TDCurrently have a $12.00 target. GLTA
Whitecap Resources Inc.
(WCP-T) C$9.16
Quarter Meets Expectations; Strong Well Results and Outlook
Event
Reports Q4/23 Results, New Well Results and YE-2023 Reserves
Impact: SLIGHTLY POSITIVE
Q4/23 production of 166.6 mBOE/d was in line with TD (168.7 mBOE/d) and
consensus (168.4 mBOE/d). CFPS of $0.76 modestly exceeded TD/consensus
of $0.75. Lower-than-expected cash taxes largely offset weaker-than-expected
hedging gains and higher-than-modelled royalties.
Formally Updated Guidance to Reflect late Q4/23 Viking Acquisition, Although
Previously Outlined in Corp. Presentation: Whitecap is formally guiding to 2024
production of 165-170 mBOE/d based on a $0.9bln-$1.1bln capital program. The
budget was introduced at 162-168 mBOE/d based on capex of $1.0bln-$1.2bln in late
October, but this pre-dated the ~4 mBOE/d Viking acquisition ($158mm in Q4/23).
Our View: This guidance change was suggested in the corporate presentation
and had previously been incorporated into our model. The guidance reflects the
Viking acquisition, partially offset by slightly lower capital spending. Said another
way, the midpoint of WCP's new guidance is ~2.5 mBOE/d higher than originally
budgeted at a cost $58mm higher (including late-Q4/23 A&D and 2024E E&D
capital) — implying a capital efficiency of ~$23k/BOEPD.
PDP Reserves were Added at an Average Cost of $14.68/BOE: This is in line
with the trailing three-year average, despite cost inflation over that period. When
combined with FY-2023 cash expenses, we calculate a full-cycle supply cost of
$46.36/BOE, which represents a full-cycle margin of 35%.
Strong Well Results Across Montney and Duvernay: At Kakwa, a follow-up pad is
performing similarly (although data not yet disclosed) to a previously announced pad
that posted an average IP120 rate of 1,889 BOE/d (32% liquids). At Lator, a two-well
pad posted an average IP60 rate of 1,655 BOE/d (45% liquids). Finally, in the Kaybob
Duvernay, seven wells tested at an average IP90 rate of 1,600 BOE/d (36% liquids).
TD Investment Conclusion
Whitecap offers compelling Montney/Duvernay inventory (>2,200 locations),
comfortable balance-sheet leverage (0.8x 2024E), and a robust yield (8%).
Moreover, it is trading at only 3.8x 2024E EV/DACF, which represents a 14% discount
to yesterday's take-out metric of its oil-weighted peer Enerplus (ERF-T).