We hosted Grant Fagerheim (President and CEO) and Thanh Kang (CFO) from Whitecap Resources for an in-person sales desk presentation in our Toronto office. The company provided an operational update detailing its asset performance, facility updates and ongoing delineation efforts with a focus on the Montney and Duvernay. We reiterate our Outperform rating.
2025 Guidance - Reiterated. Whitecap's 2025 guidance is calling for production of 176-180 mboe/d (RBCe: 178 mboe/d) and capital spend of $1.1-$1.2bn (+15% y/y). WCP plans to allocate 50% of its budget ($550-$600mm) to its Montney and Duvernay assets that includes drilling 30 (30 net) wells (67% Duvernay) and tieing in 34 (32.5 net) wells in 2025. The company plans to drill 190 (171.8 net) conventional wells in Alberta and Saskatchewan in 2025.
2024 Guidance - Reiterated. The company's Q4 production is guiding towards 175.5 mboe/d (65% liquids) and expects FY24 to reach 174 mboe/d driven from new wells exceeding type curve expectations, base production optimizations, timing of production adds and lower downtime on top of capital spending of $0.9-1.1bn.
Return of Capital - Key Focus. Post PGI infrastructure approval, we expect Whitecap to exit 2024 with ~$1.0bn debt in tandem returning 75% of FCF through a mix of its base dividend ($0.74/share) and NCIB utilization. In 2024, the company bought back ~13.7mm shares for a total of ~$138mm via public sources.
Lator - Phase 1. In Lator, the designing and engineering of its Phase 1 4-13 facility is progressing. IP365s from two 2023 wells have averaged 1.3 mboe/d (33% condensate) and an additional two delineation wells having promising early results. Technical delineation efforts will be the main focus until late 2026-early 2027 when its 4-13 facility is expected to come online. The company noted that Phase 1 of Lator could reach 35-40 mboe/d on top of $250-300 million of capital (funded by PGI) needed for facilities and infrastructure and Phase 2 of Lator (~$150-300 million) could have the capability to reach upwards of 85 mboe/d.
Musreau. At Musreau, the company is producing 17.5 mboe/d (11 mbbl/d liquids) at its 5-9 battery, and the company has observed production capability of 25 mboe/d (after tieing in its 4th four-well pad). WCP will continue manage pace of growth at Musreau development and review facility expansions as needed.
Other Ongoing Operations. The company noted that it is open to bringing in partners to help delineate and develop the Resthaven lands with a focus on LNG exports. In SE Sask, the company is encouraged with its step out drilling in the Frobisher at Steelman and State A OHML pilot well to expand its inventory. Its State A OHML pilot well achieved an IP90 of 224 boe/d (73% liquids).