CIBCHave a $15.00 target. GLTA
EQUITY RESEARCH
April 26, 2023 Flash Research
WHITECAP RESOURCES INC.
First Look: Q1/23 Results In Line With Estimates
Whitecap reported Q1/23 results that were in line with our expectations and
consensus. Key takeaways include a successful first-quarter drilling program
in Central Alberta and Southern Saskatchewan showcasing higher liquids
production than company expectations, along with a shift in the cadence of
capital spending and drilling schedule to optimize commodity exposure.
Whitecap is focusing on higher-netback oil-weighted projects, deferring
timing of natural gas-focused assets towards the latter parts of this year,
while also resolving Montney supply-chain delays.
Financial And Operating Takeaways
Q1/23 Results: Production of 155,124 Boe/d was in line with our estimate of
157,451 Boe/d and consensus of 156,800 Boe/d. Adjusted FFO per share of
$0.73 was in line with our estimate of $0.72 and consensus of $0.70. Capex
of ~$254 million was ~2% above our estimate of ~$248 million and ~5%
below consensus of ~$267 million.
Return Of Capital: $121 million was returned to shareholders in the quarter,
consisting of $88 million in dividends and $33 million in share repurchases.
The company finished the quarter with net debt of $1.47 billion and is on the
way towards its $1.3 billion target, which we see the company achieving in
Q3/23 on current strip, at which time it will raise FCF allocation to 75%
including a $0.73/share annual dividend. The company has completed ~30%
of its current NCIB and plans to renew upon its expiry on May 20, 2023.
2023 Guidance And Capital Spending Cadence: Whitecap reiterated full-
year guidance of 160 MBoe/d-162 MBoe/d on capital spending of $900
million-$950 million. This is in line with our expectation of ~161 MBoe/d and
slightly below our capital spending estimate of ~$1 billion. Q1/23 capex of
$254 million was below previous guidance of $300 million as the company
modified its drilling program to focus on higher-netback oil-weighted projects
given the movement in natural gas pricing. $40 million of Montney capital
was pushed to Q2 and Q3 due to now resolved supply-chain delays. The
company sees Q4 production averaging 170 MBoe/d as the majority of
reallocated capital starts to come online.
Operational Update: A four-well Kakwa pad brought onstream in late-2022
averaged 1,201 Boe/d (52% liquids) over the first 150 days, exceeding
liquids yield expectations. Supply-chain concerns delayed first production for
the two most recently drilled pads (seven wells); the company expects to
bring these wells online in the second half of 2023 as these issues have
been resolved. In the Duvernay, Whitecap commenced drilling on a three-
well pad at Kaybob (11-34) with production expected in Q3. Another four-well
Duvernay pad will then be drilled as part of a capital reallocation strategy to
focus on higher liquids production and is expected to be onstream in Q4.
Valuation: Whitecap trades at a 2023E EV/DACF multiple of 4.0x and a
2023E FCF yield of 12%, vs. the oil-weighted SMID-cap group at 3.4x and
16%, respectively.