NEWS WHITECAP RESOURCES INC. ANNOUNCES SALE OF WEYBURN ROYALTY AND ACHIEVES DEBT REDUCTION TARGET
Whitecap Resources Inc. has entered into a definitive agreement with Topaz Energy Corp. for the sale of a newly formed 5-per-cent gross overriding royalty (GORR) on its working interest in the Weyburn CO2 unit for cash proceeds of $188-million. The transaction is expected to close on or before Oct. 31, 2021.
Following the completion of the GORR sale, Whitecap will retain its operated 65.3-per-cent working interest ownership in the Weyburn unit, which remains a core strategic asset within the company's portfolio. The Weyburn unit is the single largest anthropogenic carbon sequestration project in the world and has sequestered over 36 million tonnes of CO2 since the project's first CO2 injection in 2000. The project is expected to continue to sequester carbon at a rate of approximately two million tonnes per year, driving Whitecap's net negative carbon footprint after accounting for scope 1 and 2 emissions. With a 100-per-cent oil and natural gas liquids weighting and less than 3-per-cent base decline rate, the profitability of the Weyburn asset is robust, and, after the sale of the GORR, it will continue to generate significant free funds flow for Whitecap, with a free funds flow break-even price of approximately $35 (U.S.) per barrel WTI based on preliminary 2022 capital plans. Production volumes from the previously announced unplanned downtime at Weyburn are now back on-line and current net production is approximately 14,000 barrels of oil equivalent per day.
Return of capital focus
The GORR sale aligns with Whitecap's stated priorities of maintaining balance sheet strength and increasing return of capital to shareholders. The GORR sale allows Whitecap to accelerate the achievement of its near-term net debt target of $1.2-billion and reach its long-term net debt target of $1-billion by year-end 2021 to enhance total shareholder returns.
In achieving $1-billion of net debt by year end 2021, Whitecap retains $1-billion of liquidity on its credit facility and a forecasted debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 1.3 times at $45 (U.S.)/bbl WTI and 0.7 times at $70 (U.S.)/bbl WTI, providing significant financial flexibility and long-term sustainability.
With the company's debt targets achieved, Whitecap has significant optionality for free funds flow allocation and the potential to accelerate return of capital to shareholders through targeted share buybacks and dividend increases. Year to date, Whitecap has repurchased 5.1 million shares at an average price of $5.98 per share and is permitted to purchase an additional 26.3 million shares under its current normal course issuer bid that runs between May 21, 2021, and May 20, 2022.
On behalf of our management team and board of directors, the company would like to thank its shareholders for their continuing support.