CIBCThey have a $15.00 target. GLTA
EQUITY RESEARCH
September 27, 2022 Flash Research
WHITECAP RESOURCES INC.
2023 Budget In Line With Our Expectations And Consensus
Whitecap announced its 2023 budget, which was mostly in line with our
expectations and consensus. Compared to preliminary expectations, capex was at the lower end of the range and production was at the mid-point. Natural gas weighting was slightly higher than our expectations but mostly in line with consensus. Our focus continues to be on the company’s ability in achieving debt targets, which could trigger increases to the dividend, and continued execution, which could drive better-than-expected capital efficiencies in the recently closed Montney/Duvernay acquisition.
Key takeaways
• Production at the mid-point of prelim guidance. 2023 production
guidance of 170,000-172,000 Boe/d (64% liquids) (prelim 168,000-
174,000 Boe/d) was in line with our estimate of 170,702 Boe/d (66%
liquids) albeit with slightly higher natural gas weighting, and was in line
with consensus at 172,166 Boe/d (65% liquids). The company plans to
add 253 wells (214.2 net), including 40 (36.0 net) wells in Northern AB &
BC, 180 (153.0 net) in SK, and 33 (25.2 net) in Central AB.
• Capex budget at the low end of the prelim guidance. 2023 spending
of $900 million-$950 million was at the lower end of the preliminary
budget of $0.9 billion-$1.1 billion and below our expectation of ~$1.1
billion. The focus of spending is on Northern AB & BC, which is seeing
~45% of spending that provides opportunities to show production growth.
This includes ~$63 million on infrastructure capex to optimize Montney
development and build-out water disposal. Saskatchewan will see ~$330
million of capex, which is focused on delivering free cash flow. In
aggregate, 2023 spending includes ~$130 million on infrastructure,
~$150 million on EOR projects, and ~$10 million to advance New Energy
initiatives.
• Continue to expect reaching net debt milestones. On strip, we expect
Whitecap to reach $1.8 billion net debt milestone by year end, which
could trigger a 25%-30% dividend increase. We expect net debt of $1.3
billion could be achieved in Q2/23, providing incremental flexibility in
returning cash to shareholders.
• Valuation. Whitecap Resources trades at a 2023E EV/DACF of 2.7x and
a 2023E FCF yield of 20% vs. the oil-weighted SMID cap group at 2.0x
and 34%, respectively.
• Conference call. Whitecap has scheduled a conference call and
webcast at 10:00 a.m. ET (8:00 a.m. MT) on Wednesday, September 28,
2022. The conference call dial-in number is: 1-888-390-0605 or (587)
880-2175 or (416) 764-8609.