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 everybody wants to Whitecap resources Q3, 2024 results and 2020 budget conference call.
Sylvie: Good morning, 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, and I would like to turn it over to Whitecap's President and CEO, Mr. Grant Fagerheim.
All lines have been placed on mute to prevent any background noise.
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 Star then the number one on your telephone keypad and if you would like to withdraw your question. Please press Star then number two.
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 of business development and information technology Demob forget.
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, Ton Kang; our Senior Vice President, Business Development and Information Technology, David Mombourquette; our Senior Vice President, Production Operations, Joel Armstrong; our Vice President of the West Division, Joey Wong; and our Vice President, East Division, Chris Bullin. 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.
Our senior Vice President production operations Joel Armstrong.
Speaker Change: This presented the West Division Joy warm and our Vice President East Division Chris Board.
Speaker Change: When 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.
Grant Fagerheim: I, 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. In particular, our liquid's production continues to outperform our expectations as condensate production for our mountainous assets at Masro and juvenile assets at K-Bog, as held in better than we had expected, and we continue to see strong production from our Southeast Saskatchewan for the Versa Drilling Program. We invested $273 million to drill 67 wells, 63.8 net wells, resulting in $136 million, a pre-fund slow generated in the core.
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 re per day 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 Martin and Montney assets at muscle and 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 a free funds flow generated in the quarter.
Grant Fagerheim: And $350 million of pre-fund slow generated for the nine months of 2024. 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 bid. 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 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.
Speaker Change: $350 million of free funds flow generated for the nine months of 2024, we've returned over $200 million to shareholders during the third quarter, including $108 million of dividends and $117 million of share repurchases on a mine of course issue a bit.
Speaker Change: Our asset level performance and operational execution has exceeded our expectations.
Speaker Change: The first nine months of 2024.
Speaker Change: Presently we're tracking above our previous annual guidance of 167 to 172000 [noise] theory per day, and now expect to average 172500 <unk> per day and our third.
Speaker Change: Production guidance.
Speaker Change: The increase for the year.
Grant Fagerheim: Turning to 2025, our budget plan incorporates our current well-designed and development strategies that have led to operational success so far in 2024. 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.
Speaker Change: Turning to 2025 her 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 76000.
Speaker Change: 280000, B per day, representing 5% per share growth at the midpoint of the range.
Speaker Change: Our capital allocation process is integrated in the regions.
Speaker Change: Per capital Cross.
Speaker Change: Both of our divisions, focusing on capital and profitability.
Our 2025 capital investments split evenly between our unconventional and conventional assets, but that's a highly economic inventory.
What types of assets and is optimized for long term sustainability for.
Grant Fagerheim: 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. Historically, we have had great success finding ways to improve our conventional inventory through updated drawing designs, longer laterals. Refine 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.
Speaker Change: For 2025, our focus on our conventional assets just to maintain production between 110 to 115000 Boe 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 designs and longer laterals.
Speaker Change: Refined 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.
Grant Fagerheim: On our unconventional asset base, which includes our Montany and Doverney assets. In 2025, we are focused on maximizing throughput of our operated facilities, a muzzle and k-bomb, as we build out our next phase of growth at the tour for start-up in 2009. 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: 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 keyboard.
Speaker Change: Build out our next phase of growth and a tour for start up in 2027.
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 are forecasted to grow at an annual rate between 10 to 15.
Speaker Change: Percent well into the future Joey.
Grant Fagerheim: Joey and Chris will provide additional details on our 2025 plans for each division. I will now pass this on to Tonne for further discussing our financial results at our 2025 budget.
Speaker Change: Joey and Chris will provide additional details on our 2025 plans for each division.
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 flow was strong at 409 million or 68 cents per diluted share. WTI prices averaged over $100 per barrel Canadian during the quarter, as a low Canadian dollar continues to benefit Whitecap's 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 recognized 33 million in capital gains on the partial disposition of our K-BOD and Muzzle facilities in the second quarter.
Speaker Change: Thanks Grant third quarter funds flow was strong at 409 million or <unk> 68 cents per diluted share W. T. I 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 TJ on the quarter.
Speaker Change: Tribute 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 keyboard and mouse rural 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.
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.
Thanh Kang: 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.
Speaker Change: Grant mentioned, we expect to now exceed the top end of our previous guidance to average 172500 Boe's per day in 2024, which puts our Q4 production at approximately 170000 theories per day.
This takes into account the lower capex spending in the fourth quarter of $200 million and timing of production additions.
Thanh Kang: 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. Our main cost assumptions for 2025 include royalties of approximately 16%, operating cost 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 G&A 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.
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 GJ Heiko.
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 pre tax by the slope.
Speaker Change: Our G&A per Boe E. At a dollar per Bowie 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 at our assets in 2025.
Thanh Kang: 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. 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 even a ratio of only 0.5 times. With our bank credit facility now unsecured, and a public investment grade rating of triple B low by DBRS, this positions us well to issue bonds in the near term to diversify our debt structure and reduce our cost of borrowing.
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.
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.
Speaker Change: I will now pass it off to 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 performance indicators, including drilling meters per day, completions, tonnage per day, and completions water intensity. 2025 will see us building on these successes as we plan to drill 30 wells across our Montany and DuVernay focus areas of K-BOB, CAQA, Muzro, and Latour, with 34 wells expected to come online in the year.
Joy Warm: Thanks, Sean.
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 a drilling meters per day completions tonnage per day and completions water intensity.
Joy Warm: 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 Lazaro and mature with 34 wells expected to come online in the year.
Joey Wong: Growth associated with this activity is expected to be 10% year over year for 20% exit to exit, meeting our expectations of 10 to 15% annualized growth over the next 5 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. 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. 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 at that point to offload excess production to a nearby third party facility, which will occur sometime in the second half of the year.
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.
Joy Warm: And cable up we are about to bring online another five well pad, which will Mark 15 operated wells online.
Joy Warm: We are seeing results of our efforts and technical work since acquiring the asset in the third quarter of 2022.
Joy Warm: Adjustments to our development plans have included longer laterals larger casing size and the introduction of a vertical inter well offset otherwise known as wine racking or benching.
'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.
Joey Wong: 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 K-2 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. 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.
Joy Warm: Our $5 nine battery is operating at full condensate capacity and approximately 80% to 90% of gas compression capacity, resulting in overall area of production around 17000 to 18000 Boe's per day.
Joy Warm: Excluding three days of downtime in Q2 associated with brief unplanned third party interruptions run time at the facility has exceeded 99% and we are very pleased that everything is running as expected.
Joy Warm: 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.
Joey Wong: 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. 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. 2025 will see the drilling of one more for WELPAD, expected to come online later in the year.
Joy Warm: 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 that.
Joy Warm: The fourth pad is expected to come online later this year at which point, we will evaluate performance of the individual wells and prioritized throughput through the battery to maximize the overall value.
Joy Warm: 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.
Joy Warm: 2025, we'll see the drilling of one more four well pads expected expected to come online later in the year.
Joey Wong: IFO performance continues throughout subsequent development programs. We'll give consideration to either moderating the face 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.
Joy Warm: 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.
Joy Warm: For 2025, we forecast our mother of asset to journey generate $150 million of free operating income after capital expenditures.
Joy Warm: <unk> achievement, considering we spud our first well into this asset just over a year ago in late 2023.
Speaker Change: Okay, well, we're planning to 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 spud 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 Montany 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. Lastly, we have just spot two Montany 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.
Speaker Change: The tour 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.
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, we'll inform our overall development plans in both the near and longer term.
Lastly, we are just about to Montney wells that berland as follow ups to our successful 2023 results.
Speaker Change: 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.
Joey Wong: These wells produce into available capacity at third party infrastructure, and we expect these wells to come online sometime in early 2025.
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 over to Chris Bullin, Vice President of our East Division, to talk about our conventional assets.
Speaker Change: With that I will now pass over to Crystal and Vice President of our East Division to talk about our conventional assets.
Chris Bullin: Thanks, Joey. 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. 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.
Crystal: Thanks Julien.
Crystal: 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 enhancement initiatives.
Crystal: 2025, we plan to drill 190 wells and cross sell Berta in Saskatchewan. This low 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.
Crystal: 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 Bullin: In Alberta, we will drill 30 wells next year, mainly targeting the Glockenite in southwestern Alberta and the Cardium at West Pamina. 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. 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 five-year plan.
Crystal: In Alberta will drill 30 wells next year, mainly targeting the glauconite and south Western Alberta, and the Cardium at West Pembina.
Crystal: Our momentum in the Glauconite play continues with the successful drilling of three mono bores, reducing costs by 10% per well a key enhancement initiative.
Crystal: 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.
Access from our 2025 program would give us enough confidence to apply this approach on a majority of our remaining inventory, resulting in improvement in NPV 10.
Crystal: And lowering our development costs as part of our five year plan.
Crystal: 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.
Crystal: And belly river, given our enviable land position.
Chris Bullin: In western Saskatchewan, we have planned a hundred wells, 79 of which target light oil and the Viking formation, with the balanced targeting our low decline and household recovery prospects in southwest Saskatchewan. In the Elrose 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. At current prices, we expect these wells to pay out in only 11 months, making this program highly efficient. In eastern Saskatchewan, we're targeting the Provisher Formation with 39 planned wells. As discussed at length, the economics of these wells are top-design, and we're always looking for ways to expand our inventory on this asset.
Crystal: 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 and.
In the <unk> area, we're continuing to test the extended reach horizontal wells with laterals up to one five miles as a key enhancement initiative to improve upon capital efficiencies, while reducing overall development capital.
Crystal: At current prices, we expect these wells to payout in only 11 months, making this program highly efficient.
Crystal: And 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-haul 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-haul 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.
Crystal: 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 in.
Crystal: Our eastern Saskatchewan region.
Chris Bullin: At our World Class CO2 Enhanced Oil Recovery Project in Waverings, Saskatchewan, we'll drill 21 wells next year, which include the mix of new phase rollouts and infill wells within the Wavering Unit. We've seen strong results from our CO2 flood rollout programs over the past four years, with this property being a significant contributor to the pre-catchable generation of the company.
Crystal: At our World class Cotwo 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.
Speaker Change: Slide 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'll 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 2020 pipe 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.
Grant: Thanks, Chris enjoy for your remarks looking back at our accomplishments.
Grant: Accomplishments over the past several years.
Grant: 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.
Grant: Of our programs.
Grant: Very strong results.
Grant: 2020 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. There was a recent completion of the Trans mountain pipeline expansion and the initial flows through coastal gasoline pipeline to the LNG, Canada facility will provide access.
Grant Fagerheim: As a 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. 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.
Grant: And pricing better pricing to global markets.
Grant: White cap is committed to responsible development of our resources, while providing strong returns to our shareholders again in 2025, we will return a minimum level.
Grant: Over $400 million in base dividends back to our shareholders. In addition to sustainable production per share growth.
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.
Grant Fagerheim: 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. 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 and operate. 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.
Grant: Upon.
Grant: Access that we've achieved to date.
Grant: I'd also like to provide a huge thank you to our employees and contractors for your relentless efforts to bring success to whitecap not only to these individuals prioritize results. They place an even greater rate emphasis on safety and the betterment of the communities in which we live and property.
Grant: In addition, our employees have also been very involved in various community fund raising initiatives.
And volunteering initiatives through the summer months and now into the fall. We were very proud of this initiative that our employees take onto Paas, good fortunate onto what they enjoy but others.
Grant Fagerheim: We are very proud of this initiative that our employees take on to pass good fortunes on to what they enjoy with others.
Sylvie: With that or no, turn the call over to the operator, Sylvie, for any questions.
With that I'll now turn the call over to the operator Sylvia for any questions. Thank you.
Sylvie: Thank you. Thank you, sir.
Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a prompt and Johan 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 cadence.
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: Please go ahead, Brett Star one now if you have any questions.
Travis Wood: And your first question will be from Travis Wood at National Bank. Please go ahead.
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. Two areas I want to focus on first at Muzzrow are growth.
Travis Wood: Yeah, good morning, and thanks for the detailed remarks there guys.
Travis Wood: Two areas I wanted to focus on first at Monro is growth they're limited by infrastructure or is it a is it inventory based as you think about kind of the five year plan expansion possibilities.
Joey Wong: They're limited by infrastructure, or is it inventory-based as you think about 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, what kind of a horizon you're looking for. In the Muzzrow area, you know, somewhere in that range of 50 to 60 inventory locations. We were figuring the facility right now at a 20,000 views per day capacity. It's about that rate. Great duration to have us not over capitalizing and not also pinched.
Joy Warm: Yes, I can take that one there Joey wrong here so.
Travis Wood: <unk>.
Travis Wood: The answer to it is its going to be.
Travis Wood: Little bit of both you know when you build out a facility you have to take into account what kind of a runway you are 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 is about that rate duration to.
Travis Wood: Have us not over capitalizing or not also pinched.
Joey Wong: Again, that said, you know, as I mentioned in the remarks there, we do have some pretty impressive results here. So we would give consideration to, like I mentioned, either drawing out that capital cadence and thereby just improving capital efficiencies, which is great. We're not talking about like a doubling or anything like that on the facility. Okay. Perfect.
Travis Wood: Again that said you know.
Travis Wood: As I mentioned in the remarks there we.
Travis Wood: We do have some pretty impressive results here.
Travis Wood: 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.
Travis Wood: Marginally increase, but we're not talking about like a doubling or anything like that on the facility.
Travis Wood: Okay, Okay, perfect and then just shifting to a tour.
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.
Travis Wood: 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: 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?
Travis Wood: 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 will you benchmark those.
Joey Wong: 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. And so, as you're aware, we're drawing 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 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: 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.
Travis Wood: As Youre aware were 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.
Travis Wood: 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 to us, it's 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, you know, 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 I say, on both the inputs and the outputs. So it's going to be a mix of everything from a technical point of view.
Travis Wood: As you know.
Travis Wood: Full fill up mode, there with a couple of rigs running in the area specifically.
Travis Wood: Sure.
Travis Wood: Running at a pretty narrow range of expectations like I say on both the inputs and the outputs. So it's going to be a mix of everything from a from a technical point of view.
Travis Wood: Their charter.
Speaker Change: Okay I appreciate the color on both of those I will turn it back.
Travis Wood: Okay, appreciate the color on both of those. I'll turn it back.
Speaker Change: Okay.
Speaker Change: Thank you next.
Patrick O'rourke: Next question will be from Patrick O'Rourke at ATB Capital Markets. Please go ahead.
Speaker Change: Next question will be from Patrick.
<unk> capital markets. Please go ahead.
Patrick O'rourke: 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, we 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.
Patrick: You talked about $400 million.
Patrick: 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.
Patrick: <unk> to whittle away at the debt.
Patrick: Share buybacks and then perhaps what the parameters.
Patrick: Around dividend growth would be and what sort of timeframe investors should be thinking about evaluating those on.
Patrick: Okay.
Thanh Kang: Sure, 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 in that 3 to 8% production for share growth. At this time, though, given the yield at about 7% and where White Cab 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, that 1.1 to 1.2 billion there.
Speaker Change: Sure. Thanks, Patrick its a ton here with.
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 WTO and $2 gas.
Speaker Change: Longer term, we do want to increase the dividend consistent with our targeted growth rate.
Speaker Change: And that 3% to 8% production per share growth.
Speaker Change: At this time, though given the yield at about 7%.
Speaker Change: 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.
Thanh Kang: 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. So it's important for us to continue to improve our balance sheet.
Speaker Change: So 75% back to our shareholders in the form of either dividends or share buybacks.
Speaker Change: 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: 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.
Patrick O'rourke: Okay, thank you.
Speaker Change: Okay. Thank you and then just on the operational side, maybe just a little bit further on on some of the questions that Thomas was asking but you know.
Patrick O'rourke: And then just on the operational side, maybe just 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. 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 inventories you spoke to before?
Speaker Change: I look back to the 2020 for budget and the well allocation between Duvernay and the Montney favored the montney in terms of the number of spuds that we're forecasting 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 infrastructure and timing of infrastructure additions and <unk>.
Speaker Change: The inventory is.
Speaker Change: You spoke to before.
Joey Wong: Yeah, I can take that one there as well as Joey here. So, yeah, the answer to that one is pretty simple, and actually, they are right in containing your in your question there.
Speaker Change: Yes, I can take that one there as well as Joey here so.
Speaker Change: So yes, the answer to that one is pretty simple actually contained in your question. There. It's it's both economics and infrastructure.
Joey Wong: It's second; 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 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 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: 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 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. 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. So really, it's just like I said, a matter of taking advantage of really good inventory and available infrastructure.
Speaker Change: <unk> from in and around that 20000, Boe's a day.
Speaker Change: Right now that's something in the range of 30 to 35000, Boe's, a day or slightly higher than that so.
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.
Speaker Change: Okay. Thank you very much.
Luke Davis: Thank you.
Speaker Change: Yeah.
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.
Luke Davis: Please go ahead. Yeah, thanks. Just a quick question on the 2025 guidance; you know, the run rate on liquids ratio within corporate points is about 65%. There's a Q3, a couple point drop into 2025, and you kind of know how to perform it across the board on the liquid side of things. So that's not a function of higher weighting to drilling in the west part of the business. Is it a function of, you know, facility constraints, or something else that I'm not thinking about?
Luke Davis: Yeah. Thanks, Good morning, guys. Just a quick question on the 2025 guidance.
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.
Luke Davis: And in the west part of the business.
Speaker Change: Is it a function of.
Facility constraints or something else that I'm not thinking about.
Speaker Change: Yeah.
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.
Kelly long: Yes, Kelly long 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 is 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.
Speaker Change: You can kind of see that in how we prioritize specifically our unconventional development is targeting those liquids anchored.
Speaker Change: 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 are roughly flat and including the 75% to 80% liquids that we're seeing on that side.
Joey Wong: Yeah, and the only thing I'd add there, Luke, is that, you know, this year we're averaging about 64% liquids, and there's slight declines 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.
Speaker Change: The clients 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 then I guess just beyond that would you expect any material changes.
Luke Davis: That's helpful, thanks.
Luke Davis: And I guess just 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 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 percent currently to 63, and ultimately to about 60% at the end of the five years.
Speaker Change: You go through the back end of 2025 or 2026.
Speaker Change: You mean in terms of the liquids weighting there Luke.
Luke Davis: Just given how the royalty structure.
Speaker Change: Yeah, you know as we look at our five year plan.
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'll go from 64% currently to 63 is and ultimately to about 60% at the end of the five years.
Luke Davis: Great. It's helpful.
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 touch-tone phone.
Speaker Change: 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 HDM Research. Please go ahead.
Speaker Change: And your next question will be from Michael Staiger of HCM Research. Please go ahead.
Michael Spiger: One of you guys, thanks for taking my question. Congrats on your performance as a cordial off to see it. I just have a question on the 2025 capital budget in the unconventional business unit. Looks like you guys are planning on spending about 575 million at the midpoint to drill and complete around kind of 32 wells.
Michael Staiger: Good morning, guys. Thanks for taking my question Congrats.
Michael Staiger: Congrats on the outperformance this quarter, you'll have to see it I just have a question on 2025 capital budget any unconventional business unit. It looks like you guys are planning on spending about $575 million at the midpoint.
Michael Staiger: To drill and complete around 32 wells.
Thanh Kang: Do you guys have any colleges 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. Thanks, guys.
Michael Staiger: 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 estimate kind of 200 $250 million will go towards full cycle spending and what what projects.
Michael Staiger: That'll tackle thanks, guys.
Thanh Kang: Yeah, I'll take a first crack at that here. It's a ton, and then Joey can comment more on the details there. So, you know, 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.
Yeah, I'll take a first crack at that here its a ton and then Joey 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 million on our unconventional which is really around compression and water handling and then the remainder of $65 million.
Michael Staiger: On our conventional assets and that's really just normal course.
Michael Staiger: <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.
Thanh Kang: But that would be, you know, where the bulk of the capital and the infrastructure is being allocated towards.
Michael Staiger: Okay.
Sylvie: Any other questions, Sylvie? Michael, did you have any further questions?
Speaker Change: Any other questions Sylvia.
Speaker Change: Michael did you have any further questions.
Michael Spiger: No, no, thanks. Thank you.
Michael Staiger: No no.
Sylvie: And at the time of the figureheim, we have no other questions registered.
Speaker Change: Yeah.
Speaker Change: And at this time Mr figures, we have no other questions registered please proceed.
Grant Fagerheim: Please proceed. Okay. Well, thank you, Sylvie.
Speaker Change: Okay, well, thank you Sylvia.
Grant Fagerheim: And we want to thank everyone for joining us and listening in today, wishing you all the best. 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: Want to thank everyone for joining us and listening in today wishing you all the best and we look forward to continued success in coming back to.
Speaker Change: The success, we've been having today, thanks very much for listening in.
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 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 to please disconnect your lines. Thank you.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.