Whitecap Resources Inc. Announces Fourth Quarter and Year En 2016-03-02 16:08 ET - News Release
Mr. Grant Fagerheim reports
WHITECAP RESOURCES INC. ANNOUNCES FOURTH QUARTER AND YEAR END 2015 RESULTS AND PROVIDES OPERATIONAL UPDATE
Whitecap Resources Inc. has released its operating and audited financial results for the year ended Dec. 31, 2015.
Selected financial and operating information is outlined below and should be read with Whitecap's audited consolidated financial statements and related Management's Discussion and Analysis ("MD&A") and Annual Information Form ("AIF") which will be available at www.sedar.com and on our website at www.wcap.ca.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended December 31Twelve months ended December 31
Financial ($000s except per share amounts) 2015 2014 2015 2014
Petroleum and natural gas sales 148,225 194,994 622,280 815,689
Funds flow (1) 111,970 139,089 482,686 486,775
Basic ($/share) 0.37 0.55 1.70 2.10
Diluted ($/share) 0.37 0.54 1.68 2.08
Net income (loss) (2) (87,087) 166,116 (500,713) 453,141
Basic ($/share) (0.29) 0.66 (1.76) 1.95
Diluted ($/share) (0.29) 0.65 (1.76) 1.94
Dividends paid or declared 56,162 47,525 212,898 169,594
Per share 0.19 0.19 0.75 0.73
Total payout ratio (%) (1) 106 69 93 101
Development capital expenditures 62,322 48,144 234,778 323,836
Property acquisitions 94,397 135,787 252,278 950,856
Property dispositions (268) (104,256) (26,592) (273,547)
Corporate acquisitions - 205,209 579,906 602,691
Net debt outstanding (1) 939,787 798,290 939,787 798,290
Operating
Average daily production
Crude oil (bbls/d) 29,092 24,752 27,958 20,796
NGLs (bbls/d) 3,130 2,979 2,974 2,596
Natural gas (Mcf/d) 59,069 59,580 60,128 54,395
Total (boe/d) 42,067 37,661 40,953 32,458
Average realized price (3)
Crude oil ($/bbl) 49.05 72.45 53.69 89.54
NGLs ($/bbl) 15.60 34.17 15.31 46.73
Natural gas ($/Mcf) 2.29 3.77 2.63 4.62
Total ($/boe) 38.30 56.28 41.63 68.85
Netback ($/boe)
Petroleum and natural gas sales 38.30 56.28 41.63 68.85
Realized hedging gain (loss) 10.84 7.29 11.39 (2.29)
Royalties (5.36) (7.42) (5.53) (9.19)
Operating expenses (9.53) (10.79) (9.81) (10.95)
Transportation expenses (1.57) (1.25) (1.57) (1.47)
Operating netbacks (1) 32.68 44.11 36.11 44.95
General & administrative (1.38) (1.48) (1.44) (1.49)
Interest & financing (2.37) (2.49) (2.37) (2.37)
Cash netbacks (1) 28.93 40.14 32.30 41.09
Share information (000s)
Common shares outstanding, end of period 300,613 253,476 300,613 253,476
Weighted average basic shares outstanding 298,973 253,360 283,889 231,879
Weighted average diluted shares outstanding 302,578 255,501 287,011 234,130
Notes: (1) Funds flow, total payout ratio, net debt, operating netbacks and cash netbacks do not have a standardized meaning under GAAP. Refer to non-GAAP measures in this press release. (2) Net loss for the twelve months ended December 31, 2015 includes a non-cash impairment charge of $506.2 million due to lower than forecasted commodity prices at December 31, 2015. (3) Prior to the impact of hedging activities.
MESSAGE TO OUR SHAREHOLDERS
We are pleased to report our operational and financial results for 2015 which have exceeded our initial full year projections despite a challenging commodity price environment. Our team remains focused on creating value for our shareholders and has delivered strong operational results in 2015 in addition to successfully closing accretive acquisitions within our core areas that enhance our low decline base production and provide significant future upside. We remain acutely aware of the challenges and headwinds our industry and Whitecap face and have taken proactive measures subsequent to the year end to ensure we maintain our financial flexibility and strength. Our proactive initiatives include a $70 million disposition of facilities (no production impact), reducing our 2016 capital program by $80 million, adjusting our monthly dividend payment to $0.0375/share ($0.45/share annually) and raising $95 million of equity capital. These initiatives provide a total of $325 million of additional liquidity resulting in approximately $455 million of unutilized credit capacity on our current bank lines of $1.2 billion. We remain focused on being the lowest cost light oil producer with Q4/2015 cash costs (royalties, operating, transportation, general and administrative and interest expense) of $20.21/boe and our priority in the current environment is maintaining our balance sheet strength and positioning our company to provide strong economic returns when the commodity price environment improves.
Our Q4/2015 drilling program included 40 (37.4 net) horizontal oil wells including 34 (31.4 net) Viking wells in west central Saskatchewan, 3 (3.0 net) Dunvegan wells in the Deep Basin area of western Alberta, and 3 (3.0 net) Boundary Lake horizontal wells in northeast British Columbia. The Boundary Lake wells are the first horizontal wells drilled in the pool as the asset was historically developed with vertical wells and the results to date have been better than we had projected.
The following are key highlights of 2015: Achieved record Q4/2015 production of 42,067 boe/d which was 467 boe/d higher than our initial forecast of 41,600 boe/d due to better than anticipated drilling results and the Boundary Lake asset consolidation which closed in late December 2015. Production grew 26% year over year to 40,953 boe/d (3% per fully diluted share) compared to 32,458 for 2014.
Realized strong cash netbacks of $28.93/boe in Q4/2015 and $32.30/boe for the full year 2015, demonstrating the strength of our high netback assets enhanced by an active and effective risk management program and our focus on reducing controllable costs.
Funds flow in Q4/2015 was down 19% compared to Q4/2014 and full year 2015 funds flow of $482.7 million ($1.68/share) was down 1% compared to full year 2014. Higher production in 2015 was more than offset by significantly lower crude oil and natural gas prices relative to 2014. The decline in commodity prices was partially offset by realized hedging gains of $170.3 million ($11.39/boe).
Continued to actively reduce our cost structure resulting in a 14% reduction in cash costs to $20.21/boe in Q4/2015 compared to $23.43/boe in Q4/2014. Cash costs decreased 19% year over year to $20.72/boe compared to $25.47/boe in 2014.
Invested $234.8 million to develop our high quality light oil inventory, drilling 125 (115.2 net) wells in 2015 with a 100% success rate, including 93 (87.0 net) horizontal Viking oil wells in west central Saskatchewan, 18 (14.7 net) horizontal Cardium oil wells in Pembina, 3 (2.5 net) horizontal Cardium wells in southwest Alberta, 8 (8.0 net) Dunvegan wells in northwest Alberta and 3 (3.0) Boundary Lake wells in British Columbia.
Achieved a total payout ratio (after development capital spending and dividend payments) of 93% in 2015. Whitecap does not have a dividend reinvestment program.
Business development initiatives include the successful integration of the Beaumont corporate acquisition of $579.9 million in addition to $225.7 million net strategic property acquisitions within our core operating areas which provides our shareholders a base for long term value creation.
Whitecap's 2015 year end reserves evaluation underpins the quality of our asset base and upside potential. Refer to our February 10, 2016 news release "Whitecap Resources Inc. Announces 27% Increase to 2015 Year End Reserves" for additional information. Net asset value based on total proved reserves discounted at 10% is $7.38 per fully diluted share and based on total proved plus probable reserves discounted at 10% is $10.95 per fully diluted share1. Increased proved developed producing reserves by 22% to 113.2 MMboe (75% oil and NGLs) and 4% per fully diluted share. Increased total proved reserves by 29% to 200.0 MMboe (77% oil and NGLs) and 10% per fully diluted share. Increased total proved plus probable ("TPP") reserves by 27% to 278.9 MMboe (77% oil and NGLs) and 8% per fully diluted share. Added 18.2 MMboe of TPP reserves at an F&D cost of $6.97/boe, including changes in future development costs ("FDC"), which generated a recycle ratio of 5.2x. FD&A costs of $18.27 per TPP boe, including FDC, which results in a recycle ratio of 2.0x. TPP reserve additions replaced 122% of production and, when including TPP acquisition reserves, replaced 499% of production.
1 Based on Whitecap's 2015 year end reserves evaluated by independent reserves evaluator McDaniel & Associates Consultants Ltd., 2015 year end net debt of $940 million adjusted for the $70 million facility disposition and $95 million bought deal financing both of which occurred subsequent to the year end, and net undeveloped land internally evaluated with an average value of $400 per acre on 315,000 undeveloped acres, and 300.6 million common shares at year end plus 13.8 million common shares to be issued from the $95 million bought deal financing.
OPERATIONAL UPDATE
Whitecap has completed its Q1/2016 capital program which included the drilling of 24 (23.6) horizontal light oil wells including 15 (14.8 net) Viking wells in Saskatchewan, 4 (3.9 net) Cardium wells in West Pembina, Alberta, 1 (1.0 net) Cardium well in Ferrier, Alberta, 2 (2.0 net) Cardium wells in Wapiti, Alberta, and 2 (1.9 net) Boundary Lake wells in Boundary Lake, B.C.
The Q1/2016 capital program has yielded exceptional results with current production of approximately 44,000 boe/d and two wells yet to come on stream. This is a very strong start to the year and we anticipate meeting or exceeding our Q1 forecast of 43,000 boe/d and are encouraged that we may have the opportunity to increase our current annual production guidance of 38,800 boe/d once we have sufficient production history from our Q1/2016 drilling program.
Our Viking development program in west central Saskatchewan continues to exceed expectations due to our operational diligence and technical expertise in this area. In our resource development areas including Lucky Hills and Whiteside our most recent five standard length horizontal wells had an average IP(30) rate of 172 boe/d, 32% above our budget expectations of 130 boe/d with average drilling and completion ("D&C") costs of $0.54 million per well. The most recent three extended reach horizontal ("ERH") wells had an average IP(30) rate of 283 boe/d, 42% above our budget expectations with average D&C costs of $0.7 million per well, 15% lower than our budget forecast.
In our Saskatchewan Viking waterflood properties at Kerrobert and Dodsland we have now drilled a total of 33 standard length horizontal wells. The average IP(30) production rates have performed above our 86 boe/d budget expectations and continue to demonstrate shallow decline profiles as a result of the waterflood pressure support. D&C costs have averaged $0.58 million per horizontal well, 3% lower than our budget forecast. The recent six ERH wells had an average IP(30) rate of 185 boe/d, 23% above our budget expectations with average D&C costs of $0.82 million per well, 2% lower than our budget forecast.
In West Pembina, the three wells from our Q1/2016 program are currently on production at rates that are higher than our budget expectations. More significantly our D&C costs on these wells averaged $1.7 million which is 33% lower than our budget expectations. In addition, we have drilled and completed our first horizontal water injector in our operated Cynthia Cardium Unit #1 and anticipate commencing injection by early April 2016.
Whitecap's Boundary Lake drilling program results continue to exceed our budget expectations. As disclosed in our February 23, 2016 news release the average IP(30) rates on the 3 wells drilled in Q4/2015 was 190 bopd which is 58% higher than our initial forecast of 120 bopd per well. These estimates do not include results from the two wells drilled in Q1/2016 which are still being completed.
OUTLOOK
We are cautious on the near term outlook for commodity prices but remain constructive on higher prices in the medium to longer term future. In 2016 we continue to generate strong cash netbacks and funds flow from our light oil focused asset base which is enhanced by our strong hedge positions and our ability to successfully lower our controllable costs. Combining our high cash netbacks with our low decline asset base allows us to spend less capital to maintain and grow our production while remaining sustainable for the long term.
Whitecap actively manages both our operational and financial risks and will continue to review opportunities to enhance our 2016 and 2017 outlook and remain confident that we will be able to navigate through the current environment to continue to create long term value for our shareholders.
We once again would like to thank our shareholders for their ongoing support of Whitecap.
We seek Safe Harbor.