INVESTOR DAY CONFIRMS STRATEGY AND HIGHLIGHTS DEPTH OF QUALITY INVENTORY
THE TD COWEN INSIGHT
Whitecap offers compelling Montney/Duvernay inventory, predictable high-return, lower- decline conventional assets, comfortable balance-sheet leverage (0.8x 2024E), and a robust yield (7%). Moreover, it is trading at a 13% 2025E FCF yield on strip pricing.
Whitecap hosted a short (1.5-hour) virtual investor day on Tuesday. Although there was not, in our view, anything thesis-changing, it allowed management to highlight historical operational success, to underscore the consistency in its strategy, reiterate its commitment to the five-year plan and provide more granular details on WCP's business segments.
Demonstrated Value Creation from Past Significant Acquisitions: Whitecap has a lengthy history of acquiring assets, improving them, and extracting value over time. In aggregate, the four major acquisitions highlighted between 2017 and 2022 (Weyburn, NAL, Torc, XTO) cost $3.7bln, generated excess CF (net of capex) of $2.9bln and have a current 2P NPV of $8.5bln.
Our View: Although acquisitions are sometimes viewed as headwinds or a distraction, when transactions are well-priced and the assets are improved upon, they can, as Whitecap has shown, be a significant driver of shareholder value creation over the long term.
Five-year Plan Offers Growth and Significant FCF: Whitecap reiterated its plan to grow production at ~5%/year to average 215 mBOE/d by 2029. Over this period (assuming US $75 WTI, $3/GJ AECO), WCP anticipates $6bln of capex split nearly equally between the new resource plays (Montney/Duvernay) and its conventional assets. The company expects the plan to generate $10bln of CF or $4bln in FCF. Beyond the current strategy, there is an option to accelerate growth late-2026 to exit the five-year plan ~10% higher (235 mBOE/d).
Significant Resource-play Inventory: Whitecap has a massive footprint in the unconventional Montney/Duvernay plays. It holds 700,000 net acres, with ~648 identified Tier 1 locations (average payout 1 year), including Tier 2 locations (average payout 1.4 years), this grows to 1,213 locations, or 6x the wells expected to be drilled through the five- year plan. Whitecap sees its Montney/Duvernay assets having average payouts of 0.6-0.9 years with NPV10% of $15.5-$17.3mm/well.
Conventional Play Inventory Offers High Returns and Quick Payouts: Although the focus tends to be on the Montney/Duvernay, Whitecap's conventional assets offer payouts of 0.4-0.9 years, with IRRs in the range of ~130-200+%.