Q3 2024 Whitecap Resources Inc Earnings Call
Good morning, My name is Sylvia and I will be your conference operator today at this time I would like to welcome everyone to Whitecap resources Q3, 2024 results and 2025 budget conference call.
Sylvie: My name is Sylvie, and I will be your conference operator today.
Sylvie: At this time, I would like to welcome everyone to Whitecap Resources, Q3-2024 results, and 2025 budget conference call. Note that all lines have been placed on mute to prevent any background noise.
All lines have been placed on mute to prevent any background noise.
Sylvie: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press start and number one on your telephone keypad, and if you would like to withdraw your question, please press start and number two.
After the Speakers' remarks, there will be a question and answer session.
I would like to ask a question. During this time simply press Star then the number one on your telephone keypad and if you would like to withdraw your question. Please press Star then number two.
Grant Fagerheim: And I would like to turn it over to Whitecap's President and CEO, Mr. Grant Fagerheim. Please go ahead.
Speaker Change: And I would like to turn it over to Whitecaps, President and CEO. Mr. Grant figure Han. Please go ahead.
Speaker Change: Thanks, Sylvia and good morning, everyone and thank you for joining US there are five members of our management team here with me today are senior Vice President and Chief Financial Officer, Tom King Senior Vice President business development, and information technology demand for Cat and our senior Vice President production and operations Joel Armstrong.
Grant Fagerheim: Thanks, Sylvie, and good morning everyone, and thank you for joining us. There are five members of our management team here with me today. Our Senior Vice President and Chief Financial Officer, Thanh Kang; our Senior Vice President, Business Development and Information Technology, Dave Monverkett; and our Senior Vice President, Production Operations, Joel Armstrong. Our Vice President of the West Division, Joey Wong, and our Vice President of the East Division, Chris Bullin.
Speaker Change: Vice President of the West Division Joy warm and our Vice President each division Crystal.
Grant Fagerheim: Before we get started today, we would like to remind everybody that all statements made by the company during this call are subject to the same forward-looking disclaimer and advisory that we support in our news release issued earlier this morning. And once again, very pleased to report that we have another strong quarter, both operationally and financially, achieving average production above our forecast at 173,302 BUE per day and generating funds for $409 million or 68 cents per share. We invested $273 million to drill 67 wells, 63.8 net wells, resulting in $136 million, a pre-punched flow generated in the quarter, and $350 million, a pre-punched flow generated for the nine months of 2024.
Speaker Change: Before we get started today I would like to remind everybody that all statements made by the company. During this call are subject to the same forward looking disclaimer and advisory that we set forth in our news release issued earlier this morning.
Speaker Change: I'm once again very pleased to report we had another strong quarter, both operationally and financially achieving average production above our forecast of 173300 to be read per day, and generating funds flow of $409 million or 68 cents per share in particular are liquids.
Speaker Change: <unk> continues to outperform our expectations as condensate production for their money and Montney assets at much room in Duvernay assets. A keyboard has held in better than we had expected and we continue to see strong production from our southeast Saskatchewan producer drilling program.
Speaker Change: We invested $273 million to drill 67.
Speaker Change: Well, it's 63, eight net wells, resulting in $136 million of free funds flow generated in the quarter.
Speaker Change: $350 million of free funds flow generated for the nine months of 2024, we returned over $200 million to shareholders during the third quarter, including $108 million of dividends.
Grant Fagerheim: We returned over $200 million to shareholders during the third quarter, including $108 million of dividends and $117 million to share repurchases on our normal course issue a bit. Our asset level performance and operational execution has exceeded our expectations through the first nine months of 2024. At present, we are tracking above our previous annual guidance of 167,000 to 172,000 BUE per day. And now expect to average $172,500 BUE per day in our third production guidance increase for the year. Turning to 2025, our budget plan incorporates our current well-designed and development strategies that have led to operational success so far in 2024.
Speaker Change: $17 million of share repurchases finally and of course issuer bid.
Speaker Change: Our asset level performance and operational execution has exceeded our expectations through the first nine months of 2024.
President: President we are tracking above our previous annual guidance of 167 to 172000 theory per day, and now expect to average 172500 <unk> per day and our third.
Production guidance.
President: The increase for the year.
President: Turning to 2025, our budget plan incorporates our current well designs and development strategies that have led to operational success. So far in 2024. The budget includes capital investments of $1, one to $1 $2 billion to achieved average production of 170 176000.
Grant Fagerheim: The budget includes capital investments of $1.1 to $1.2 billion to achieve average production of 176,000 to 180,000 BUE per day, representing 5% per share growth at the midpoint of the range. Our capital allocation process is integrated in the region's compete for capital across both of our divisions, focusing on capital fail and profitability. Our 2025 capital investments split evenly between our unconventional and conventional assets reflect the highly economic inventory of both types of assets and is optimized for long-term sustainability. For 2025, our focus on our conventional assets is to maintain production between 110 to 115,000 BUE per day, 75 to 80% liquids, while improving capital efficiencies and expanding our inventory duration.
President: 280000, B per day, representing 5% per share growth at the midpoint of the range.
President: Our capital allocation process is integrated in the regions.
President: Per capital across.
President: Both of our divisions, focusing on capital and profitability.
President: Our 2025 capital investments split evenly between our unconventional and conventional assets because that's a highly economic inventory.
Speaker Change: What types of assets and is optimized for long term sustainability for.
Speaker Change: For 2025, our focus on our conventional assets just to maintain production between 110 to 115000 per day, 75% to 80% liquids.
Speaker Change: Proving capital efficiencies and expanding our inventory inventory duration historically, we've had great success, finding ways to improve our conventional inventory through updated drilling design longer laterals.
Grant Fagerheim: Historically, we have had great success finding ways to improve our conventional inventory through updated drilling designs, longer laterals. We're fine development plans or simply better operational execution. As such, we expect we will continue to be successful with our inventory enhancement initiatives and extend the duration and contributions from our conventional assets for many years to come. On our unconventional asset base, which includes our Montany and Doverney assets. In 2025, we are focused on maximizing throughput of our operated facilities of Muzzrow and K-Bop as we build out our next phase of growth at the tour for start-up in 2010.
Mine development plans or simply better operational execution.
Speaker Change: We expect we will continue to be successful with our inventory enhancement initiatives and extend the duration and contributions from our conventional assets for many years to come.
Speaker Change: On our unconventional asset base, which includes your Montney and Duvernay assets. In 2025, we are focused on maximizing throughput of our operated facilities mushroom and KBR as we build out our next phase of growth on a tour for start up in 2027.
Grant Fagerheim: We have achieved initial success in our approach to the unconventional development and customization of drilling and completion design, including both horizontal and vertical interwell spacing across each of our Montany and Doverney assets, and expect this to continue in 2025. These assets are forecasted to grow at an annual rate between 10% to 15% well into the future.
Speaker Change: We have achieved initial success in our approach to the unconventional development and customization of drilling and completion design, including both horizontal and vertical inter well spacing across each of our montney and duvernay assets and expect this to continue in 2025 these assets.
Speaker Change: Forecasted to grow at an annual rate between 10% to 15% well into the future.
Grant Fagerheim: Joey and Chris will provide additional details on our 2025 plans for each division.
Speaker Change: Julien Chris will provide additional details on our 2025 plans for each division.
Thanh Kang: I will now pass this on to Tonne for further discussing our financial results at our 2025 budget.
Speaker Change: I'll pass this onto torn prefer to discuss our financial results and our 2020 budget time.
Thanh Kang: Tonne?
Thanh Kang: Thanks, Grant. Third quarter of funds below was strong at 409 million or 68 cents per diluted share. WPI prices averaged over $100 per barrel Canadian during the quarter, as the low Canadian dollar continues to benefit Whitecap revenues. ACO natural gas prices averaged 65 cents per GTA in the quarter and contributed to less than 3% of our revenues. We realized hedging gains of 14.9 million in the quarter, of which 12.6 million was attributed to our natural gas hedges. Current tax expense of 53 million was 48% lower than the previous quarter, as we recognize 33 million in capital gains on the partial disposition of our K-BOD and Muzzle facilities in the second quarter.
torn: Thanks Grant third quarter funds flow was strong at $409 million or 68 cents per diluted share.
Speaker Change: UTI prices averaged over $100 per barrel Canadian during the quarter as a low Canadian dollar continues to benefit Whitecaps revenues Heiko natural gas prices averaged 65 cents for the quarter and contributed to less than 3% of our revenues.
Speaker Change: We realized hedging gains of $14 9 million in the quarter of which $12 6 million was attributed to our natural gas hedges.
Speaker Change: Current tax expense of $53 million with 48% lower than the previous quarter as we recognized $33 million in capital gains on the partial disposition of our cable and mother old facilities in the second quarter.
Thanh Kang: In addition, the lower commodity price outlook for the remainder of the year prompted a true-up to taxes paid in the first half and resulted in an overall decrease to cash taxes paid. As Grant mentioned, we expect to now exceed the top end of our previous guidance to average 172,500 BUEs per day in 2024, which puts our Q4 production at approximately 170,000 BUEs per day. This takes into account the lower cap expending in the fourth quarter of 200 million and timing of production additions. For 2025, our production guidance of 176 to 180,000 BUEs per day is forecast to generate 1.6 to 1.7 billion in funds flow at US $70 per barrel WTI and 250 per GJA ACO.
Speaker Change: In addition, the lower commodity price outlook for the remainder of the year prompted a true up to taxes paid in the first half and resulted in an overall decrease to cash taxes paid.
Speaker Change: As grant mentioned, we expect to now exceed the top end of our previous guidance to average 172005 hundred Boe's per day in 2024, which puts our Q4 production at approximately 170000 theories per day.
Speaker Change: This takes into account the lower capex spending in the fourth quarter of $200 million and timing of production additions.
Speaker Change: For 2025, our production guidance of 176 to 180000 Boe's per day is forecast to generate 1.6 to $1 7 billion in funds flow at U S $70 per barrel W. T I and $2 50 per D J a cold.
Thanh Kang: Our main cost assumptions for 2025 include royalties of approximately 16%, operating costs of approximately $14 per BUE, transportation costs of $2.10 per BUE, and cash tax equating to 11 to 12% of pre-tax funds flow. Our GNA per BUE at $1 per BUE is one of the lowest in the sector. We'll also direct approximately 40 to 45 million on abandonment and reclamation activities on our assets in 2025. Our balance sheet at the end of the third quarter is in excellent shape, with net debt of 1.4 billion, which equates to a debt to EBITDA ratio of only 0.6 times.
Speaker Change: Our main cost assumptions for 2025 include royalties of approximately 16%.
Speaker Change: Operating cost approximately $14 per Boe.
Speaker Change: Transportation costs of $2 10 per Boe.
Speaker Change: And cash tax equating to 11% to 12% of pretax funds flow.
Our G&A per Boe E. At a dollar per BOE is one of the lowest in the sector.
Speaker Change: Well, we'll also dragged approximately $40 million to $45 million on abandonment and reclamation activities on our assets in 2025.
Speaker Change: Our balance sheet at the end of the third quarter is in excellent shape with net debt of $1 4 billion, which equates to a debt to EBITDA ratio of only <unk> six times.
Thanh Kang: Upon closing of the PGI transaction, which is pending regulatory approval, pro-form and net debt is expected to be approximately 1 billion, or a debt to EBITDA ratio of only 0.5 times. With our bank credit facility now unsecured and a public investment-grade rating of triple B low by EBS, this positions us well to issue bonds in the near term to diversify our debt structure and reduce our cost of borrowing.
Speaker Change: Upon closing of the P. G I transaction, which is pending regulatory approval pro forma net debt is expected to be approximately a 1 billion or a debt to EBITDA ratio of only <unk> five times.
Speaker Change: With our bank credit facility now unsecured and a public investment grade rating of Triple B low by keep your <expletive> this positions us well to issue bonds in the near term to diversify our debt structure and reduce our cost of borrowing.
Joey Wong: I will now pass it off to Joey for more remarks on our West division.
Speaker Change: I will now pass it off the joy for more remarks on our West Division results and 2025 plants.
Joey Wong: Thanks, Sean. 2024 has been an exceptional year for our Montany and DuVernay assets on both execution and performance. Well results have exceeded expectations across the board, and we are realizing the benefits of our technical analyses on our operational efficiencies. Since our update at our investor day in June, we have continued to realize better efficiencies on our Montany and DuVernay operations, with improvements on our key points. Performance indicators, including drilling meters per day, completions, tonnage per day, and completions water intensity.
Todd: Thanks Todd.
Joy Warm: 'twenty 'twenty four has been an exceptional year for our Montney and duvernay assets on both execution and performance.
Joy Warm: Well results have exceeded expectations across the board and we are realizing the benefits of our technical analysis on our operational efficiencies.
Joy Warm: Since our update at our Investor Day in June we have continued to realize better efficiencies on our Montney and Duvernay operations with improvements on our key performance indicators, including drilling meters per day completions tonnage per day and completions water intensity.
2025, you will see US building on these successes as we plan to drill 30 wells across our Montney and Duvernay focus areas of cable up Catclaw Mezro tour with 34 wells expected to come online in the year.
Joey Wong: 2025, we will see us building on these successes as we plan to drill 30 wells across our Montany and DuVernay focus areas of K-Bob, Kaqwa, Muzro, and Latour, with 34 wells expected to come online in the year. Growth associated with this activity is expected to be 10% year-over-year or 20% exit-to-exit, meeting our expectations of 10 to 15% annualized growth over the next five years and beyond. In K-Bob, we are about to bring online another 5-well pad, which will mark 15 operated wells online. We are seeing results of our efforts and technical work since acquiring the asset in the third quarter of 2022.
Joy Warm: Growth associated with this activity expected is expected to be 10% year over year or 20% exit to exit meeting our expectations of 10% to 15% annualized growth over the next five years and beyond.
Speaker Change: Okay, Bob we are about to bring online another five well pad, which will Mark 15 operated wells online.
Speaker Change: We're seeing results of our efforts and technical work since acquiring the asset in the third quarter of 2022.
Joey Wong: The adjustments toward development plans have included longer laterals, larger casing size, and the introduction of a vertical interwell offset, otherwise known as wine racking or benching.
Speaker Change: Adjustments to our development plans have included longer laterals larger casing size and the introduction of the vertical inter well offset otherwise known as wine racking or benching.
Joey Wong: 2025 will see us spot an additional 20 DuVernay wells, which will have our 15 to 7 gas processing facility running at full capacity, and we will look to, at that point, to offload excess production to a nearby third-party facility, which will occur sometime in the second half of the year. At Muzro, our 5 of 9 battery is operating at full condensate capacity and approximately 80 to 90% of gas compression capacity, resulting in overall area production around 17,000 to 18,000 B.O.E.'s per day. Excluding three days of downtime in Q2 associated with brief unplanned third-party interruptions, runtime at the facility has exceeded 99%, and we are very pleased that everything is running as expected.
Speaker Change: 'twenty 'twenty five we'll see us spud, an additional 20, Duvernay wells, which will have our 15 to seven gas processing facility running at full capacity and we will look to at that point to offload excess production to a nearby third party facility, which will occur sometime in the second half of the year.
Speaker Change: Our $5 nine battery is operating at full condensate capacity at approximately 80% to 90% of gas compression capacity, resulting in overall area of production around 17000 to 18000 Boe's per day.
Speaker Change: Excluding three days of downtime in Q2 associated with brief unplanned third party interruptions.
Speaker Change: Time at the facility has exceeded 99% and we were very pleased that everything is running as expected.
Joey Wong: Initial condensate to gas ratios have come in on the higher end of expectations, currently in the range of 330 barrels per million standard cubic feet of gas, as compared to a facility design of 250 to 300. With the initial pads also showing stronger than expected overall inflow, we are currently full with three pads, which is ahead of schedule as we had anticipated to be full with our fourth pad. That fourth pad is expected to come online later this year, at which point we will evaluate performance of the individual wells and prioritize throughput through the battery to maximize overall value.
Speaker Change: Initial condensate to gas ratios have come in on the higher end of expectations. Currently in the range of 330 barrels per million standard cubic feet of gas as compared to a facility design of 250 to 300.
Speaker Change: With the initial pads also showing stronger than expected overall inflow. We are currently full with three pads, which is ahead of schedule as we had anticipated to be full with our fourth third.
Speaker Change: The fourth pad is expected to come online later this year at which point, we will evaluate performance of the individual wells and prioritize throughput through the battery to maximize the overall value.
Joey Wong: We have also received regulatory approval to commence injection at our adjacent water disposal well, which is expected to handle the water from our new wells and save on operating costs moving forward.
Speaker Change: We've also received regulatory approval to commence injection at our adjacent water disposal, well, which is expected to handle the water from our new wells and save on operating cost moving forward.
Joey Wong: 2025 will see the drilling of one more for WELPAD, expected to come online later in the year. IFO performance continues throughout subsequent development programs. We'll give consideration to either moderating the pace of development or expanding our facility, both of which would be compelling options and provide excellent economic returns. For 2025, we forecast our muzzle asset to generate $150 million of free operating income after capital expenditures. A significant achievement considering we spot our first well into this asset just over a year ago in late 2023. A CAQA, we're planning to drill another four WELPAD in the southeast portion of our acreage in 2025, which is a follow-up to our two successful three WELPADs at wider spacing of six WELPADs per section versus the offsetting precedent of eight.
Speaker Change: 2025, we'll see the drilling of one more for wealth had expected expected to come online later in the year.
Speaker Change: Yeah. So performance continues throughout subsequent development programs will give consideration to either moderating the pace of development or expanding our facility both of which would be a compelling options and provide excellent economic returns.
Speaker Change: For 2025, we forecast our Muslim asset to journey and generate $150 million of free operating income after capital expenditures.
Speaker Change: Significant achievement, considering we spud our first well into this asset just over a year ago in late 2023.
Speaker Change: Okay cool.
Speaker Change: Drill another four well pad in the southeast portion of our acreage in 2025, which is a follow up to our two successful three well pads at wider spacing of six wells per section versus the offsetting precedent of eight.
Speaker Change: Approximately 20 kilometers to the northwest we just bought a three well pad targeting the D. Three D, two and lower middle Montney and a triple bench configuration.
Joey Wong: Approximately 20 kilometers to the northwest, we've just spot a three WELPAD targeting the D3, D2, and lower middle money in a triple bench configuration. This portion of our acreage lends itself to this approach given the observed high porosity in each of the three benches. Results from this pad are expected in mid 2025.
Speaker Change: This portion of our acreage lends itself to this approach given the observed high porosity in each of the three benches.
Speaker Change: From this pad are expected in mid 2025.
Joey Wong: At Latour, progression of technical due diligence, planning, and design work is well underway. Everything is coming together as expected, and we still expect to bring the facility on production in late 2026 or early 2027. Well activity has been and will remain targeted until we're ready to drill startup wells beginning sometime in 2026. Information gathered along the way will inform our overall development plans in both the near and longer term.
Speaker Change: About the Tor progression of technical due diligence planning and design work is well underway.
Speaker Change: Everything is coming together as expected and we still expect to bring the facility on production in late 2026 or early 2027.
Speaker Change: While activity has been and will remain targeted until we're ready to drill startup wells beginning sometime in 2026 information gathered along the way, we'll inform our overall development plans in both the near and longer term.
Speaker Change: Lastly, we are just about to money wells at Berlin as follow ups to our successful 2023 results.
Joey Wong: Lastly, we have just spot two money wells at Berlin as follow-ups to our successful 2023 results. While the economic returns of these wells fit nicely within our portfolio, the limited running room has the area limited to smaller programs at this time while we evaluate a potential expansion of a larger activity set in the years to come. These wells produce into available capacity at third party infrastructure, and we expect these wells to come online sometime in early 2025.
Speaker Change: While the economic returns of these wells fit nicely within our portfolio. The limited running room has area limited to smaller programs at this time, while we evaluate a potential expansion of a larger activity set in the years to come.
Speaker Change: These wells produce into available capacity at third party infrastructure and we expect these wells to come online sometime in early 2025.
Chris Bullin: With that, I will now pass it over to Chris Bullin, Vice President of our East Division, to talk about our conventional assets. Thanks, Joy. On the conventional side of our business, we are also building on the strengths of a very successful 2024 operational year that has delivered outperformance relative to our expectations across our focus plays, along with advancing inventory enhancements initiatives. In 2025, we plan to drill 190 wells across Alberta and Saskatchewan. This low decline high net back asset base is a key differentiator for us as it provides 70% of our corporate free cash flow and provides white gap with a strong foundation for long term sustainability and profitability.
Speaker Change: With that I will now pass it over to Chris Baldwin Vice President of our East Division to talk about our conventional assets.
Chris Baldwin: Thanks Joanne.
Chris Baldwin: On the conventional side of our business. We are also building on the strengths of a very successful 'twenty 'twenty four operational year that has delivered outperformance relative to our expectations across our focused players along with advancing inventory enhancements initiatives in 2025, we plan to drill 190 wells across Alberta, and Saskatchewan This slow decline.
High Netback asset base is a key differentiator for us as it provides 70% of our corporate free cash flow and provides whitecap with a strong foundation for long term sustainability and profitability. Thanks.
Chris Bullin: Thanks to our active capital programs and exceptional technical teams, progression of efficiencies has continued and is expected to continue in the years to come, boosting the already strong economics and extending the lifespan of these assets. In Alberta, we will drill 30 wells next year, mainly targeting the Glockenite in southwestern Alberta and the Cardium at West Pemana. Our momentum in the Glockenite play continues with the successful drilling of three monobores, reducing costs by 10% per well, a key enhancement initiative. Following a detailed operational and geological review, including analysis of our recent operating results, we plan to utilize monobores on the majority of our 2025 location.
Chris Baldwin: Thanks to our active capital programs and exceptional technical teams progression of efficiencies has continued and is expected to continue in the years to come boosting the already strong economics and extending the lifespan of these assets.
Chris Baldwin: In Alberta will drill 30 wells next year, mainly targeting the glauconite in south Western Alberta, and the Cardium West Pembina.
Chris Baldwin: Our momentum in the Glauconite play continues with the successful drilling of three mono bores, reducing cost by 10% per well a key enhancement initiative.
Chris Baldwin: Following a detailed operational and geological review, including analysis of our recent operating results we plan to utilize mono bores on the majority of our 2025 locations.
Chris Bullin: Success for more 2025 program would give us enough confidence to apply this approach on the majority of our remaining inventory, resulting in improvement in NPV10 and lowering our development costs as part of our 5-year plan. This is another example of continued efficiencies gained on our operated assets and is a testament to our commitment and culture of continuous improvement. In addition to these improvements, we are also seeking to expand our prolific Glockenite inventory set with targeted delineating aviation wells, along with advancing secondary plays, including the Ellersley, Spirit River, and Belly River, given our enviable land position.
Access from our 2025 program would give us enough confidence to apply this approach on the majority of our remaining inventory, resulting in improvement in NPV 10.
Chris Baldwin: And lowering our development cost as part of our five year plan.
Chris Baldwin: This is another example of continued efficiencies gained on our operated assets and is a testament to our commitment and culture of continuous improvement. In addition to these improvements. We're also seeking to expand our prolific lock in IC inventory set with targeted delineation wells along with advancing secondary plays including the allergy Spirit River.
Chris Baldwin: And belly river, given our enviable land position.
Chris Bullin: In Western Saskatchewan, we have planned 100 wells, 79 of which target light oil and the Viking formation, with the balanced targeting our low decline and hassle recovery prospects in southwest Saskatchewan. In the Ellers area, we are continuing to test extended reach horizontal wells with laterals up to 1.5 miles as a key enhancement initiative to improve upon capital efficiencies by reducing overall development capital. At current prices, we expect these wells to pay out in only 11 months, making this program highly efficient. In eastern Saskatchewan, we are targeting the Provisher Formation with 39 planned wells. As discussed at length, the economics of these wells are top-design, and we are always looking for ways to expand our inventory on this asset.
Chris Baldwin: In Western Saskatchewan, we have planned 100 wells 79 of which target light oil in the Viking formation with a balanced targeting our low decline enhanced oil recovery prospects in southwest Saskatchewan.
Chris Baldwin: In the <unk> area, we're continuing to test extended reach horizontal wells with laterals up to 1.5 miles as a key enhancement initiative to improve upon capital efficiencies by reducing overall development capital.
Chris Baldwin: At current prices, we expect these wells to payout in only 11 months, making this program highly efficient.
Chris Baldwin: In eastern Saskatchewan, we're targeting the Frobisher formation with 39 planned wells as discussed at length. The economics of these wells are top decile and we're always looking for ways to expand our inventory on this asset one such enhancement initiative has been to target. The state aid formation via open hole multilateral drilling design. This data is a much tighter part.
Chris Bullin: One such enhancement initiative has been to target the state-A formation by an open-hole multilateral drilling design. The state-a is a much tighter part of the upper-provisher formation and therefore has not been targeted historically. Our first open-hole multilateral targeting this zone is showing promising early results. And if successful, could significantly extend the lifespan of this asset with the potential to add approximately two to three years of highly economic wells to our inventory set in our eastern Saskatchewan region. At our Rogue Class CO2 Enhanced Oil Recovery Project in Waverings, Saskatchewan, we will drill 21 wells next year, which include the mix of new phase rollouts and in-fill wells within the Wavering Unit.
Chris Baldwin: The upper upper Frobisher formation, and therefore has not been targeted historically, our first open hole multilateral targeting this one is showing promising early results and if successful could significantly extend the lifespan of this asset with the potential to add approximately two to three years of highly economic wells to our inventory set.
Chris Baldwin: Eastern Saskatchewan region.
Chris Baldwin: At our World Class C O two enhanced oil recovery project in waiver in Saskatchewan will drilled 21 wells next year, which includes a mix of new phased rollouts and infill wells within the waiver and unit we've seen strong results from our C O two.
Chris Bullin: We have seen strong results from our CO2 flood rollout programs over the past four years, with this property being a significant contributor to the free-catchable generation of the company.
Blood rollout programs over the past four years with this property being a significant contributor to the free cash flow generation of the company with that I'll turn it back over to grant for his closing remarks.
Grant Fagerheim: With that, I will turn it back over to Grant for his closing remarks. Thanks, Chris, and Joy for your remarks. Looking back at our accomplishments over the past several years, we are pleased with the strong foundation we've laid for 2025 and for years to come. The asset base that we've assembled, combined with the technical rigor and analysis that our teams contribute to the planning, execution, and analysis basis of our programs, has yielded very strong results. Our 2025 budget is a reflection of this, and we are looking forward to executing on our plans. The backdrop for Canadian oil and gas is positive as the recent completion of the transplant pipeline expansion and the initial flows through the coastal gasoline pipeline to the LNG Canada facility will provide access and better pricing to global markets.
Grant Han: Thanks, Chris enjoy for your remarks looking back at her accomplish called accomplishments over the past several years. We are pleased with the strong foundation, we've laid for 2025 and for years to come the asset base that we've assembled combined with the technical rigor and analysis that our teams contribute to the planning execution and analysis phases.
Chris Baldwin: All of our programs.
Chris Baldwin: Very strong results for 2020 budget is a reflection of this and we're looking forward to executing on our plans as the backdrop for Canadian oil and gas is positive. There was a recent completion of the Trans mountain pipeline expansion and the initial closer to coastal gasoline pipeline to the LNG, Canada facility will provide access.
Chris Baldwin: And pricing better pricing to global markets.
Grant Fagerheim: WhiteCAP is committed to responsible development of our resources while providing strong returns to our shareholders. Again, in 2025, we will return a minimum of over 400 million in base dividends back to our shareholders in addition to sustainable production for share growth. Our budget will remain flexible to changes in commodity prices as we are able to quickly scale back our programs at lower prices or increase our program spending with higher prices. We are committed to balanced growth with enhanced returns to shareholders at higher prices. Our priority is to generate long-term sustainable and profitable growth and are excited to build upon the success that we've achieved today.
Chris Baldwin: <unk> is committed to responsible development of our resources, while providing strong returns to our shareholders again in 2025, we will return a minimum level.
Chris Baldwin: Over 400 million and dividends.
Chris Baldwin: Dividends back to our shareholders. In addition to sustainable production per share growth.
Chris Baldwin: Our budget will remain flexible to changes in commodity prices as we were able to quickly scale back our programs at lower prices or increase our program spending with higher prices. We are committed to balanced growth with enhanced returns to shareholders at higher prices. Our priority is to generate long term sustainable and profitable growth and we're excited to build.
Chris Baldwin: Upon the success that we've achieved to date.
Grant Fagerheim: I would also like to provide a huge thank you to our employees and contractors for your relentless efforts to bring success to Whitecap. Not only do these individuals prioritize results, they place even greater emphasis on safety and the betterment of the communities in which we live in poverty. In addition, our employees have also been very involved in various community fundraising initiatives and volunteering initiatives through the summer months and now into the fall. We're on to pass good fortunes on to what they enjoy with others.
We'd also like to provide a huge thank you to our employees and contractors for your relentless efforts to bring success to whitecap.
Chris Baldwin: Not only do these individuals' prioritize results, they're placing an even greater rate emphasis on safety and the betterment of the communities in which we live and property.
Chris Baldwin: In addition, our employees have also been very involved in various community fund raising initiatives.
Chris Baldwin: And volunteering initiatives through the summer months and now into the fall. We were very proud of this initiative at our employees take onto Paas, good fortunate onto what they enjoy but others.
Sylvie: With that or no, turn the call over to the operator, Sylvie, for any questions.
Chris Baldwin: With that I'll now turn the call over to the operator Sylvia for any questions. Thank you. Thank.
Sylvie: Thank you. Thank you, sir.
Thank you Sir.
Sylvie: Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your Georgetown phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. And if using a speaker phone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions.
Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your that you will then hear a prompt and Yohan has been raised Jewish to decline from the polling process. Please press star followed by two and if you're using a speaker phone you'll need to lift the handset before pressing any keys. Please go ahead Brett.
Brett: I don't know if you have any questions.
Travis Wood: And your first question will be from Travis Wood at National Bank. Please go ahead. Yeah, good morning, and thanks for the detailed remarks there, guys. Two areas I want to focus on. First, at Maduro, is growth there limited by infrastructure or is it inventory based as you think about kind of the five-year plan expansion possibilities?
Speaker Change: And your first question will be from Travis Wood at National Bank. Please go ahead.
Travis Wood: Yeah, good morning, and thanks for the detailed remarks there guys.
Travis Wood: Two areas I wanted to focus on first at Maestro is growth, they're limited by infrastructure or is it a is it inventory base as you think about kind of the five year plan expansion possibilities.
Joey Wong: Yeah, I can take that one there. Joey Wong here. So the answer to it is, it's going to be a little bit of both. You know, when you build out a facility, you have to take into account what kind of a runway you're building for or what kind of a horizon you're looking for in the Maduro area, you know, somewhere in that range of 50 to 60 inventory locations. We were figuring the facility right now at a 20,000 BOE's per day capacity. It's about that right duration to have us not over-capitalizing and not also pinched.
Travis Wood: Yes, I can take that one there Joey wrong here so.
Travis Wood: The.
Speaker Change: The answer to it it's going to be a little bit of both you know when you build out a facility you have to take into account what kind of a runway here building for what kind of a horizon youre looking for and the mazo area somewhere in that range of 50 to 60 inventory locations. We were figuring the facility right now at its 20000 Boe's per day capacity.
Speaker Change: It's about that rate duration to have us not over capitalizing or not also pinched.
Speaker Change: Again that said you know as I mentioned in the remarks there we.
Joey Wong: Again, that said, you know, as they mentioned in the remarks there, we do have some pretty impressive results here. So we would give consideration to, like you mentioned, either drawing out that capital cadence and thereby just improving capital efficiencies, which is great, or doing some targeted dev bottleneck in which could marginally increase. We're not talking about like a doubling or anything like that on the facility.
Speaker Change: We do have some pretty impressive results here.
Speaker Change: So we would give consideration to like you mentioned, either drawing out that capital cadence and thereby just improving capital efficiencies, which is which is great for doing some targeted debottleneck, which could.
Speaker Change: Marginally increase, but we're not talking about like a doubling or anything like that on the facility.
Speaker Change: Okay. Okay, perfect and then just shifting to la Torre M. Obviously, it's kind of within the longer range plan from a growth perspective, but you talk about some due diligence through 2025.
Travis Wood: Okay, perfect.
Travis Wood: And then just shifting to the tour, obviously it's kind of within the longer-range plan from a growth perspective, but you talk about some due diligence through 2025.
Joey Wong: What are those and kind of what types of things should we be looking for as you go through that in 2025 and how will you benchmark those? That's Travis Joey again. Thanks for that question as well. Yeah, so it's going to be a mix of observation of technical data that we see off of our lands. Of course, there are operators around us and then operations on our land. So, as you're aware, we're drawing the two wells this year and the two wells next year. And those are very intentional wells where we're going to be trying to ensure that we have a full understanding, not just airy like throughout the land base, but then within that vertical stack of how the performance is going to be.
Speaker Change: What are those and kind of what what types of things should should we be looking for as you go through that in 2025, and how would you benchmark those.
I tried to show you again, thanks for that question as well yeah. So it's going to be a mix of observation of technical data that we see off of our lands of course theres operators around us and then operations on our land so.
Speaker Change: As you are aware, we're drilling the two wells this year and the two wells next year and those are those are very intentional wells, where we were going to be.
Speaker Change: Trying to ensure that we have a full understanding not just really liked it throughout the land base, but then within that vertical stack of how the performance is going to be and to us. It's not just the performance on our well delivery point of view. It's also on execution, so making sure that as we look to develop this area pretty materially.
Joey Wong: And two of us is not just the performance on a well-delivery point of view. It's also an execution, so making sure that as we look to develop this area pretty materially, as we're at full fill-up mode there with a couple of rigs running in the area specifically, that we are running in a pretty narrow range of expectations, like you say on both the inputs and the outputs. So it's going to be a mix of everything from a technical point of view. Okay. Appreciate the color on both of those.
Speaker Change: As where they are.
Speaker Change: Full fill up mode, there with a couple of rigs running in the area specifically.
Speaker Change: But we are.
Speaker Change: Running at a pretty narrow range of expectations like I say on both the inputs and outputs. So it's going to be a mix of everything.
Speaker Change: From a from a technical point of view.
Speaker Change: They're trying to.
Speaker Change: Okay.
Speaker Change: Appreciate the color on both of those I will turn it back.
Travis Wood: I'll turn it back.
Patrick O'rourke: Thank you.
Speaker Change: Thank you next.
Patrick O'rourke: Next question will be from Patrick O'Rourke at ATB Capital Markets.
Speaker Change: Next question will be from Patrick.
Speaker Change: <unk> capital markets. Please go ahead.
Thanh Kang: Please go ahead. Hey guys, good morning, and thank you for taking my question. I guess first thing I just like to understand is with the 2025 budget, you talk about $400 million, maybe a little bit more than that in dividend payments. And if you take the midpoint, you probably have a bit of excess free cash flow beyond that. Can you maybe speak to your priorities on that excess free cash flow between, you know, continuing to whittle away at the debt, share buybacks, and then, you know, perhaps what the parameters around dividend growth would be. And what sort of time frame investors would be thinking about you evaluating those on?
Patrick: Hey, guys. Good morning, and thank you for taking my question I guess.
Patrick: First thing I'd, just like to understand is with the 2025 budget.
Speaker Change: You talked about $400 million, maybe a little bit more than that in dividend payments and if you take the midpoint you probably have a bit of excess free cash flow beyond that can you maybe speak to your priorities on that.
Speaker Change: Excess free cash flow between you.
Speaker Change: Continuing to whittle away at the debt.
Speaker Change: Share buybacks and then perhaps what the parameters around.
Speaker Change: Dividend growth would be and what sort of timeframe investors would be thinking you're evaluating those on.
Yeah.
Thanh Kang: Sure.
Speaker Change: Sure. Thanks, Patrick its a ton here with.
Thanh Kang: Thanks, Patrick. It's a ton here. With respect to the dividend, we're certainly comfortable around the sustainability of it. And what I mean by that is we look at it being fully funded, both the dividend and our maintenance capital down to $50 WTI and $2 gas. Longer term, we do want to increase the dividend consistent with our targeted growth rate. You know, in that 3 to 8% production for share growth.
Speaker Change: With respect to the dividend, we're certainly comfortable around.
Speaker Change: The sustainability of it and what I mean by that is we look at it being fully funded both the dividend and our maintenance capital down to $50 W Ti and $2 gas.
Speaker Change: Longer term, we do want to increase the dividend consistent with our targeted growth rate.
Speaker Change: In that 3% to 8% production per share growth.
Thanh Kang: At this time, though, given the yield at about 7% and where WhiteCab is currently trading at, our focus would be on share buybacks. When we look at our return of capital framework being 75% of our free cash flow, this would be after our capital spending of, you know, about 1.1 to 1.2 billion there. So 75% back to our shareholders in the form of either dividends or share buybacks. You know, we think that's a healthy return back to our shareholders there.
At this time, though given the yield at about 7% and were white cap is currently trading at our focus would be on share buybacks.
Speaker Change: When we look at our return of capital framework being 75% of our free cash flow. This would be after our capital spending of about $1 one to $1 2 billion there.
Speaker Change: So 75% back to our shareholders in the form of either dividends or share buybacks.
Speaker Change: We think that's a healthy return back to our shareholders. There. So it's important for us to continue to improve our balance sheet is in excellent shape right now, but we will still continue to direct 25% of our free cash flow.
Thanh Kang: So it's important for us to continue to improve our balance. I mean, it's in excellent shape right now, but we'll still continue to direct 25% of our free cash flow back to the balance sheet. And this will allow us to capture future opportunities, including a more aggressive share buyback program as we think about the business going forward here.
Speaker Change: Back to the balance sheet and this will allow us to capture future opportunities, including a more aggressive share buyback program as we think about the business going forward here.
Thanh Kang: Okay, thank you. And then just on the operational side, maybe this is a little bit further on some of the questions that Travis was asking. But, you know, I look back to the 2024 budget and the well allocation between the DuVernay and the Monty favored the Monty in terms of the number of spuds that were forecast there. This year, it's sort of reversed. And, you know, almost completely flipped in terms of the ratio.
Speaker Change: Okay. Thank you and then just on the operational side, maybe just a little bit further on some of the questions that Travis was asking but.
Speaker Change: I look back to the 2020 for budget.
Speaker Change: And the allocation between the Duvernay and the Montney favored the Montney in terms of the number of spuds that were forecast there this year, it's sort of reverse.
Speaker Change: Almost completely flipped in terms of the ratio and I'm wondering what is the key driver. There is that is this an economic view or is this more about managing kind of the.
Joey Wong: And I'm wondering, you know, what is the key driver there? Is that an economic view or is this more about managing kind of the infrastructure and timing of infrastructure additions and/or the inventory as you spoke to before? Yeah, I can take that one there as well as Joey here.
Speaker Change: The infrastructure and timing of infrastructure additions.
Speaker Change: And or the inventory as.
Speaker Change: You spoke to before.
Joy Warm: Yes, I can take that one there as well as Joey here.
Joey Wong: So, yeah, the answer to that one is pretty simple. And actually, yeah, right in contained in your question there. It's both economics and infrastructure, as we're all aware. We've seen some really compelling results from the area on our operated lands. And as we've noted, we found some pretty good efficiencies along the way on the execution side. So, with respect to that available capacity as it stands right now, we have a plan that's currently putting through about 110 million a day of gas on a raw basis. So by the time we then utilize that available offload that we spoke to at the nearby third-party plant, we have the ability to get up to about 200 million a day out of the area.
Speaker Change: So yes, the answer to that one is pretty simple and actually contained in your in your question. There. It's it's both economics and infrastructure.
Speaker Change: As we're all aware we've seen some really compelling results from the area on our operated lands and as we've noted we found some some pretty good efficiencies along the way on the execution side.
Speaker Change: So with respect to that available capacity as it stands right now we have a plant. That's currently putting through about 110 million a day of gas on a raw basis. So by the time. We then utilize that available off load that we spoke to at the nearby third party plant, we have the ability to get up to about 200 million a day out of the area. So that'll take our.
Joey Wong: So that'll take our production from, you know, in and around that 20,000 BUE's a day that we're seeing right now up to something in the range of 30 to 35,000 BUE's a day or slightly higher than that.
Speaker Change: <unk> from in and around that 20000, Boe's a day that were <unk>.
Speaker Change: Right now that there's something in the range of 30 to 35000, Boe's, a day or slightly higher than that so.
Joey Wong: So really, it's just like I say, a matter of taking advantage of really good inventory and available infrastructure.
Speaker Change: So really it's just like I said, a matter of taking advantage of really good inventory and available infrastructure.
Luke Davis: Okay, thank you very much. Thank you.
Speaker Change: Okay. Thank you very much.
Speaker Change: Yes.
Speaker Change: Thank you next question will be from Luke Davis Raymond James. Please go ahead.
Luke Davis: Next question will be from Luke Davis at Raymond James. Please go ahead. Yeah, thanks.
Luke Davis: Yes. Thanks. Good morning, guys. Just a quick question on the 2025 guidance.
Luke Davis: Just a quick question on the 2025 guidance. You know, the run rate on liquids ratio within corporate volumes is about 65%. There's a Q3 couple point drop into 2025, and you kind of know how to perform it across the board on the liquid side of things. So is that a function of a higher weighting to drilling in the west part of the business?
Luke Davis: The run rate on liquids ratio within corporate claims is about 65% of Q3 couple of point drop into 2025, and you kind of noted outperformance across the board on the liquid side of things. So that's been a function of a higher weighting to drilling.
Speaker Change: And the worst part of the business.
Luke Davis: Is it a function of, you know, facility constraints, or something else that I'm not thinking about?
Speaker Change: Is it a function of.
Speaker Change: Facility constraints or something else I'm not thinking about.
Joey Wong: Yeah, Luke, Joey Wong here. Yeah, that's just going to come as a result of the balance of the capital program. Like you indicated, there's nothing that's holding us back on a facility or infrastructure side. When it comes to allocating that capital right now, of course, given the commodity prices in front of us, you know, you can kind of see that in how we prioritize, specifically, our unconventional development is targeting those liquids-anchored inventory sets there. And then, of course, like we identified there, with a healthy amount, roughly half going to the conventional side to keep that roughly flat and including the 75 to 80% liquid that we're seeing on that side.
Speaker Change: Yes totally wrong here.
Speaker Change: It's going to come as a result of that.
Speaker Change: The balance of the capital program like you are like you indicated there's nothing that's holding us back on a on a facility or infrastructure side. When it comes to allocating that capital right now of course, given the commodity prices in front of us.
Speaker Change: You can kind of see that and how we would prioritize specifically our unconventional development is targeting those liquids anchored.
Speaker Change: Inventory sits there and then of course like we are identified there with a healthy amount roughly half going to the conventional side.
Speaker Change: Keep that are roughly flat and including the 75% to 80% liquids that we're seeing on that side.
Thanh Kang: Yeah, and the only thing I'd add there, Luke, is that, you know, this year we're averaging about 64% liquid. And there's a slight decline to that, obviously, as we continue to build out the mountain in the Duvernay. And that's expected to average about 63% in 2025.
Speaker Change: Yeah, and the only thing I'd add there Luke.
Speaker Change: Luke is that you know this year, we're averaging about 64% liquids slight declines that obviously as we continue to build out the montney the duvernay and that's expected to average about 63% in 2025.
Luke Davis: That's helpful. Thanks, and I guess, just beyond that would you expect any material changes.
Luke Davis: That's helpful, thanks.
Michael Spiger: And I guess just, you know, beyond that, would you express any material changes, you know, through the back end of 2025 or in the 2026? You mean in terms of the liquids waiting there, Luke? That's right. Yeah. Just given how the digital is structured. Yeah, you know, as we look at our five-year plan, you know, that decreases to somewhere in that 60% at the end of the five years. So still, the majority of our, you know, production as well as our cash loads are driven by the liquid support of it. So it'll go from 64% currently to 63%, and ultimately to about 60% at the end of the five years.
Speaker Change: Through the backend of 2025 or or in 2020.
Speaker Change: You mean in terms of the liquids weighting there Luke.
Speaker Change: That's right yeah.
Just given how the royalty structure.
Speaker Change: Yeah, you know as we look at our five year plan.
Speaker Change: Decreases to somewhere in that 60% at the end of the five years. So still the majority of our production as well as our cash flows are driven by the liquids portion of it. So it will go from 64% currently to 63 of it ultimately to about 60% are.
Speaker Change: At the end of the five years.
Michael Spiger: Great, couple.
Speaker Change: Great. That's helpful. Thank you.
Sylvie: Thank you. As a reminder, ladies and gentlemen, if you have any questions, please press star followed by one on your Dutch telephone.
Thank you.
Speaker Change: As a reminder, ladies and gentlemen, if you have any questions. Please press star followed by one on your Touchtone phone.
Michael Spiger: And your next question will be from Michael Spiger at HTMResearch. Please go ahead. Well, guys, thanks for taking my question. Congrats on the performance of the corridor. You'll have to see it.
Speaker Change: And your next question will be from Michael Spike at HCM Research. Please go ahead.
Michael Spike: Good morning, guys. Thanks for taking my question Congrats.
Michael Spike: Congrats on the outperformance this quarter, you'll have to see it I just have a question on that 2025 capital budget any unconventional business unit. It looks like you guys are planning on spending about $575 million at the midpoint.
Thanh Kang: I just have a question on the 2025 capital budget in the unconventional business unit. It looks like you guys are planning on spending about 575 million at the midpoint to drill and complete around kind of 32 wells. Do you guys have any color just around the balance of that allocation towards infrastructure projects and half-cycle spending, so drilling and completion spending, and what kind of, I estimate, kind of $250 million would go towards full cycle spending and what projects that'll tackle.
Michael Spike: To drill and complete around kind of 32 wells.
Michael Spike: Do you guys have any color just around the balance of that allocation towards infrastructure projects and half cycle spending so drilling and completion spending in and what kind of I estimate kind of 200 $250 million will go towards full cycle spending and what what projects.
Michael Spike: That will tackle thanks, guys.
Thanh Kang: Thanks. Yeah, I'll take a first crack at that here.
Speaker Change: Yeah, I'll take a first crack at that here. It's taught it enjoy can comment more on the details there so within our $1 one to $1 2 billion, there's about $165 million or 14% of our budget that we're allocating towards infrastructure spending there and that's split between about 95.
Thanh Kang: It's a ton, and then Joey can comment more in the details there. So within our 1.1 to 1.2 billion, there's about 165 million, or 14% of our budget, that we're allocating towards the infrastructure spending there. And that's lit between about 95 million on our unconventional, which is really around compression and water handling. And then the remainder 65 million on our conventional assets. And that's really just normal course, optimization, and initiatives. So pretty similar, I would say, to what we allocated in 2024 at about 150 million. But that would be, you know, where the bulk of the capital and the infrastructure is being allocated towards.
Speaker Change: On her unconventional which is really around compression and water handling and then the remainder of $65 million on our conventional assets and that's really just normal course.
Speaker Change: <unk> initiatives, so pretty similar I would say to what we allocated in 2024 at about $150 million, so that would be where the bulk of the capital and the infrastructure is being allocated towards.
Speaker Change: Yes.
Michael Spiger: Any other questions, Sylvie? Michael, did you have any further questions? No, thanks.
Speaker Change: Any other questions Sylvia.
Speaker Change: Michael did you have any further questions.
Michael Spike: No no. Thanks.
Grant Fagerheim: Thank you. And at the time of the Fagerheim, we have no other questions registered.
Michael Spike: And that the financial figures, we have no other questions registered please proceed.
Grant Fagerheim: Please proceed. Okay, well, thank you, Sylvie. And we want to thank everyone for joining us and listening in today, wishing you all the best. And we look forward to continuing success and coming back to the success that we've been having today. Thanks very much for listening in.
Speaker Change: Okay, well, thank you Sylvia.
Michael Spike: Thank everyone for joining us and listening in today.
Michael Spike: Wishing you all the best and we look forward to continued success in coming back to them.
Michael Spike: The success, we've been having today, thanks very much for listening in.
Sylvie: Thank you, sir.
Speaker Change: 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 could you. Please disconnect your lines.
Sylvie: 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.
Speaker Change: Okay.
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