Excerpt from Stockwatch Energy-yesterday Elsewhere in Alberta (and Saskatchewan), Grant Fagerheim's Whitecap Resources Inc. (WCP) lost 25 cents to $10.15 on 3.75 million shares, despite its best efforts to impress investors at today's inaugural investor day. As expected, the company gave itself plenty of pats on the back for buying XTO Energy Canada for $1.9-billion two years ago -- a deal that raised some eyebrows at the time, but in management's view will surely "enhance long-term profitability." Management also unveiled a five-year plan to boost production the "organic" way (without acquisitions). The company-wide production target for 2029 is 215,000 to 235,000 barrels a day, up from this year's guidance of 167,000 to 172,000 barrels a day.
One area where management does not seem to be forecasting an increase, to investors' chagrin, is the dividend. Whitecap currently pays a 6.08-cent monthly dividend (for a yield of 7.2 per cent), or 73 cents annualized, for a total of $3.65 per share over five years. Management estimated that this $3.65-per-share five-year payout will cost a total of $2.2-billion. That will plough through more than half of the $4-billion in cumulative free cash flow that Whitecap expects to generate over this period. The company plans to use $1-billion of this amount for debt repayment, leaving $800-million for share buybacks, the preferred option over dividend hikes. (One reason for the preference may be that it is much easier to quietly tinker with buyback programs than dividends. SEDI filings show that Whitecap has not bought back any shares so far this year.)