Q2 2024 Whitecap Resources Inc Earnings Call
Sylvie: Good morning, my name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Whitecap Resources' Q2 2024 Results Conference Call. Note that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, simply press star, then number two, or, I'm sorry, star, then number one on your telephone keypad. And should you wish to withdraw your question, please press star, then number two. I would now like to turn it over to Whitecap's President and CEO, Mr. Grant Fagerheim. You may begin, sir.
Good morning, My name is Sylvie and I will be your conference operator today at this time I would like to welcome everyone to Whitecap resources Q2, 2024 results conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session and if you would like to ask a question. During this time simply press Star then the number two I'm sorry start them number one on your telephone keypad and you should you wish to withdraw your question. Please press Star then the number two.
I would now like to turn it over to Whitecap, President and CEO. Mr. Grants figure hype you may begin sir.
Grant Bradley Fagerheim: Thanks very much, Sylvie. Good morning, everyone, and thank you for joining us. There are four members of our management team here with me today. Our senior vice president and CFO, Thanh Kang. Our senior vice president of Business Development and Information Technology, Dave Mombourquette. Our vice president of our West Division, Joey Wong, and our vice president of our East Division, Chris Bullin.
Thanks, very much Sylvie and good morning, everyone and thank you for joining US there are four members of our management team here with me today.
Our senior Vice President and CFO, Tom King.
Our senior Vice President of business development information technology gave mom with her.
Our vice President.
West Division Joy one.
Our vice President of our East Division Crystal.
Grant Bradley Fagerheim: Before we get started today, I would like to remind everybody that the statements made by the company today during this call are subject to the same forward-looking disclaimer and advisory that we set forth in our news release issued yesterday afternoon. I am pleased to report that we had a very successful second quarter with record quarterly production averaging over $177,000 BUE per day, especially when compared to our forecast of $170,500 BUE per day. This generated $426 million of fund flow and $23 million of free fund flow.
Before we get started today I would like to remind everybody that the statements made by the company today. During this call are subject to the same forward looking disclaimer and advisory that we set forth in our news release issued yesterday afternoon.
I am pleased to report that we had a very successful second quarter with record quarterly production, averaging 170, <unk> over 177000 <unk> per day, especially when.
Compared to our forecast of 170500 Boe per day.
This generated $426 million of essential and $23 million of free funds from these results are directly attributed to the exceptional work of our of our exceptional technical teams our year to date operationally and asset performance wise has been exceptional resulting in production performance across our entire portfolio in particular.
Grant Bradley Fagerheim: These results are directly attributed to the exceptional work of our exceptional technical teams. Our year to date operationally and asset performance-wise has been exceptional, resulting in production outperformance across our entire portfolio. In particular, our southeast Saskatchewan Frobisher assets, our central Alberta Accordium and Glockenheit assets, as well as our unconventional Montney and DuVernay assets, all outperformed our earned internal expectations. Since acquiring XTO assets in August 2022, we have taken meaningful steps to develop our Montney and DuVernay assets, which has underpinned our strong operational performance in our unconventional assets.
Our southeast Saskatchewan, Frobisher assets, our central Alberta, Cardium, and glauconite assets as well as our unconventional montney and duvernay assets all outperformed our internal expert expectations since acquiring <unk> assets in August 2022, we have taken meaningful steps to develop our morning.
Duvernay assets, which has underpinned our strong operational performance in our unconventional assets today.
Grant Bradley Fagerheim: To date, we have designed and executed on a development plan across both our Monteney and DuVernay assets, providing confidence to the market in the deliverability of our asset base and our operational execution. We designed, constructed, and brought on our Mosrow Battery on time and under budget. Developed a long-range plan showcasing meaningful growth and depth of inventory within our Montigny and Duvernay assets and, in particular, our next stage of Montigny growth and development in our Latour area of Alberta.
To date, we have designed and executed on a development plan across both our montney and duvernay assets, providing confidence to the market and the deliverability of our asset base and our operational execution design.
Designed constructed and brought on our module battery.
And under budget.
Developed a long range plan showcasing meaningful growth in <unk>.
Depth of inventory within our <unk>.
Montney and Duvernay assets and in particular, our next stage of <unk> growth and development and our inventory areas of Alberta.
Grant Bradley Fagerheim: Subsequent to the end of the second quarter, we also announced a positive FID on our Phase One new build in the Tor facility that is fully funded by PGI. This is in addition to the partial working interest disposition of our Musro and Kebab facilities to strong partners Topaz and PGI for total proceeds of $520 million. Through the extensive scale and depth of our high-quality inventory, we've been able to secure additional pipeline and facility access, enhance contract terms, and highly competitive fees on our processing, transportation, fractionation, and marketing for all areas of our Monteney and Duvernay developments.
Subsequent to the end of the second quarter, We also announced a positive that Friday on our phase one newbuild <unk> facility.
It is fully funded by Pgi. This in addition to the partial working interest disposition of our muscle and keep our facilities to strong partners Topaz and Pgi for total proceeds of $520 million.
Through our extensive <unk>.
<unk> and depth of our high quality inventory, we've been able to secure additional pipeline and facility access enhanced contract terms and highly competitive fees on our processing.
Inspiration fractionation and marketing for all areas of our Montney and Duvernay Duvernay development. These synergies will enhance our future net backs and reduce the overall financial impact of infrastructure.
Grant Bradley Fagerheim: These synergies will enhance our future netbacks and reduce the overall financial impact of infrastructure working interest dispositions. We are very excited to move ahead with both partners and look forward to continued progression of our unconventional Montanian tubernate development. I will now pass. I'm going to put the phone on hold for Tom to discuss our second quarter financial results.
Working interest dispositions.
We are very excited to move ahead with both partners and look forward to continued progression of our unconventional montney and Duvernay development.
I will now pass the.
Phone on to <unk> to discuss our second quarter financial results.
Tom: Thanks, Grant. Our second quarter financial results were equally as strong as our operational results, generating fund flow of $426 million, or $0.71 per share, and free fund flow of $223 million, or $0.37 per share. Our predominantly light oil and condensate production base benefited from crude oil prices averaging over $110 per barrel on a Canadian dollar basis, with total liquids representing 95% of our revenue for the quarter. Our operating costs decreased to $13.49 per BOE in the second quarter, a strong result for our team and reflecting higher production and continued focus on cost savings.
Thanks, Brent our second quarter financial results were equally as strong as our operational results generating funds flow of 426 million or 71 per share and free funds flow of $223 million or 37 per share.
Our predominantly light oil and condensate production base benefited from crude oil prices, averaging over $110 per barrel on a Canadian dollar basis with total liquids, representing 95% of our revenue for the quarter.
Our operating costs decreased to $13 49 per Boe in the second quarter, a strong result for our team and reflect higher production and continued focus on cost savings.
Tom: Cash tax expense of $100 million and a quarter included $33 million or $0.05 per share impact on capital gains from the partial infrastructure disposition. Excluding this one-time impact, the tax rate as a percentage of pre-tax funds flow for the six months ended was 12%, which is consistent with our forecast of between 12% to 14% for 2024. Year-to-date, we have returned almost $250 million to shareholders, including $25 billion of share repurchases in July.
Cash tax expense of $100 million in the quarter included $33 million or <unk> <unk> per share impact on capital gains from the partial infrastructure disposition.
Excluding this onetime impact the tax rate as a percentage of pre tax funds flow for the six months ended was 12%, which is consistent with our forecast of between 12% to 14% for 2024.
Year to date, we have returned almost $250 million to shareholders, including 25 billion of share repurchases in July.
Tom: We plan to use $200 million of the proceeds from the partial infrastructure dispositions towards share repurchases in the second half of the year. Pro forma for the dispositions, our net debt sits at below $900 million, and after share repurchases, we forecast a net debt of below $1 billion at year end. This low level of debt relative to our projected $1.7 billion in funds flow provides us with capital allocation optionality going forward. I will now pass it off to Joey for remarks on our West Division results.
Glad to use $200 million of the proceeds for the partial infrastructure dispositions towards share repurchases in the second half of the year.
Pro forma the dispositions our net debt sits at the low $900 million and after share repurchases, we forecast net debt or below a $1 billion at year end.
This low level of debt relative to our projected $1 7 billion in funds flow provides us with capital allocation optionality going forward.
I will now pass it off to Joy for remarks on our West Division results.
Thanks Dawn.
Joey Wong: Our Montigny and DuVernay assets continue to perform well, with updated data showing that our recent wells are outperforming on both an initial and longer-term basis. As we progress the development of this asset base, incremental data is analyzed by our team and informs production strategies and forecasting models for existing wells, while also helping to shape development and expectations for our plans going forward. As we highlighted at our Investor Day in early June, our approach to customized PAD design, completion parameters, and development plans has yielded positive results across our Montney and DuVernay assets at Kaqua, Latour, and KBOPS.
Our montney and Duvernay assets continue to perform well with updated data showing that our recent wells are outperforming on both an initial and longer term basis.
As we progressed development of this asset base incremental data is analyzed by our team and informs production strategies in forecasting models for existing wells.
Also helping to shape development and expectations for our plans going forward.
As we highlighted in our Investor day in early June our approach to customize pad design completion parameters and development plans.
Yielded positive results across our Montney and Duvernay assets of CAC wildly tour in cable.
Chris Bullin: Our recent results on our first eight wells at Musro are another data point that validates this approach. Over the first 90 days, the eight wells have averaged 1,600 BOEs a day per well, with almost 1,100 barrels per day of condensate per well. At times, we were producing at over 80% of our condensate stabilization capacity in our new facility, and after bringing on our third four-well pad in late Q3, we expect to be producing consistently at a sales condensate capacity of almost 11,000 barrels per day.
Our recent results on our first eight wells at Mazo are another data point to validate this approach.
Over the first 90 days the eight wells have averaged 600, boe's a day per well with almost 1100 barrels per day of condensate per well.
At times, we were producing at over 80% of our condensate stabilization capacity of our new facility and after bringing on our third four well pad in late Q3, we expect to be producing consistently at sales condensate capacity of almost 11000 barrels per day.
Chris Bullin: The economics of these first eight wells are very robust and are projected to pay out in only five months. In total, we plan to bring on 15 Montigny and DuVernay wells in the second half of the year after bringing on our latest DuVernay 3-well pad at 11 of 34B in the second quarter. Although we would define each area as drilling liquids-rich natural gas wells, the liquids, and more specifically, the condensate volumes, drive the economics of each area.
The economics of these first eight wells are very robust and are projected to pay out in only five months.
In total we plan to bring on 15, Montney and Duvernay wells in the second half of the year after bringing on our latest duvernay three well pad at 11 34 b in the second quarter.
Although we would define each area is drilling liquids rich natural gas wells, the liquids and more specifically the condensate volumes drive the economics of each area when running sensitivities on a keyboard duvernay plus CAC will mature and Muslim Montney type curves, we can run $0 natural gas prices for the first four months of production and still is.
Chris Bullin: When running sensitivities on our K-Bob DuVernay plus Kaqua, Latour, and Muz-Ro-Montney type curves, we can run $0 natural gas prices for the first four months of production and still achieve average payout in less than one year across the four areas. This is why it makes sense for us to adhere to our schedule and continue to bring wells on production despite the challenging natural gas environment at this I'll now pass it on to Chris for his comments on the East Division. Thanks, Joey.
<unk> average payout in less than one year across four areas. This is why it makes sense for us to adhere to our schedule and continue to bring wells on production. Despite the challenging natural gas environment at this time.
I'll now pass it onto Chris for his comments on the East Division.
Thanks Joey.
Chris Bullin: As you've heard, consistently strong results are the theme so far, and the East Division results are no exception. Momentum carried through from our first quarter drilling program, and we are very pleased with what our assets and teams were able to accomplish in the second quarter. We brought on a total of 26, 20.4 net wells during the second quarter, 14 of which carried over from the first quarter, and 12 were drilled in the second quarter.
As you've heard consistently strong results are the themes so far in the East Division results are no exception.
<unk> carried through from our first quarter drilling program and we are very pleased with what our assets and teams were able to accomplish in the second quarter.
We brought on a total of 26 24 net wells during the second quarter 14 of which carried over from the first quarter and 12 are spud in the second quarter.
Chris Bullin: Outperformance relative to our expectations has come from both the new 2024 wells and higher than forecasted base production levels. In southeast Saskatchewan, our 2024 Frobisher results have been exceptionally strong, with expectations for these wells to pay out in less than six months. Highlighting the attractiveness of these assets is that not only in the initial payout, which is very quick, but we actually forecast these wells to pay out our capital investment three times in the first three years.
Outperformance relative to our expectations has come from both the new 2024 wells and higher than forecasted based production levels.
And southeast Saskatchewan, our 2024 Frobisher results have been exceptionally strong with expectations for these wells to pay out in less than six months highly.
Highlighting the attractiveness of these assets is that not only in the initial payout very quick we actually forecast these wells to pay out our capital investment three times in the first three years. This is truly a top tier asset and we are very pleased with the land position. We have built in only three years since entering the play through the torque acquisition in early 2021.
Chris Bullin: This is truly a top-tier asset, and we are very pleased with the land position we have built in only three years since entering into play through the torque acquisition in early 2021. Moving west to our Viking assets in west-central Saskatchewan, where the initial results on recently acquired land in the Elrose area are meeting our expectations and are above historical results for the area. We continue to advance enhancement opportunities as we have just installed our first 1.5-mile ERH in the Elrose area.
Yeah.
Moving west toward Viking assets in West Central Saskatchewan, where the initial results on recently acquired land in the <unk> area are meeting our expectations and our above historical results or the area. We continue to advance enhancement opportunities as we have just spud our first one five mile CRH in the <unk> area the.
Chris Bullin: The ability to drill ERH wells into the newly consolidated land position will improve capital efficiencies and enhance our future inventory. In Alberta, we have achieved strong production results from our recent Glockenite drilling program as our first six wells online continue to significantly outperform expectations. A combination of flowing unrestricted through alternative infrastructure along with attractive subsurface qualities, despite being a challenging area to drill, has initial liquids production outperforming our expected rates by 40% over the first 90 days on production.
The ability to drill ear, each wells into the newly consolidated land position with improved capital efficiencies and enhance our future inventory.
In Alberta, we have achieved strong production results from our recent glauconite drilling program as our first six wells online continue to significantly outperform expectations, a combination of flowing unrestricted through alternative infrastructure, along with attractive subsurface qualities, despite being a challenging area to drill has initial.
Liquids production outperforming our expected rates by 40% over the first 90 days on production.
Chris Bullin: I also wanted to take a moment to highlight a recent operational enhancement initiative in our Central Alberta Cardium Program. We recently drilled a four-well pad in West Pamina and successfully implemented an updated frac design, which increased our daily sand placement by 25 to 50 percent compared to previous, resulting in 6 percent total cost savings on completions relative to budget expectations. We are actively investigating the applicability of this new frac design across our conventional asset base.
I also wanted to take a moment to highlight our recent operational enhancement initiative and our central Alberta Cardiome program.
We recently drilled a four well pad in west Pamela and successfully implemented an updated frac design, which increased our daily sand placement by 25% to 50% compared to previous resulting in 6% total cost savings on completions relative to budget expectations. We're actively investigating the applicability of this new frac design across our conventional <unk>.
<unk> base.
Chris Bullin: Our recent West Pemida results have been very strong, and these well-cost savings are improving the already robust economics of our light-oil-cardium assets. Although some of our East Division employees don't receive the same notoriety as our unconventional assets, our teams continue to do an excellent job of improving the long-term sustainability and profitability of these assets, thereby further strengthening our corporate free cash flow. With that, I'll turn it back over to Grant for his closing remarks.
Our recent wet Pamela results have been very strong and these well cost savings are improving the already robust economics of our light oil cardium assets.
Although some of our East Division plays don't receive the same notoriety as our unconventional assets. Our teams continued to do an excellent job of improving the long term sustainability and profitability of these assets, thereby further strengthening our corporate free cash flow.
With that I'll turn it back over to grant for his closing remarks.
Grant Bradley Fagerheim: Thanks Chris, Joey, and Tom for your remarks. As you've heard, the first six months of the year have been very strong for Whitecap, and we look forward to building on this momentum in the second half of the year. We have not changed our production guidance of 167,000 to 172,000 B.E. per day, but given the success to date, we do expect to come in close to the higher end of the range, if not higher.
Thanks, Chris Julien Tom for your remarks, as you've heard the first six months of the year have been very strong for whitecap and we look forward to building off this momentum in the second half of the year.
<unk> not changed our production guidance of 167200, 72000 <unk> per day, but given the success to date, we do expect to come in close to the higher end of the range if not higher.
Sylvie: As we advance through the remainder of the year, we expect our price realizations to remain very robust, given our exposure to light oil as well as a strong U.S. dollar, although commodity price volatility is expected to continue. We are in an advantageous position financially with low net debt or low decline, which further supports long-term sustainability and profitability across our commodity cycle. The outlook for Whitecap continues to be positive, and we are looking forward to the second half of this year as we develop and grow our assets into 2025 and beyond. With that, I will now turn the call over to the operator, Sylvie, for any questions.
As we advance through the remainder of the year, we expect our price realizations to remain very robust given our exposure to light oil as well as our hedge.
Strong U S dollar, although commodity price volatility is expected to continue.
We are in an advantageous position financially with low net debt.
Our low decline.
Great further supports long term sustainability and profitability across our commodity cycles.
The outlook for White cap continues to be positive and we're looking forward to the second half of this year as we develop and grow our assets into 2025 and beyond with that I'll now turn the call over to the operator for any questions.
Thank you Sir.
Sylvie: Ladies and gentlemen, as stated, if you do have questions, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And should you wish to withdraw your question, simply press the star followed by two. We do ask, however, if you're using a speakerphone, to please lift the handset before pressing any keys. Please go ahead and press star one now if you do have any questions. And your first question will be from Dennis Fong at CIBC. Please go ahead. Bye.
Ladies and gentlemen ask David if you do have a question. Please press star followed by one on your Dutch domicile.
We'll then hear as withheld from acknowledging your request and should you wish to withdraw your question simply press star followed by two.
Thank you.
Speaker phone please lift the handset before pressing any keys. Please go ahead and press Star one now if you do have any questions.
And your first question will be from Dennis Fong of CIBC. Please go ahead.
Dennis Fong: Hi, good morning.
Hi, good morning.
Dennis Fong: Congratulations on the second quarter results, as well as the strong well performance. I've got a couple of questions here. The first one kind of goes back to the well-performance and the multi-bench development. I was actually hoping to get a little bit more clarity or understanding around what your view would be or what results you're frankly looking for to help you confirm both your development strategy and then, secondarily, feel more comfortable rolling out a kind of an improved type curve throughout both guidance and kind of your five-year plan that you outlined at your investment.
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Second quarter results as well as the strong well performance.
I've got a couple of questions here. The first one kind of goes back to the well performance in the multi bench development.
Actually hoping to get a little bit more clarity or understanding around what you view would be or what results. You frankly looking for to help you confirm both your development strategy and then secondarily feel more comfortable rolling out a kind of an improved type curve throughout both.
And kind of your five year plan that you outlined at your Investor Day.
Yeah.
Joey Wong: Hey, Dennis. Joey Wong here.
Hey, Dennis Joey long here.
So the first question in terms of what we're looking for on results of course, the results themselves on a production basis.
Joey Wong: So the first question in terms of what we're looking for in terms of results, of course, the results themselves on a production basis. We put in our release there that at 1,600 barrels per day or so, that's slightly above our reference type curve. So the short answer on what we're seeing in terms of results is that they're a slight beat to our expectations, which is good.
We put in our release there that at 600 barrels per day or so that's slightly above our reference type here. So the short answer on what we're seeing on results is it there a slight beat to our expectations, which is which is good.
Joey Wong: What we're also looking for, which won't be quite as visible in the production, is the interaction between wells, be it on a short-term or long-term basis. And I think we talked about that a little bit in the last call there, is that what we're looking at is... Do we see the wells interacting with each other, whether that be on the initial completion, whether that be kind of in the short-term production period, or whether that be in the long-term production period?
What we're also looking for which won't be quite as visible on the production is the interaction between wells.
On a short term or long term basis, and I think we had.
<unk> talked about that a little bit in the last call. There is that what we're looking at is.
Do we see the wells interacting with each other whether whether that'd be on initial completion, whether that'd be kind of in the short term production period, whether that be in the long term production period.
Joey Wong: In the short-term production period and the interaction with the frac, what we're seeing is actually some really, really encouraging results that the wells are just barely seeing interaction from each other, which is kind of what we want to see. As we move to the balance of our asset base, what we're going to do is look at how the rock changes, look at how the condensate ratio has changed, and tailor our development plan from there. But that's a long-winded way of saying we're liking what we're seeing, and it's reaffirming the plans we've got right now.
In the short term production period and the interaction on Frac, what we're seeing is actually some really really encouraging results that the wells are just barely seeing interaction from each other which is kind of what we want to see.
As we move to the balance of our asset base, what we're going to do is is look at how the rock changes.
Look at how the condensate ratio has changed and tailor our our development plan from there, but that's a long winded way of saying, we're liking what we're seeing and it's reaffirming the plans we've got right now.
Dennis Fong: Great. I appreciate that context.
Great I appreciate that context.
Dennis Fong: The second question that I have, and it might be a little bit early for this, obviously, just given it's still kind of mid to late summer and you guys are probably just starting your capital budget planning. How should we be thinking about the CapEx cadence going into 2025, especially with the now, we'll call it, accelerated, quote unquote, development of Latour with that recently signed infrastructure deal? Thanks.
The second question I have and it might be a little bit early for this obviously just given it's still kind of mid to late summer and you guys are probably just starting your capital budget.
Planning, how should we be thinking about capex cadence going into 2025, especially with the.
Now we'll call it accelerated quote unquote development lit whore with.
We recently signed an infrastructure deal.
Thanks.
Thanh: Yeah, thanks for that question, Dennis; it's Thanh here. I think as we look at production and capital spending for the balance of the year here, Q3 will be higher than Q4, but I expect to be within the range there, you know, somewhere in that billion to 1. billion for 2024. Thinking about 2025, and certainly this wouldn't be budget quality at this particular time here, but I would use 5% growth, which gets us to about 180,000 BUEs per day. Capital plans, despite kind of the acceleration of Latour with the PGI funding there on the facility, I would still expect to see between 1.1 and 1.2 billion for 2025.
Yes, Thanks for that question Dennis It's Tom here.
As we look at.
Production and capital spending for the balance of the year here.
Q3 will be.
Higher than Q4, but I.
I expect to be within the range there.
Somewhere in that 1 billion to $1 1 billion.
For 2020 for thinking about 2025, and certainly this wouldn't be budget quality at this particular time here, but I would use 5% growth with gets us to about 180000 Boe's per day.
Capital plans.
Despite kind of the acceleration of <unk> with the Pgi funding there on the facility.
Would still expect to see between one one and $1 2 billion for 2025.
Dennis Fong: Great. I appreciate that context. I'll turn it back.
Great I appreciate that context ill turn it back.
Sylvie: Thank you. As a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. The next question will be from Erin Bilkosky at TD Cowan. Please go ahead. Thanks.
Thank you.
As a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.
Next question will be from Aaron Bykowski at TD Cowen. Please go ahead.
Erin Bilkosky: Thanks. So I guess I'll start with asking a prequel question to one of Dennis's questions. I'm curious about the cadence of the new Montney and DuVernay tie-in to the back half of this year. And I guess the second part of that is how you're thinking about the shape of the production profile through year-end.
So I guess I'll start with asking the prequel question I wanted to ask those questions I'm curious about the cadence of the new Montney and duvernay tie into the back half of this year and I guess the second part of that is how youre thinking about the shape of the production profile through year end.
Thanh: Yeah, thanks for that, Aaron. Yeah, I think the, you know, when we look at our normal and duvernay productions, it is chunky in terms of production ads throughout the balance of the year here. Again, when we look at it on an average for the full year, you know, as Grant mentioned there, we're very comfortable that we'll be closer to the high end of the production guidance, closer to 171, 172,000 VUEs per day.
Yeah, Thanks for that Eric.
Yes, I think when we look at our Montney and Duvernay production.
Chunk in terms of production adds.
Throughout the balance of the year here again, when we look at it on an average for the full year basis. As grant mentioned there were very comfortable that we'll be at closer to the.
High end of the production guidance closer to the 170 172000 Boe's per day, when we look at the third quarter with respect to the unconventional there really isn't any wells that we're expecting to come online.
Thanh: When we look at the third quarter with respect to the unconventional, there really aren't any wells that we're expecting to come online until August 25th at the earliest there. So, you know, a lot of our production ads will certainly come in the fourth quarter. So, again, expect that we'll be at the top end of our guidance range there between 167,000 to 172,000 VUEs per day.
Until August 25th.
At the earliest there. So you know a lot of our production adds we will certainly come in the fourth quarter. So again expect that we will be at the top end of our guidance range. There between the 167% to 172000 Boes per day.
Erin Bilkosky: Thanks, maybe a follow-up question to that. Given the lumpiness of the production additions, is there any way to maybe feather wells in over time to avoid relatively lumpy quarters, or is that just operationally not particularly feasible?
Thanks, maybe a follow up question is that given the lumpiness of production additions is there any way to maybe.
Further wells in overtime to avoid relatively lumpy quarters or is that just operational.
Particularly feasible.
Tom: You know what? That's a good question.
That's a good question, it's something that we'll certainly look at as we develop our budget for 2025 to smooth it out through the quarters, what we've been focusing on really is maximizing cash flow for the year and so it's been designed certainly with that in mind for 'twenty four but smooth.
Tom: You know, it's something that we'll certainly look at as we develop our budget for 2025 to smooth it out through the quarters. You know, what we've been focusing on really is maximizing cash flow for the year. And so, it's been designed certainly with that in mind for 2024, but smoothing it out is definitely a consideration for 2025.
It out is definitely consideration for 2025.
Tom: And just to add to that, you know, Aaron, what we're looking at as we focus moving forward into the 2025, 26, 27 budget timeframes is when do we add incremental drilling rigs in both the unconventional and the conventional part of our assets. Again, we want to ensure that as part of this facility infrastructure transaction that we did, we want to make sure that there is facility infrastructure in order to produce our wells.
And just to add to that Erinn is that.
What we're looking at is as we.
Focus.
Moving forward into 2025, 26, 27 budget Timeframes.
When do we add incremental drilling rigs.
In both the unconventional and into the conventional part of our assets.
Again, we want to ensure that part of this facility infrastructure.
<unk> action that we did want to make sure that theres facility infrastructure in order to produce our wells.
Tom: But, and as Tom was saying, focus on, you know, our net back and our ability to increase our cash flow on an ongoing basis. So we'll look to, as part of the budget process for, say, the next three years going forward, how do we blend and smooth the production, the lumpiness of the production profile out as we advance through those years.
And.
Tom was saying focus on.
Our netback and our ability to increase our cash flow.
Ongoing basis, so we will look to as part of the budget process for let's say for the next three years going forward.
Is how do we blend and smoothie production the lumpiness of the production profile out as we advance through.
Those years.
Erin Bilkosky: Thanks for that. If I could follow up with one more financial question, and that's, given your commitment to the NCIB through the back half of the year, I'm curious why shareware purchases were fairly minimal in Q2, despite having, I think, excess free cash flow to do more.
Thanks for that if I could follow up on one more financial question.
Speaker Change: Given your commitment to the Mci in the back half of the year I am curious why share repurchases were fairly minimal in Q2.
Speaker Change: I think excess free cash flow.
Thanh: Yes, so the way that we're thinking about the NCIB purchases, Darren, is that we're really looking at it on a six-month basis there, just with the way that the cadence for capital is. You know, we'll typically have our highest capital programs in the first quarter and the third quarter, and then it'll taper down in Q2 and Q4. So, you know, it's better for us to look at it in six-month increments.
Speaker Change: Yes, so the way that we're thinking about the CIB purchases. There is it's really looking at it.
Speaker Change: On a six month basis, there just with the way that.
Speaker Change: The cadence for capitalists will typically have our highest capital programs in the first quarter in the third quarter.
Speaker Change: And then it will taper down in Q2 and Q4 there so.
Speaker Change: It's better for us to look at it in six month increments effectively.
Thanh: Effectively, you know, in the first half of the year here, free cash flow was directed both to the balance sheet as well as the dividend. And as you mentioned, as we get into the back half of the year, we'll generate more free cash flow to be able to execute on our NCIB. So the way that we're looking at it today in the back half of the year, you know, this is using our deck at $80 WTI here. We have about $30 to $50 million.
Speaker Change: In the first half of the year here free cash flow was directed both to the balance sheet as well as the dividend.
Speaker Change: And as you mentioned there as we get into the back half of the year, we will generate more free cash flow to be able to execute on our CIB. So the way that we're looking at it today in the back half of the year. This is using our deck at $80 W. Ti here, we have about $30 million to $50 million, that's over and above our dividend obligation that we will use on the <unk>.
Thanh: That's over and above our dividend obligation that we'll use on the NCIB. And then, as per our press release there, we're carving out an additional $200 million that we'll use on the proceeds from the disposition towards the NCIB. So the capital allocation, or I should say the free cash flow allocation, hasn't changed. We're still looking at 75% return to shareholders in the form of the dividend and share buybacks, but the $200 million is incremental to that. It's just the last comment.
Speaker Change: And then as per our press release, there were carving out an additional 200 million that we'll use on the proceeds from the disposition towards the NCI. So the capital allocation or I should say the free cash flow allocation Hasnt changed were still looking at 75%.
Speaker Change: Returned back to shareholders in the form of the dividends and share buybacks, but the $200 million is incremental to that.
Grant Bradley Fagerheim: Just the last comment to add to that is that we have to be mindful of our trading blackout periods of time as well. So as we go into different time periods, we're very respectful of trading blackouts, which we're very stringent on at Whitecap Resources, so that plays into our overall time periods for releasing information to the market. We were in a long discussion about not only the infrastructure sell-down, but we were in a time period here with just dropping into our quarterly reporting as well.
Speaker Change: And just the last comment to add into that is that.
Speaker Change: Part of what we have to be mindful of our trading blackout periods of time as well. So as we go into different time periods, we're very respectful of trading blackout.
Speaker Change: Which we're very stringent on fleet count resources so.
Speaker Change: Hum.
Speaker Change: That plays into our overall.
Speaker Change: Time periods is releasing information to the market we're in discussion.
Speaker Change: A discussion with.
Speaker Change: Not only the infrastructure sell down that we were in a time period here with.
Speaker Change: Just dropping into.
Speaker Change: This.
Speaker Change: Quarterly reporting as well.
Speaker Change: Thank you both I appreciate that.
Speaker Change: Yeah.
Sylvie: Thank you. The next question will be from Patrick Rook at ATB Capital Markets. Please go ahead.
Speaker Change: Thank you next question will be from Patrick O'rourke.
Speaker Change: <unk> capital markets. Please go ahead.
Patrick Rook: Okay, good morning, guys. A strong quarter there. Great to see the good results.
Patrick O'rourke: Oh, Hey, good morning, guys strong quarter, there great to see the well results.
Patrick O'rourke: Mostly financial questions here for you.
Speaker Change: <unk> with the sort of the room, you've made on the balance sheet post the infrastructure dispositions, you alluded to capital allocation flexibility, but Todd just pointed to.
Speaker Change: We're pretty narrow goalposts with respect to 2025 capital spend and production at this point in time. So I'm just wondering if you can maybe walk us through with.
Patrick Rook: I have a couple of mostly financial questions here for you. You alluded to the sort of the room you've made on the balance sheet, post the infrastructure dispositions, you alluded to capital allocation flexibility, but Thanh just pointed out that we have pretty narrow goalposts with respect to 2025 capital spend and production at this point in time. So I'm just wondering if you could maybe walk us through, in order of priority, what your priorities would be in terms of dividend growth, acquisitions, and incremental production growth that could be above and beyond, you know, what you just talked about or spoke to us about in 2025.
Speaker Change: With respect to the flexibility and things you could you sort of rank order what your priorities would be in terms of dividend growth acquisitions incremental.
Speaker Change: Production growth that could be above and beyond what you just talked about or spoke to you on 2025.
Thanh: Yeah, sure. Thanks for that question there, Patrick.
Speaker Change: Yeah sure. Thanks, Thanks for that question there Patrick.
Thanh: Yeah, as we go through the list of returns back to shareholders here, the dividend, at that $0.73 there, sustainable down to $50 WTI. The yield, from our perspective, is too high, so there's certainly no rush for us to increase the dividend at this time. The priority would be around share buybacks, and that's why, you know, we've allocated the $200 million towards buying back our shares.
Speaker Change: Yes, as we go through the list of.
Speaker Change: Returns back to shareholders here the dividend.
Speaker Change: At that 73 cents, there sustainable down $50 <unk>.
Speaker Change: The yield.
Speaker Change: From our perspective is too high so there is certainly no.
Speaker Change: Rush for us to increase the dividend at this time, the priority would be around share buybacks and that's why we've allocated the $200 million towards buying.
Thanh: Could we potentially use more? Yeah, absolutely we can. I think the billion dollars that we're targeting in net debt at the end of the year feels comfortable for us, but I would say priority is the NCIB over any dividend increases at this particular time. And the reality is that when we continue to buy back our shares here, we reduce that, you know, overall dividend obligation, and we are increasing it on a per share basis there.
Speaker Change: Buying back our shares could we potentially use more yeah, absolutely. We can I think the $1 billion that we're targeting a net debt at the end of the year Phil.
Speaker Change: Feels comfortable for us, but I would say priority as the NCI.
Speaker Change: Any dividend increases at this particular time and the reality is when we continue to buyback our shares here.
Phil: Reduce that.
Speaker Change: Overall dividend obligation and we are increasing it on a per share basis, theyre optionality around the balance sheet.
Thanh: Optionality around the balance sheet outside of returning capital to shareholders would be around smaller tuck-in acquisitions where, you know, we have a working interest, we're the operator there, and really it's just a consolidation of a play that we have expertise in versus larger-scale M&A activity at this particular time.
Speaker Change: Outside of returning capital to shareholders.
Speaker Change: Would be around smaller tuck in acquisitions, where we have a working interest where the operator, there and really it's just a consolidation of a play that we have expertise in versus larger scale M&A activity at this particular time.
Patrick Rook: Okay, and then maybe just build a little bit or add a little bit of nuance to Aaron's earlier question with respect to execution on the buyback. You have a $200 million number that's out there. You spoke of looking at it in six-month increments, and obviously, the first half of the year is a higher capital obligation, just given the way the cadence of the drilling programs tends to play out, or in particular the first quarter.
Speaker Change: Okay, and then maybe just build a little bit or add a little bit of nuance to Aaron's earlier question with respect to execution on the buyback you have a 200 million dollar.
Speaker Change: Number that's out there.
Speaker Change: So looking at in six month increments and obviously the first half of the year is a higher capital obligation.
Speaker Change: Just given the way the cadence of.
Speaker Change: Programs.
Patrick Rook: Just wondering how you look at that $200 million in the back half of the year. Can we expect it to be executed on a very rateable basis, on a month-by-month basis, or is there going to be a bit of finesse to that around the share price performance and the blackout periods that Grant touched on?
Speaker Change: Play out or in particular in the first quarter. Just wondering how you look at that $200 million in the back half of the year can we expect it to be sort of executed on a very ratable basis.
Speaker Change: On a month by month basis or is there going to be a bit of finesse.
Speaker Change: To that around sort of the share price performance in the blackout periods that grant touched on.
Thanh: Yeah, I mean, I think the way that we look at it is, if you look at the third quarter here, you know, we'll likely spend somewhere in that $125 million on the share buybacks on a very methodical and consistent basis here. And then in the third quarter, you know, you've got the $75 million plus whatever free cash flow is left after paying the dividends. So, as I mentioned, in that $30 to $50 million range. So, expect to see in excess of $100 million in the fourth quarter based on our forecast at this time.
Speaker Change: Okay.
Thanh: Yeah, I mean...
Speaker Change: Yes, I mean, I think the way that we look at it is if you look at the third quarter here, we'll likely spend somewhere in that $125 million on the share buybacks on a very methodical and consistent basis here.
In the third quarter, you got the $75 million plus whatever free cash flow.
Speaker Change: Is left after paying the dividend so as I mentioned in that 30% to $50 million. So expect to see in excess of $100 million in the fourth quarter based on our forecast at this time.
Speaker Change: Okay. Thank you very much.
Grant Bradley Fagerheim: Thank you. And at this time, gentlemen, there are no other questions registered. Please proceed.
Speaker Change: Thank you and at this time gentlemen, there are no other questions registered please proceed.
Grant Bradley Fagerheim: Well, thank you everyone for your time to listen to our call today, and we would like to wish everyone a very pleasant remainder of their summer weather and summer holidays. Bye for now. Thank you. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you.
Speaker Change: Well. Thank you everyone for your time to listen to our call today.
Speaker Change: And we would like to wish everyone, a very pleasant remainder of your.
Speaker Change: Summer weather and summer holidays.
Speaker Change: Thank you.
Sylvie: Thank you, sir. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.
Speaker Change: Thank you Sir.
Speaker Change: Ladies and gentlemen, this does indeed conclude your conference call for today once again, thank you for attending.
Speaker Change: At this time, we do ask that you. Please disconnect your lines.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
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