Post by
retiredcf on Sep 20, 2024 9:12am
CIBC
Have a $15.00 target. GLTA
EQUITY RESEARCH
September 19, 2024 Flash Research
WHITECAP RESOURCES INC
Operations Update And Close Of Unsecured Credit Facilities
Whitecap Resources provided an operations update and announced the closing of its new $2 billion unsecured credit facilities concurrent with the release of its investment grade credit rating. Our key takeaways include outperformance from Musreau wells despite constrained gas throughput given the strong liquids rates, progress on development across its core
assets, and the reiteration of strong production expectations towards the upper-end of full-year production guidance of 167 MBoe/d-172 MBoe/d, which is line with our estimate of 172.1 MBoe/d and consensus of 171.6 MBoe/d.
Kay Takeaways
• Montney and Duvernay update. Whitecap recently brought on its third Montney four-well pad (4.0 net) and is now drilling its fourth Montney four-well pad (4.0) at Musreau. The company has reached its designed condensate capacity at its 05-09 battery of ~11 MBbl/d, limiting its gas throughput to ~80% of nameplate capacity for total production of 17.5 MBoe/d. The first two Musreau pads continue to outperform, showing an
average IP120 of 1,573 Boe/d (71% liquids) per well including 1,050 Bbl/d of condensate. Its third pad is currently producing at a restricted rate. In Duvernay, Whitecap brought on production its 11-34B three-well Duvernay pad (3.0 net), showing average IP90 of 1,428 Boe/d (34% liquids) per well. Whitecap also finished frac operations on its 11-14B five-well Duvernay pad (5.0 net), which is its first pilot with new design. In Lator, Whitecap is completing the first and drilling the second of its two-well delineation program and expects results in Q1/25. Well results will support upcoming development in the area and could be a positive catalyst in the new year.
• Conventional update. Whitecap continued to perform well in Q3, with focus on capital reduction and inventory enhancement initiatives. Whitecap finished drilling its second monobore well in the Glauconite and has realized 10% cost saving per well. Whitecap is drilling two OHML pilot wells in H2/24, with the first OHML well being brought on production in September. Successful performance could result in an incremental two
to three years to its existing Southeast Saskatchewan light oil inventory.
• Public investment grade credit rating. Whitecap announced a public investment grade credit rating of BBB, allowing the company to access longer tenors and a lower cost of funding. Concurrent with the release of this credit rating, Whitecap entered into a new $2 billion unsecured covenant-based credit facility, replacing the existing secured credit and term loan facility. The existing $195 million of senior secured notes,
which mature December 2026 with a coupon of 3.9%, will be amended. Whitecap had D/EBITDA of 0.6x at the end of Q2/24.
• Valuation. Whitecap trades at a 2025E EV/DACF multiple of 3.5x and a 2025E FCF yield of 11%, vs. the oil-weighted SMID cap group at 2.9x and 17%, respectively.