB is another tool available to management to increase long-term total shareholder returns. Our first priority is to ensure our net debt to funds flow ratio is under 1.5 times and believe that we are well positioned to further allocate our free funds flow to both enhancing our per share metrics and increasing our dividend as we move through 2017 and into 2018.
SOURCE: Whitecap Resources Inc.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.