Whitecap Resources Inc.
(WCP-T) C$10.74
Volumes Strong, CFPS Slightly Shy, 2023 Guidance Unchanged.
Event
Reports Q3 Results. Guidance Unchanged
Impact: MIXED
Q4 Production Modestly Ahead of Expectations, CFPS Shy: Production was 145.8 mBOE/d which was modestly ahead of TD’s estimate (141.9 mBOE/d) and Consensus (143.1 mBOE/d). CFPS of $0.88 was shy of TD ($0.91) and Consensus ($0.92). The lower-than-expected CF can be attributed to higher opex, which experienced upward pressure due, in part, to higher Alberta Power prices. ARO and cash SBC was also higher than we had anticipated.
Strong Montney Well Results on Recently Acquired XTO Assets: Whitecap now has 12 Montney wells from the XTO acquisition on production. Results for seven of them across two pads were provided. The first pad posted an average IP120 of 1,900 BOE/d (30% liquids) per well. The second pad posted an average IP270 of 1,660 BOE/d (29% liquids) per well.
Targeting High End of 2022 Production Guidance. 2023 Guidance Unchanged:
The company anticipates Q4 production to be 165 mBOE/d, which pegs FY-2022 volumes at 144 mBOE/d - the high end the guidance range. The 2023 capital budget is unchanged at $900-950mm and is guided to generate 170-172 mBOE/d.
Dividend Increase Likely Prior to Year-End: Whitecap reiterated its view that the first debt milestone of $1.8B should be reached by year end. This should trigger a 25-30% increase in the base dividend. The plan remains to move the dividend to $0.73/sh annually when debt hits $1.3B (approx. mid-2023).
Alberta Carbon Hub Opportunities: Whitecap was selected to pursue development of two separate carbon hubs in Alberta. This includes the Rolling Hills Hub NW of Calgary. The company will partner with AltaGas and outlined a potential in-service date in 2026. The second is the Central Alberta Hub east of Red Deer and is connected to the Alberta Carbon Trunk Line. For this project, Whitecap has partnered with Wolf Midstream and outlined a potential in-service date of 2027.
TD Investment Conclusion
Whitecap offers investors exposure to high-impact Montney/Duvernay plays, while anchoring FCF in low decline oil plays. We see significant return of capital via a 30% dividend increase before YE, a subsequent increase mid-2023, along with additional buybacks.