Whitecap Resources Inc T.WCP

RBC 2

[retiredcf]

Their upside scenario target is $18.00. GLTA

July 25, 2024

Whitecap Resources Inc. Q2/24 - Well Positioned

Outperform

TSX: WCP; CAD 9.94

Price Target CAD 14.00

Our view: Q2 results were ahead of the Street, leaving the company well positioning to meet/exceed FY24 guide and continue with meaningful return of capital. As previously noted, WCP plans to allocate $200 million of its infrastructure disposition proceeds to share repurchases under its NCIB in H2 (~$25 million has been executed to date). Our estimates have been increased to reflect Q2 actualizations and a stronger 2025 volume outlook.

Key points:

Q2/24 – Quality Beat on Liquids. WCP reported Q2/24 production of 177,314 boe/d (RBC: 170,015 boe/d; Street: 169,700 boe/d) driving AFFO (f.d.) of $0.71 (RBC/Street: $0.64/0.66). Capital expenditures came below expectations at $204mm (RBC/Street: $225mm/$212mm); $223 million ($0.37/share) in FCF was generated in the quarter. See Exhibit 1 for key variances and estimate changes which were driven by both higher volumes and also a stronger liquids component than we (and street) had expected.

Operations Update - In Good Shape. WCP's first eight wells from Musreau have experienced results above regional type curve (IP90: 1.6 mboe/ d). WCP is currently completing an additional four-well pad at Musreau targetting both D2/D3 Montney with production in Q3. WCP highlighted its results in the Frobisher with its recent wells achieving payout in less than 6 months (3x payout in 3 years) and plans on drilling 26 (23.8 net) wells in H2/24. In the Viking, WCP plans on drilling 32 (32.0 net) wells in H2/24. In the Glauc, the company brought 12 (11.7 net) new wells online, all well above initial expectations with 6 (6.0 net) wells planned H2/24.

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) and we expect a longer-term run- rate of $1.2–1.4bn.

Return of Capital - A Key Focus. Whitecap exited Q2/24 with $1.3bn in net debt (RBC: $1.3bn) and is on track to reduce below $1.0bn in Q4/24 (including dispositions) while in tandem returning 75% of FCF through a mix of its base dividend ($0.73/share) and NCIB utilization. We model meaningful share buybacks through both 2024 ($203 million) and 2025 ($147 million). While we do not forecast acquisitions, though we view M&A as a core part of the long- term strategy; near-term we believe management is likely to focus on strategic tuck-ins, though larger strategic deals could come into play.

Increasing Estimates, Outperform. Our 2024/25 estimates increase slightly reflective of margin adjustments and an increase to our 2025 volume outlook (to 179,000 boe/d, 63% liquids). See additional details in Exhibit 1 of this report.

[Citizen13]

While we do not forecast acquisitions , we kinda forecast acquisitions . What a dummy . STOP BEING CONTRADICTORY GRANT. Its not doing your share price any favours.  .  Its kind of like the contract I have at work.  " We'll pay you X percentage of the profit in commissions but , well maybe not at our discretion . Took the contract to a labour lawyer and its not worth the

[Ocalaman]

I listened to the conference call and nothing was said about acquisitions by any presenters so Fagerheim is  not misleading anyone. The RBC report only speculated tuck ins or a major deal if the economics work. Nothing earth shattering here. Tuck ins can be tweaks while acquisitions can transformational  and enhance shareholders returns. I could care less if they issue shares if it

[barneyj44]

Well said Ocalaman,  Grant holds 3 million shares ,many purchased on the open market like you and me. He has my vote of confidence. 

[Citizen13]

So, clearly analysts are not sure  what happens next, but you are ? It doesnt matter what you think , it's the anaylsts and buyers who like to be crystal clear about acquisitions . I have seen Grant be clear as mud on other calls as well.  If Eric Nuttall goes on BNN every time and says the market fears an acquisiton and it's the reason your stock is lagging , make your