Whitecap Resources Inc T.WCP

Ink Research

[retiredcf]

Morning Report: Oil patch insider bolts out of the gate in 2022 

January 5, 2022

Just so there is no doubt that insiders continue to signal opportunity in the oil patch at the stock level, we make it two days in a row in 2022 where we visit Energy sector insider buying. Today, we return to Whitecap Resources (WCP) which is becoming an INK regular during this bull run thanks to a steady stream of insider buying. Since we last featured it here on October 12th of last year, the stock has advanced 3.6%, lagging the INK Canadian Insider Index (+7.0%).

The relative weakness may help explain CEO Grant Fagerheim's eagerness to buy more shares on the first trading day of the year. The company has been busy acquiring assets in its operating areas over the past year and has been using its stock as a partial form of payment. That may help to explain some of the headwinds facing the share price from time to time. For example, on December 6th, it announced three separate transactions in Western Canada that are expected to boost production by 9,000 barrels of oil equivalent per day (about 67% liquids). The combined deal was worth $342.5 million including the issuance of about 15.2 million WCP shares with the balance in cash ($240 million). In Q3, Whitecap produced 115,935 boe/d and generated $4.27 in cash flow per share on a trailing 12-months basis according to Refinitiv. That leaves the stock trading at a price-to-cash-flow ratio of 2.0. Are there any value investors left in the house?