Q2 2023 Whitecap Resources Inc Earnings Call

And generally outsized free funds flow.

The capital expenditures.

Our West Division is primarily our unconventional resource plays which include the Montney the Duvernay and we'll have higher annual growth rate of 10% to 15% given the depth and quality of inventory in this division.

Our extensive portfolio of.

60, 584 gross 565000.

175, net drilling locations allows us to continue to generate significant free funds flow, while growing 3% to 8% production per share through our organic drilling towards the 200000 Boe per day over the next five year period of time.

As reported yesterday results in our Montney and <unk> continued to be strong with 82% of our wells drilled to date, achieving payout in less than one year or one year or less some even paying out in less than five months, the free funds flow potential and results to date from this asset that validates our initial technical.

<unk> of the <unk> assets. Furthermore, our teams continue to make significant strides in further enhancing their understanding of the montney assets and we believe that continual refinement of our development plans specific to individual areas and pad selection sensors targeted intervals within the montney benches, well spacing completion design and <unk>.

Duction operation efficiencies will further increase the return characteristics and profitability of this expansive.

Set of assets moving forward.

In our West Division, we have now drilled and completed our first three well pad.

And have commenced drilling our second pad, a four well pad in the duvernay.

We look forward to having the first three wells tied into permit facilities non production in late August while a four well pad is expected to be on production in the fourth quarter. We are very encouraged by the execution of our drilling and completion operations to date as well as our initial production test rates.

Second quarter facilities capital included $15 million towards the expansion of our $3 seven three.

327 facility and about halal region as well as initial capital for a module battery. This battery is expected to be completed in the second quarter of 2024, allowing us to <unk>.

Efficiently develop one of the most attractive areas in the Montney that was acquired as part of the <unk> transaction last year.

Drilling operations at Monster Lake are expected to begin later this year with production adds coinciding with the completion of the battery.

Our longer term development planning for the larger undeveloped montney acreage includes the expansion and increased utilization of current infrastructure as well as new infrastructure to support and maintain control of our unconventional growth plans.

I'll now pass.

They might go on to Tom to discuss our financial results.

Thanks, Grant second quarter funds flow of $450 million or <unk> 68 per diluted share equates to a fund flow netback of approximately $31 per Boe.

Strong liquids production improved differentials on our salary and medium crudes sold in Saskatchewan and onetime TCA adjustments all contributed positively to our netback in the quarter.

Production shut ins due to the Alberta wildfires resulted in increased per unit operating costs to over $15 per Boe in the second quarter.

Going forward, we forecast operating cost will decrease to approximately $13 per Boe as we increased production in the back half of the year.

As grant mentioned the balance sheet is in excellent shape with a debt to EBITDA ratio of only <unk> six times and $1 7 billion of Unutilized capacity, our balance sheet will continue to strengthen as we forecast net debt passing the $1 3 billion target and reaching approximately one 2 billion by year end based on current strip prices.

At this point, we will have decreased net debt by 1 billion since the closing of the <unk> transaction and returned over $500 million to shareholders through base dividends plus share repurchases.

Our 2023 capital spending guidance remains unchanged at $900 million to $950 million and we've adjusted our annual production guidance to 157000 to 159000 boe's to reflect the impact of the Alberta wildfires oil and liquids production has been stronger than forecasted.

Through the first six months of the year and in combination with some of the program changes. We've made earlier this year, we're now expecting our annual liquids weighting to increase to 65% from 64% previously.

I will now pass back to grant for his closing remarks.

Okay.

Mr. <unk>, we cannot hear you.

Yeah.

Thanks, Tom.

Cited a vote for the opportunity set that is ahead of us and look forward to capitalizing these assets to extract as much value from the assets as we can our teams continue to refine their understanding of each play that we are in and we have an expansive inventory depth that we.

Can efficiently develop and hit our growth targets, while continuing to improving profitability and returns to shareholders with our healthy inventory depth strong balance sheet low decline high netback asset base Whitecap is inhibition of strengthened as we advance our business through the remainder of 2023 into 2024 and beyond.

Outlook for Canadian oil and gas is positive as his long awaited export projects begin to come online in high quality response, we produce Canadian energy can be utilized in markets around the world Whitecap has and will continue to be significant supply source of conventional oil and as of recently a larger supplier of natural gas to end users across north.

America.

We are also advancing our carbon capture utilization and storage hubs across Alberta, and Saskatchewan and as our subsurface expertise and experience with carbon sequestration is highly sought after to assist these large emitters and their deep de carbonization efforts. We have multiple projects that are scheduled to begin sequestration in late 2024.

And while there is still a significant amount of work to be done with all the stakeholders stakeholders involved we are confident that the solutions will be found to making significant advancements are moving Canadian energy into a lower carbon economy.

With that I will now turn the call over to the operator Sylvia for any questions. Thank you.

You Sir ladies.

Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone.

He will then here.

Acknowledging your request and if you would like to withdraw from the question queue. Please press star followed by two and if you're using a speakerphone you will need to lift your handset.

Before pressing any keys. Please go ahead and press Star one now if you have any questions.

And the first question will be from Jeremy Mccrea with Raymond James. Please go ahead.

Hi, guys I want to talk about some of your operations.

Just based on some of the test results that you've been getting in the Montney. Some of the early looks at the Duvernay are you guys looking at shifting any of your Capex within your budget here. Maybe later this year or what you are kind of somewhat thinking here for 2024.

And just is there any new technology that you are seeing from any maybe even some of your peers that can improve any of these plays here.

Yes, Hi, Jeremy it's Darren here.

No.

The results were seeing are within our expectations of what we thought our budget allocation capital allocation is going to remain pretty similar.

And as for you know.

Groundbreaking technology changes not really you know the montney and duvernay for that matter are both fairly well up the learning curve. So there is.

The only modifications and optimization being made are very specific on a pad by pad well by well reservoir by reservoir basis. So.

Nothing Earth shattering from that perspective.

And just to follow on to that Jeremy I think that in the Montney.

Where it is.

Gary referenced quite far up the learning curve, we've drilled a total of 30 montney wells to date, including our our car and car crop areas through our acquisitions, our joint venture with hammerhead.

Acquisition of timber rock as well as the <unk> transaction. So we're quite far up the learning curve as far as new using the newest technologies that are available to us.

As Darin said that getting the results that we're having are.

As expected and maybe a little bit better than expected what was new to US I think is the duvernay and we're seeing some very good test results at this particular time and look forward to advancing those projects and bringing those on stream for a full time.

And then be able to talk to it perhaps.

At the end of the third quarter.

Okay.

Maybe just shifting gears here a bit.

Now that you're kind of close to your targeted debt levels.

Any more thoughts on the A&D market, what it's looking like if youre looking to potentially sell.

Some additional noncore assets or is there anything that.

You want to maybe add to the portfolio now that your balance sheets.

But much stronger shape.

The cash acquisition.

Yes, just on the.

The M&A market and Ive got David Barber Cat sitting here. He is anxious to get going again for sure with his team, but now what we're looking at is we think that as I had referenced earlier I think on the last call that when we did the cleansing of the assets that we werent going to capitalize that we did in the first quarter of the year, bringing in four.

<unk> hundred million dollars.

Cash to our balance sheet that was helpful to us and I think we're very comfortable with the.

While we are very comfortable with the asset suite that we have now.

One of the areas, we may bring on assets that that we're not looking to drill over the next seven to 10 year period of time, we may look to bring in third party capital.

And to some of the areas because we have such an expansive opportunity set in front of us. So that's an area that we'll look at but we do have to be cautious.

To ensure that if we are truly not going to capitalize on that.

Maybe we can get.

Others, too, but that will be something we'll look at as we move into the balance of this year and into 'twenty four.

As far as specific acquisitions, we're not.

This was a year, we're going to be focused on our operations and we're committed to that.

Okay.

Perfect guys. Thank you very much.

Thanks, Jeremy.

Next question will be from Josh.

Securities. Please go ahead.

Hey, guys its strong quarter and thanks for taking my questions.

My first question is on the Montney Aqua.

I'm, hoping if you can.

Could add some color on what specific opportunities youre seeing to enhance capital efficiency in the region.

Yes, it's Darren here can you can you repeat that I missed the middle part.

Yes, I was wondering if you could add some color on what specific opportunities youre seeing to enhance capital efficiencies in the region.

Yes, primarily just continue.

To exceed what our expectations are with regards to <unk>.

Proper placement.

Fit for purpose rock designs, depending on what the reservoir characterization is.

Sure.

Flowing through.

Controlled facilities to optimize our cash flow in the short term.

Like nothing like I said in the last question nothing groundbreaking just continual improvement.

Piece by piece.

Okay.

My second question is on the Duvernay.

How do you think about optimizing the asset going forward either on the drilling or completion side now that you've taken over the asset and what would you.

Or what would increase the confidence to accelerate the development of the play in 2024.

Okay.

Yes first of all just.

We've walked into this cautiously the Duvernay play just when we acquired it we had not been drilling up in this place we wanted to do.

More geoscience and engineering work on it before we went in and were very.

<unk>.

Very.

Pleased with what we've seen in our first three well pad not just from the drilling but from a completion and <unk>.

Test results that we're having at this particular time.

And that allowed us to shift our capital around and drill the four well pad that we're on right now we're on the third well of the three.

On a four well pad.

Drilling that out that we talked about in our earlier about bringing our arm by by the end of the year the second pad. So.

<unk>.

We're tiptoeing into the play I would expect that this year, we'll have drilled seven wells, but moving forward will set our budget up depends.

Depending on results as to what we get here.

Darrin in the engineering team together with our Geoscientists and operations guys will put together a budget for 'twenty.

<unk> 'twenty four 'twenty five that will include.

Advancing these projects at a little bit more where we're not capacity facility capacity constrained there we own the 15% to 7%.

Plant and it is only utilize to the tune of about 65% today. So we have capacity to move product through that.

Okay. Thanks, that's all from me.

Okay. Thank you. Thank you.

A reminder to please press star one if you do have any questions.

Next will be Travis wood at National Bank. Please go ahead.

Yes. Thanks.

Okay.

And in terms of the facility that came with <unk>. So it's.

It's about 65% full.

Room too.

Got to help on the cost side.

I expect.

But maybe on an caps with caps up and running are you guys seeing any wiggle room to improve costs on transport on the liquid side now or.

And on the processing side with some.

Some incremental space left at 50% to seven.

Yes.

And I think your two part question is first of all the 15% to seven facility.

Obviously, we'll continue with more throughput will drive down costs on a per unit basis. So that will be an area that we'll look to advance and as far as the kaps pipeline and getting tied into to that.

That will take place in the first quarter as well, so first quarter, leading into the second quarter or so.

Which we do have capacity we have.

<unk> on that.

And the end of the cap system. So.

I think we're in very good shape here.

Increasing production driving down costs I think it's.

And these bigger what we'll call more unconventional resource plays both in the in the Duvernay and the Montney.

Okay, that's perfect so kind of leveraging off.

Pipeline.

In Q1 of next year.

That's correct, Yeah, that's right okay.

Okay. Thanks, Greg.

Okay.

Thank you and at this time Mr. <unk>.

It appears that we have no other question Sir Please proceed.

Well that was quick can keep going here for quite a while anyway.

Thanks, Sylvia and once again I want to thank each of you for taking the time and interest and listened to our call. Today. We are excited to advance our company forward with a strong total returns to shareholders and we look forward to updating you on the progress from an operational perspective over the next several months all the best have a good day enjoy the balance of your summer.

Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

[music].

Sure.

With regard.