Whitecap Resources Inc T.WCP

RBC

[retiredcf]

September 12, 2024

Whitecap Resources Inc.
Highlights from Desk Presentation

TSX: WCP | CAD 9.76 | Outperform | Price Target CAD 14.00

Sentiment: Neutral

We hosted a desk presentation with Whitecap Resources featuring Grant Fagerheim (President and CEO) and Thanh Kang (CFO) in Toronto. The session mainly focused on core operations and sensitivity to commodity prices, combined with broader industry observations and the long term outlook.

Details:

2024 Guidance - Reiterated. Management reiterated 2024 production guidance of 167,000–172,000 boe/d; Capital spending of $0.9–1.1bn was unchanged (RBC: $1.1bn, 171.8 mboe/d) while the company highlighted that it would look to achieve the upper end of guidance. Management outlined its recent infrastructure deal (see more here) which supports long-term organic growth ambitions to reach 215 mboe/d (5% CAGR) by end of 2028 (with an option to accelerate to 235 mboe/d in 2026). Whitecap expects corporate growth to be driven by the West Division (Montney/Duvernay) at a 15% CAGR to reach 100 mboe/d, while the East Division remains essentially flat at 115 mboe/d. Whitecap noted that if commodity prices remain low over the long term, they have flexibility to tweak their production guidance lower, as dictated by pricing.

Infrastructure deal provides balance sheet optionality and depth of inventory limits the need for upstream M&A. Whitecap highlighted the operational and cost synergies from its recent infrastructure deal and reiterated that large upstream M&A is not on the table for now. The deal drives meaningful debt reduction supporting RoC initiatives and leaves the door open for small upstream M&A and potential divestment opportunities down the road (but noted it must be accretive). Whitecap noted at $50 WTI its D/CF is 1.0x and it is confident with its capital efficiencies; the company would be debt free by 2029 (notwithstanding M&A) at $75 WTI flat pricing.

Return of Capital - Key Focus. Since its infrastructure deal, the company has been active on its NCIB (estimated $100mm QTD) and will continue the back half of its $200mm buyback target for the remainder of the year. The company reiterated returning 75% of FCF to shareholders (via base dividend and NCIB). Whitecap remains on track to reduce debt below $1.0bn in Q4/24 (including dispositions).