Details:
Montney/Duvernay to drive long-term corporate growth. Management reiterated 2023 guidance at 161,000-163,000 boe/d, with Northern AB at just under half of corporate volumes (75,000 boe/d, 43% liquids). However, the team provided additional detail on its 5-year target of reaching 200,000 boe/d, factoring in 3-8% annual organic growth rates. Whitecap expects Northern AB (Montney/Duvernay) to drive long-term corporate growth with legacy positions in Central AB and SK expected to be more moderate cash flow engines (1-2% organic growth). That said, near-term capital allocation could shift in favour of legacy oilier regions driven by quick payouts, FX tailwinds, and weaker gas pricing.
Significant debt reduction backstopped by cash flow generation. Management expects to reach its $1.3 billion net debt target by the end of Q2/23 and $1.0-$1.2 billion by year-end 2023 at current strip prices. The company remains focused on managing a conservative balance sheet with its $1.3 billion target (<1.0x D/EBITDA at US$50/bbl), noting this strategy has backstopped its aggressive M&A strategy since 2020. The company currently holds $3.1 billion in total debt capacity, allowing for additional flexibility.
Return of capital linked with debt targets. Whitecap noted its $0.73/sh dividend target is sustainable down to US$50/bbl; management expects to reach this level by the end of Q2/23. Upon reaching this level and its $1.3 billion net debt target, Whitecap anticipates allocating 75% of FCF to shareholders through its base dividend and a return to the NCIB. The company expects to continue to deliver dividend increases beyond this target level, commensurate with future production growth.
M&A - on pause for 2023. Whitecap reiterated its focus on integration and debt reduction in 2023 despite the current expectation to surpass structural leverage targets into the second half. Beyond 2023, Whitecap noted M&A remains integral to the strategy, though the team underscored its depth and quality of inventory (13/20 years of 1P/2P RLI), with any new assets having to compete economically. If accretive M&A does not surface, the company has multiple levers for capital, including debt reduction, increased growth capital, or further returns to shareholders.
ESG remains a focus, FID on Saskatchewan Carbon Hub expected in Q2/23. Whitecap built its saline aquifer sequestration hub in December at Quest (partnered with Wolf Midstream), with testing ongoing. The company also noted its Saskatchewan Carbon Hub (5 MOUs totalling 1.2-3.0 MT/yr of captured CO2), with FID to come in the next month and an expected on stream date in H2/24. Whitecap expects its first commercial project to be with Federal Co-op in summer 2023.