National Bank Bulletin - July 28thWhitecap Resources Inc. Montney Momentum WCP (TSX) STOCK RATING TARGET EST. TOTAL RETURN C$9.45 Outperform (Unchanged) C$17.50 (Unchanged) 89.9% Q2/22
Financial & Operating Results
We have updated our estimates following the release of WCP's Q2/22 results and conference call. Refer to our flash from earlier today. Results — Beat Average production of 132 mboe/d (75% liquids) was flat sequentially (+13% Y/ Y) and in line with NBF and consensus forecasts of 129 mboe/d and 130 mboe/ d, respectively. CFPS of $1.08 (+35% Q/Q; +152% Y/Y) was a beat relative to NBF and consensus estimates of $1.00 and $0.98. Driving the beat relative to our estimates was higher than expected revenue associated with both volumes and strong price realizations. Of note, royalties of $242 million (NBF $240 million) were in line with our estimates, while opex of $187 million (NBF $170 million) came in slightly above our expectations.
Operations Update
WCP drilled 8 (5.4 net) wells during the quarter across its Montney and Frobisher assets. Of note, the Company achieved strong average IP30 rates of 2,150 boe/d per well at the most recent four well (2.6 net) 12-33 pad at Kakwa (jointly held with XTO) and strong average IP180 rates of 1,832 boe/d per well at the three well (2.4 net) 14-13 pad.
Looking ahead, WCP anticipates activity levels increasing in Q3 (reaching 11 rigs by August) and then modestly decreasing in Q4 before increasing back up to ~11 rigs to begin 2023.
Estimate Changes 2022 capex and production guidance remains unchanged at $610-630 million to support average production of 138-140 mboe/d, reflecting the recent XTO acquisition which is expected to close before the end of Q3, while preliminary 2023 guidance calls for capex of $900-1,100 million to support average production of 168-174 mboe/d (unchanged). Notwithstanding, we have made several changes to our forecast, including adjusting our price realizations, which have been trending marginally below our forecast, leaving us with a lower implied pricing forecast on crude and liquids. Additionally, we have increased our operating costs throughout the remainder of 2022 and into 2023, which in our view better captures the inflationary impacts currently underway, but also is an improved reflection of the asset integration of lower-cost XTO barrels (more details within).
We reiterate our Outperform rating and target price of $17.50, which remains based on a 2023e EV/DACF multiple of 5.0x.