I honestly think Whitecap is misunderstood. Its current form, and where it’s going don’t exactly reconcile at first glance, and thus it gets placed in a bucket with other mostly oil-weighted producers, and middle of the road dividend payors. But it’s more than a 5% yield and 64% liquids, it’s a bet on Grant, and the team, to deliver something great inside the next decade, and shareholders looking to the short term flags like slight type-curve beats, or small dividend increases, end up missing the forest for the trees. It’s not a dividend name, and it’s not a single well bet, more abstractly — it’s one of, if not the only Canadian SMID on the market that has a real chance at crossing solidly into that ‘large cap’ territory, and competing with Tourmaline.
The fact is, Whitecap is one of the longest duration liquids-weighted conventional names in Canada and their recent acquisitions (think back to NAL, Torc, and more recently XTO Canada) have have given them the runway and cushioning to comfortably grow organically, while waiting for opportunities in the A&D market. Unlike other PDP weighted names like Journey, and Surge which are (for the most part) operating, and incrementally improving legacy assets (less capital intensive both on a remaining cycle/life, and acquisition basis), Whitecap has a vast land base they will continue to exploit. Post-XTO, their RLI is one of the best among peers, as shown below. They have built themselves a very good jumping-off platform.
Whitecap also doesn’t get enough credit for their acquisition history (at least by retail). They have deployed approximately $3b counter-cyclically (where the commodity price is below $60) and have made their dollar-weighted average acquisition around $70 WTI. This is a very excellent record.
It’s not talked about enough the capital they have deployed since the downturn in 2015 (and how quickly they vacuumed up value during COVID). While peers were disposing assets, they were buying.
They now have the land and skill to enjoy their long runway. They have set themselves up nicely. Not to discount small milestones and tiny wins — what are large successes but a summation of tiny wins (and small wins give us something to look forward to) — but perhaps people miss the 2026-2030+ story for Whitecap, in favour of looking forward to IP rates beating expectation — insignificant milestones on a long horizon.
Next year Whitecap will spend $70m on Kakwa development, including water build out, and their third party associated gas plants sit around 60% utilization, while their operated infrastructure hovers around 70% full. This complements their land positioning excellently, really, it’s a great setup.
On a timeline basis, it’s my opinion that most people think out 2-3 years with Whitecap (and frankly, many other names) while totally discounting, or ignoring what the goal, and eventual outcome is (a much larger business that has compounded over the years). Some names you should absolutely underwrite a half-dozen value destruction scenarios given management track record of generally doing stupid things. Whitecap is the opposite.
Think back, three, five, even ten years — it’s highly unlikely anyone remembers the exact 15% type curve beats from Tourmaline, CNRL, NuVista, or ARC. So it begs the question, why, if you believe in the company over the next decade (and if you don’t, why allocate into a name built for exactly that) are allocators focusing on the catalysts over the next few quarters. Whitecap isn’t built for quarterly beats like some other names lighter on inventory (where the amount of cash generated in the NTM noticeably affects an equity IRR%), it’s built more like a compounder, a “set it and forget it” name. The obsession with the short term is baffling to me.
See below… “slides that nobody remembers”, why should a similar slide from Whitecap then matter on a 10-year horizon?