Whitecap Resources Inc T.WCP

TD Notes

[retiredcf]

INDUSTRY UPDATE

CNQ/CVX READ-THROUGHS FOR VRN & WCP

THE TD COWEN INSIGHT

Chevron (CVX-US, US$151.12, Hold, Gabelman) announced it divested its Cdn assets to Canadian Natural Resources (CNQ-T, $49.81, Buy, Hulshof) for C$8.8bln. The package included the widely marketed/expected sale of CVX's Kaybob Duvernay. Beyond implications for CNQ (here) and CVX (here); there are read-throughs for the incumbents in the Kaybob Duvernay - Veren (VRN-T, $9.13, Buy) and Whitecap (WCP-T, $11.17, Buy).

What Value Could CNQ Have Assigned to the Duvernay Assets? Given the mix of assets acquired, including difficult to value assets (Quest CCS, Scotford...), this exercise lacks precision; however, we believe it to be an instructive datapoint for those evaluating either Veren or Whitecap. If we assume CNQ attributed C$6.2bln for the Athabasca Oil Sands Project (AOSP) and C$0.6bln for the remaining non-Duvernay assets, this would imply a value of C$2bln for the Kaybob Duvernay (~40 mBOE/d; 245,000 net acres) - implying a metric of $50,000/BOE/d.

What Does This Imply for Kaybob Duvernay Value within Veren and Whitecap?

Implied Value to Veren:

• Veren's Duvernay production is currently ~50 mBOE/d, or ~25% of total. VRN holds 400,000 net acres in the region. Based on the implied metrics of this transaction, we estimate implied value of $2.5bln for Veren's Duvernay or ~30% of current EV.

• Based on VRN's current EV/BOE/d metric of ~$47,000 (Q3/24E), we estimate the CNQ/ CVX metric implies the market is valuing the Duvernay within the portfolio at $2.35bln. This implies upside of $150mm ($0.24/shr) or a 3% increase to the current share price.

  Implied Value to Whitecap:

• WCP is currently producing ~20 mBOE/d in the Duvernay or ~12% of total. Whitecap holds 72,000 net acres of Duvernay at Kaybob. The transaction metrics outlined above imply a value of $1.0bln for Whitecap's Kaybob Duvernay or 13% of current EV.

• Based on WCP's EV/BOE/d metric of ~$45,000 (Q3/24E), we estimate the CNQ/CVX metric implies the market is valuing the Duvernay within the portfolio at $900mm. This implies upside of $100mm ($0.17/shr) or a 2% increase to the current share price

[PabloLafortune]

My guess is AOSP is worth more than this. This is upgraded oil, they don't need to buy any condensate to market it, they realized $108 on this stuff in Q2 vs $74 for bitumen (per MEG). MEG EV is $83000 per boepd this stuff has to be worth north of $100,000. IOW they paid less than $2.6B for the rest. Chevron must have wanted out badly (opportunity cost of capital).