Very good results. 22% increase in production over q4 Q1 2018 FINANCIAL HIGHLIGHTS
- Achieved record production of 73,120 boe/d in Q1/18 compared to 55,886 boe/d in Q1/17, an increase of 31% (16% per share). Production in Q1/18 increased 22% (11% per share) compared to 59,707 boe/d in Q4/17.
- Generated funds flow for the quarter of $166.5 million ($0.40 per share) compared to $124.6 million ($0.34 per share) in Q1/17, an increase of 34% (18% per share).
- Achieved strong capital efficiencies on $182.4 million of development capital spending of which $10 million was spent on decline rate mitigation projects. We drilled a total of 104 (92.8 net) wells including 57 (56.1 net) horizontal Viking oil wells in west central Saskatchewan, 18 (14.5 net) horizontal Cardium wells in west central Alberta, 1 (0.9 net) water injection Cardium well in west central Alberta, 18 (11.8 net) wells in southwest Saskatchewan and 10 (9.5 net) wells in northwest Alberta and British Columbia.
- Continued to protect economic returns and free funds flow by actively managing our hedging program with 49% of the Company's remaining 2018 crude oil production (net of royalties) hedged at an average floor price of approximately C$68.00/bbl, 25% of 2019 crude oil production (net of royalties) hedged at an average floor price of approximately C$73.00/bbl and an initial position of 1,000 bbls/d in 2020 with a C$65.00/bbl by C$77.00/bbl costless collar.
- Pursuant to the Company's normal course issuer bid (“NCIB”), repurchased 1.3 million shares for $11.5 million in the first quarter (2.5 million shares repurchased to date for $22 million) which reduces annual dividend payments by approximately $370,000.
Subsequent to the quarter end, and as part of our annual credit facility review, we transitioned from a borrowing-based structure with lending capacity re-determined on a semi-annual basis, to a financial covenant-based revolving facility with an extendible four year term governed by our existing leverage and interest coverage ratios. The new facility provides Whitecap with a stable and committed credit capacity across the commodity price cycle.
OUTLOOK
We are off to a very strong start to the year, and subject to access, post break-up field activity is expected to start in June 2018 with 6 rigs running (3 rigs in west central Saskatchewan, 2 rigs in southwest Saskatchewan and 1 rig in southeast Saskatchewan). As we enter Q3/18, we plan to add an additional 2 rigs. Q2/18 production is estimated to be negatively impacted by approximately 800 boe/d due to unanticipated third party turnarounds, however, we are confident that we are still on track to meet our full year guidance of 73,600 – 74,800 boe/d.
With estimated production of 74,000 boe/d in 2018, and with WTI currently above US$65.00/bbl, we anticipate generating in excess of $180 million in free funds flow after investing $430 – $450 million of development capital, growing production per share by 14% and returning $133 million in dividends to shareholders.
The first quarter is always our most capital intensive wherein we outspend our funds flow, and the second quarter is always the least capital intensive wherein our funds flow is significantly more than our capital spending allowing us to continue to apply the free funds flow to reduce net debt. This will allow us to reduce our net debt to funds flow ratio to 1.5 times by the fourth quarter of 2018. We currently have bank lending capacity of $1.105 billion and $595 million of term notes for total credit capacity of $1.7 billion. Year end net debt is anticipated to be approximately $1.2 billion providing us with $500 million of unutilized credit capacity. Whitecap is in a very strong financial position to continue to deliver meaningful total returns to our shareholders.
We have experienced a strong upward move in crude oil prices since the end of 2017 to approximately US$67.00/bbl WTI. When combined with the weaker Canadian dollar, the current Canadian equivalent price is in excess of C$85.00/bbl. Despite the resulting increase to our free funds flow, we have chosen to remain disciplined in our approach to capital allocation with a focus on return on capital employed and ensuring we maintain a strong balance sheet.
With the strong operational results to date, combined with significantly higher crude oil prices, our Board of Directors has approved a 5% increase to the monthly dividend to $0.027 per share ($0.324 per share annualized) from $0.0257 per share ($0.3084 per share annualized) effective for the June 2018 dividend. The dividend increase represents less than 2% of our anticipated free funds flow in 2018 and demonstrates confidence in our ability to generate free funds flow along with our commitment to return cash to shareholders.
On behalf of our Board of Directors and the Whitecap management team, we would like to thank our shareholders for their ongoing support.