Q1 2025 Whitecap Resources Inc Earnings Call

Good morning, My name is Joana and that will be your conference operator today.

Joanna: My name is Joanna, and I will be your conference operator today.

Joanna: At this time, I would like to welcome everyone to Whitecap Resources' Q1 2025 Results Conference Call. All lines have been placed on mute to prevent any background noise.

Speaker Change: At this time I would like to welcome everyone to Whitecap resources Q1, 2025 results conference call. All lines have been placed on mute to prevent any background noise. After.

Joanna: 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 star then the number one on your telephone keypad.

After the Speakers' remarks, there will be a question and answer session.

Speaker Change: If he would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press Star then the number two.

Grant Fagerheim: If you would like to withdraw your question, please press star then the number I would now like to turn it over to Whitecap's President and CEO, Mr. Grant Fagerheim. You may begin your conference call.

Speaker Change: I would now like to turn it over to white caps, President and CEO. Mr. Cohen, you may begin your conference call.

Mr. Cohen: Thanks, very much sure I appreciate that and good morning, everyone and thank you for joining US there are four members of our management team here with me today.

Grant Fagerheim: Thanks very much, Joanne. I appreciate that.

Grant Fagerheim: Good morning, everyone, and thank you for joining us. There are four members of our management team here with me today.

Grant Fagerheim: Our Senior Vice President and CFO, Thanh Kang. Our Senior Vice President, Business Development and Information Technology, Dave Mombourquette. Our Senior Vice President, Production and Operations, Joel Armstrong. Our Vice President, West Division, Joey Wong, and our Vice President, East Division, Chris Bullin.

Mr. Cohen: Our senior Vice President and CFO, Tom King, our senior Vice President business development.

Mr. Cohen: And information technology came out of a kit.

Mr. Cohen: Senior Vice President of production operations Joel Armstrong.

Speaker Change: The Vice President West Division Joy, one in a race prison, each division crystal and actually their slide members of our team with US today 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 we set forth in our news release issued yesterday afternoon.

Grant Fagerheim: Actually, there's five members of our team with us today.

Grant Fagerheim: 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 yesterday afternoon. The momentum that brought us success in 2024 has continued into the first part of 2025 with excellent first quarter operational and financial results. We are very pleased with the strong asset level performance along with the team's execution of a very active 14-rig, 86-well first quarter drilling program. 2025 has started off on the right foot, and we expect that strong performance to continue through the year.

Speaker Change: Well imagine with the broad success in 2024 has continued into the first part of 2025 with excellent first quarter operational and financial results. We were very pleased with the strong asset level performance along with the team's execution of a very active fortune rig 86, well first quarter drilling.

Speaker Change: Graham.

Speaker Change: 2025 to start it off with a report and we expect to have strong performance to continue through the year.

Grant Fagerheim: First quarter production of 179,151 BUE per day was over 6,000 BUE per day above our interim forecast of 173,000 BUE per day. As production from newer wells was higher than anticipated expectations, particularly in our Montney, Duvernay, and Glockenheit assets leading the way. In addition, our base production continues to outperform our expected type curve projection over the longer term.

Speaker Change: First quarter production of 179151 theory per day with over 6000 be per day above our internal forecast of 173000 barrel per day.

Speaker Change: Production from new wells was higher than I.

Speaker Change: Expectations, particularly in our Montney Duvernay and glauconite assets, leading the way. In addition, our base production continues to outperform our type curve projections over the longer term Julien Chris will provide additional details on production Oh performance.

Grant Fagerheim: Joey and Chris will provide additional details on production outperformance.

Grant Fagerheim: With respect to the pending combination with Barron that is announced on March the 10th, a joint information circular has been filed and shareholder votes are scheduled for May the 6th. We have already received competition bureau approval and the transaction is expected to close on May the 12th. At that time or shortly thereafter, we will issue updated 2025 guidance for the combined company. We are very much looking forward to combining these outstanding assets and teams together to create a leading light oil, condensate and natural gas producer focused on improving long-term sustainability and profitability to drive superior returns to our shareholders.

Speaker Change: With respect to the pending combination with Darren but as announced were made in March the 10th.

Speaker Change: And information circular has been filed and shareholder votes are scheduled for me. The six we have already received competition Bureau approval on a drug that transaction is expected to close on May 12.

Speaker Change: At that time or shortly thereafter, we will issue updated 2025 guidance for the combined company.

We're very much looking forward to combining these outstanding assets and teams together to create a leading light oil condensate and natural gas producer focused on improving long term sustainability and profitability to drive superior returns to our shareholders our strategic priorities as we continue through the curve.

Grant Fagerheim: Our strategic priorities as we continue through the current commodity price and market volatility remain unchanged with the focus on balance sheet management and capital discipline. Our management team has been through multiple cycles, most recently through the pandemic environment in 2020 as well as in 2015-16 time period and utilizing both periods of market dislocation to help transform Whitecap into the company it is today. Maintaining balance sheet strength is a top priority which will allow us to navigate through the current market uncertainty and ensure as we continue to provide strong risk-adjusted returns to our debt and equity holders.

Speaker Change: Commodity pricing and market volatility remain unchanged with a focus on balance sheet management and capital discipline.

Speaker Change: Our management team has been through multiple cycles. Most recently through the pandemic environment in 2020 as well as in 2015 16 time period on utilizing both the periods of market dislocation to help transform wake you up into the company. It is today maintain.

Speaker Change: Maintaining balance sheet strength is a top part.

Speaker Change: Which will allow us to navigate through the curve.

Speaker Change: Certainty and insurance insurers, we continued to provide strong risk adjusted returns.

Speaker Change: Now to our debt and equity holders are balance sheet isn't exactly excellent shape at the end of the first quarter and this strength has maintained pool for the bedroom combination with forecasted net debt of $3 $5 billion at year end, which represents a debt to annualized funds flow ratio of one times at our stress.

Grant Fagerheim: Our balance sheet is in excellent shape at the end of the first quarter and this strength is maintained pro forma, the VARM combination with forecasted net debt of $3.5 billion at the year end which represents a debt to annualized funds flow ratio of one times. At our stress test case of $50 WTI and $2 April price, it would be still under 1.5 times funds flow. Consistent with past periods of commodity price weakness, we have the flexibility to optimize our capital program across both our unconventional and conventional assets to prioritize free funds flow, returning on capital, investing and balance sheet strength.

Speaker Change: Test case in a $50 <unk> and.

Speaker Change: Two dollar equal price it would be.

Speaker Change: Still under one five times our friends from.

Speaker Change: Consistent with past periods of commodity price weakness.

Speaker Change: Have the flexibility to optimize our capital program across both our unconventional and conventional assets to prioritize free funds flow returning on capital investing and balance sheet strength, what kind of a dividend is an important component of our total returns to shareholders and is fully funded.

Grant Fagerheim: Whitecap's dividend is an important component of our total returns to shareholders and is fully funded at or below $50 WTI and in combination with the strength of our balance sheet provides consistent and stable returns for shareholders through commodity price cycle. We remain focused on continuing to drive down controllable costs and increasing capital efficiencies to improve the long-term profitability and sustainability of our business. We have the asset base, processes, operating teams, and management aligned to fully successful execute on these strategic priorities.

Speaker Change: At or below $50, Adobe Ti and in combination with the strength of our balance sheet provides consistent and stable returns for shareholders through commodity price cycles.

Speaker Change: They are focused on continuing to drive down costs, and increasing capital efficiencies to improve the long term profitability and sustainability of our business we.

Speaker Change: We have the asset base.

Speaker Change: Presses operating teams and management are aligned to fully successful execute execute on these strategic priorities I will now pass it off to Joy Tomorrow's her remarks on our unconventional results.

Joey Wong: I will now pass it off to Joey for more remarks on our unconventional results. Thanks, Grant. Our unconventional Montney and DuVernay assets continue to perform exceptionally well, driven by strong execution and the growing benefits of our unconventional development workflows. These workflows, now embedded across our teams, are yielding repeatable results and informing our long-range planning efforts. At KBOB, our first wine rack pad has now reached 180 days on production, achieving an IP180 rate of 1,100 BOEs a day with 39% liquid. This is a strong result and, importantly, when viewed in tandem with observed and interpreted bottom hole flowing conditions, strengthens our confidence in this development strategy on these lands.

Hey, Brett.

Speaker Change: Our unconventional montney and Duvernay assets continued to perform exceptionally well driven by strong execution and the growing benefits of our unconventional development workflows.

Speaker Change: He's worked closely now embedded across our teams are yielding repeatable results in informing our long range planning efforts.

Speaker Change: That came up our first wine rack HUD has now reached 180 days on production achieving an I P 180 rate of 1100, Boe's a day with 39% liquids.

Speaker Change: This is a strong result, and importantly, when viewed in tandem with observed and interpreted bottom hole flowing conditions strengthens our confidence in this development strategy. On these lands are of particular interest the rate of drawdown is lower than relevant offset wells and condensate to gas ratios are being sustained at higher values than those offsets, indicating improved reservoir coverage.

Joey Wong: Of particular interest, the rate of drawdown is lower than relevant offset wells, and condensate to gas ratios are being sustained at higher values than those offsets, indicating improved reservoir coverage.

Speaker Change: Our second wine rack had recently came on line two permanent facilities and early results are promising as rates and pressures are conforming to expectations established on the first part of that.

Joey Wong: Our second wine rack pad recently came online through permanent facilities and early results are promising as rates and pressures are conforming to expectations established on the first pilot With these results in hand, we have elected to spud our third wine rack pad, the six of five pad, and look forward to further validating the design's broader application across our future inventory at Kiva. At CAQA, we've successfully drilled and completed our first triple bench pad in northwest CAQA at 16 of 17. Initial flow tests have been encouraging. observed frac behavior, including how the wells treated, and how the three benches interacted with each other and offset parent wells conformed to our expectations.

Speaker Change: With these results in hand, we have elected to spud, our third wine rack pad. The six five pad and look forward to further validating the designs broader application across our future inventory to keep up.

Speaker Change: The catwalk, we successfully drilled and completed our first triple bench pad in northwest talk about 16 or 17.

Speaker Change: And there's a flow tests have been encouraging.

Speaker Change: Observed frac behavior, including how the wells treated and how the three benches interacted with each other and also parent wells conforms to our expectations.

Joey Wong: This provides an important early validation point for this configuration.

Speaker Change: This provides an important early validation point for this configuration.

Joey Wong: The pad has been tied into permanent facilities and we look forward to sharing more information on these wells as it becomes available. Also in Kakwa, we're drilling a new four-well pad at the southeast Kakwa area using six wells per second spacing, building off the inter-well spacing success we saw in 2023. At Muzro, we did experience some brief downtime in January and February stemming from an unexpected outage on one of our four compressors at our 5-9 facility that necessitated a reduction in throughput by about 25% for just over a month. Since then, production has returned to our facility's condensate-constrained capacity of about 17,500 Buies per day.

Speaker Change: The pad has been tied into permanent facilities and we look forward to sharing more information on these wells as it becomes available.

Speaker Change: Also in CAC Lac were drilling a new four well pad at the South East Catholic area using six wells per section spacing building off the inter well spacing success, we saw in 2023.

Speaker Change: It must be wrong, we did experience some brief downtime in January and February stemming from an unexpected outage on one of our four compressors at a five nine facility that necessitated a reduction in throughput by about 25% for just over a month.

Speaker Change: Since then production has returned to our facilities condensate constrained capacity of about 17500 Boe's per day.

Joey Wong: Our next pad in the area will be drilled in the second half of 2025, with production expected in early 2026 as plant capacity becomes available. Well performance continues to impress with long-term aggregate production exceeding expectations by more than 20%. This can be attributed to both our development configuration as well as production strategy of optimizing economic well recoveries through deliberate drawdown management throughout the early productive life of the wells.

Speaker Change: Our next pad in the area will be drilled in the second half of 2025 with production expected in early 2026 has plenty of capacity becomes available.

Speaker Change: Well performance continues to impress with long term aggregate production exceeding expectations by more than 20%.

Speaker Change: This can be attributed to both our development configuration as well as production strategy of optimizing economic well recoveries through deliberate drawdown management.

Speaker Change: Throughout the early productive life of the wells.

And Ah Berland area. We have just brought on line. Another two months wells initial rates. After 90 days are just over a thousand boe's per day of which just over 500 barrels a day is condensate.

Joey Wong: In our Burland area, we have just brought online another two Monty Wells. Initial rates after 90 days are just over 1,000 BOEs per day, of which just over 500 barrels a day is condensate. These results, which exceed our internal expectations for this localized area by approximately 14%, are an important confirmatory data point.

Speaker Change: These results, which exceed our internal expectations for this localized area by approximately 14% are an important confirmatory data point.

Joey Wong: We are investigating targeted de-bottlenecking to support modest programs in this area in the years to come.

Speaker Change: We are investigating targeted debottlenecking to support modest programs in this area in the years to come.

Speaker Change: Finally, a tour or 413 facility continues to advance on schedule.

Joey Wong: Finally, at Latour, our 413 facility continues to advance on schedule. With 90% of long-lead equipment now ordered and detailed engineering well underway, we remain firmly on track for commissioning in late 2026 to early 2027. This facility will unlock 35,000 to 40,000 BOEs per day of high-impact monty production with the potential for significantly more in Phase 2. Our two recent delineation wells in the area continue to exceed expectations, which is helping to continue to build confidence in our long-term development plans in the area. The first well at 13 of 21 has now been on production for more than 180 days and has achieved an IP180 of just over 1,300 BUEs a day.

Speaker Change: With 90% of long lead equipment, now ordered and detailed engineering well underway. We remain firmly on track for commissioning in late 'twenty 'twenty six to early twenties 27. This.

Speaker Change: <unk> will unlock 35000 to 40000 Boe's per day of high impact Montney production with the potential for significantly more in phase two.

Speaker Change: Our two recent delineation wells in the area continue to exceed expectations, which is helping to continue to build confidence in our long term development plans in the area.

Speaker Change: The first well at 13 of 21 has now been on production for more than a 180 days and has achieved an IP 181 80 of just over 1300 Boe's a day.

Joey Wong: 39% liquids, including 420 barrels a day of condensate. The second well, at 13 of 35, with 120 days production, has achieved an IP120 of roughly 1,650 BOEs a day, of which 23% of liquids, including 245 barrels a day of condensate. As noted in our last earnings call, those liquid percentages would be expected to increase by 10 to 15% once they flow into deep cut facilities, which will be the case once our 4 of 13 facility is online.

Speaker Change: <unk> 39 per cent liquids, including 420 barrels a day of condensate.

Speaker Change: The second well at 13F 35, with a 120 days production.

Speaker Change: Is it cheating IP 120th of roughly 650 barrels a day of which 23% of liquids, including 245 barrels a day of condensate.

Speaker Change: As noted in our last earnings call those liquids percentages would be expected to increase by 10% to 15% once they flow into deep cut facilities, which will be the case once our 413 facility is online.

Chris Bullin: With that, I will now pass it over to Chris Bullin to talk about our conventional assets. Thanks, Joey. First quarter operational results in our conventional assets were strong, overcoming weather-related delays in February to exceed expectations across multiple regions. In particular, our essential liberticardium and gluconate assets drove a significant portion of the conventional outperformance to the first three months of the year. Of note, we observe the impact that asset-based diversification and collaboration between operating teams can have on results, as our most recent Wapiti Cardium wells are significantly exceeding initial expectations after updating our completion model, based on learnings of our unconventional program.

Speaker Change: With that I will now pass it over to Chris Bohn to talk about our conventional assets.

Chris Bohn: Thanks Joanne.

Chris Bohn: First quarter operational results and our conventional assets, where strong overcoming weather related delays in February to exceed expectations across multiple regions in particular, our central Alberta, Cardium and glauconite assets drove a significant portion of the conventional outperformance to the first three months of the year.

Chris Bohn: Of note, we observe the impact that asset base diversification and collaboration between operating teams can have on results as our most recent wapiti cardium wells are significantly exceeding initial expectations. After updating our completion model based on learnings of our unconventional program.

Chris Bullin: These are our first cardium wells drilled at Wapiti since Q4 of 2022, taking advantage of available infrastructure in the area. The first three wells with IP90 data are averaging 650 BOE per day with 81% liquids, which is 44% above our area type curve. The success here is aided by an optimized completion design, which was established using workflows from our unconventional assets. On these wells, following a detailed technical review, it was determined that we could realize superior results with tighter cluster spacing and higher profit intensity. Results from this year's development are being reviewed for read-through and application on this and similar assets.

Chris Bohn: These are our first cardium wells drilled at Wapiti since Q4 of 2022, taking advantage of available infrastructure in the area.

Chris Bohn: The first three wells with IP, United data are averaging 650 Boe per day, with 81% liquids, which is 44% above our area type curve.

Chris Bohn: Our success here is aided by an optimized completion design, which was established using workflows from our unconventional assets.

Chris Bohn: These wells following a detailed technical review it was determined that we could realize superior results with tighter cluster spacing and higher proppant intensity.

Chris Bohn: Results from this year's development are being reviewed for read through an application on this and similar assets.

Chris Bullin: It's a clear example of how cross-asset technical learning is strengthening our overall portfolio. We also exceeded our expectations with our Glockenheim program in the first quarter. Monomore drilling has now been fully implemented, delivering 10% cost savings and expanding the economic reach of our inventory. Infrastructure access improvements have also supported additional volumes and recent well results are trending above type curve. Our most recent five development wells that have over 90 days of production history are yielding an average IP90 rate of 963 BOE per day, 52% liquids per well, which exceeds our type curve expectations by 27%.

Chris Bohn: A clear example of how cross asset technical learnings is strengthening our overall portfolio.

Chris Bohn: We're also excited we also exceeded our expectations with our glauconite program in the first quarter mono bore drilling has now been fully implemented delivering 10% cost savings and expanding the economic reach of our inventory.

Chris Bohn: Infrastructure access improvements have also supported additional volumes and recent well results are trending above type curve. Our most recent five development wells that have over 90 days of production history are yielding an average IP 90 rate of 963 Boe per day, 52% liquids per well, which exceeds our type curve expectations by <unk>.

Chris Bohn: 27%.

Chris Bullin: This includes our most prolific well result to date in the glauconite with our 436 well achieving an IP90 in excess of 2,000 BOE per day with 42% liquid. We drilled 64 57.8 net wells in Saskatchewan during the first quarter with results meeting or exceeding our expectations. The depth and quality of our inventory coupled with short cycle times and strong market access provides Whitecap the flexibility to quickly augment our development activity in response to changing price environments and evolving business priorities. This adaptability strengthens our business and reinforces our competitive edge.

Chris Bohn: This includes our most prolific well results to date in the block and I with our 436, well achieving an IP 90 in excess of 2000 Boe per day with 42% liquids.

Chris Bohn: We drilled 64 57.8 net wells in Saskatchewan during the first quarter with results meeting or exceeding our expectations.

Chris Bohn: The quality of our inventory coupled with short cycle times of strong market access provides wake up the flexibility to quickly augment our development activity in response to changing price environments and evolving business priorities. This adaptability strengthens our business and reinforces our competitive edge.

Thanh Kang: I will now pass it to Thanh to further discuss our financial results. Thanks, Chris. First quarter funds flow was $446 million, or $0.75 per share, which was up 17% compared to the first quarter last year, and 7% higher than the fourth quarter of 2024. After capital expenditures of $398 million, free funds flow was $48 million. WTI averaged over $102 per barrel on a Canadian dollar basis during the first quarter, with ACO prices averaging just over $2 per GJ. First quarter operating and transportation costs total $15.92 per BOE, 2.5% lower than Q1 2024 at $16.33 per BOE and consistent with the previous quarter.

Chris Bohn: I'll now pass the baton to further discuss our financial results.

Thanks, Chris first quarter funds flow was 446 million or 75 cents per share, which was up 17% compared to the first quarter last year and 7% higher than the fourth quarter of 2024.

Chris Bohn: After capital expenditures of 398 million free funds flow was 48 million.

Chris Bohn: W. T I averaged over $102 per barrel on a Canadian dollar basis during the first quarter with April prices average, averaging just over $2 per D. J.

Chris Bohn: First quarter operating and transportation costs totaled $15 92 per BOE, a 2.5% lower than Q1 2024 at $16 33 per Boe and consistent with the previous quarter.

Thanh Kang: We incurred cash tax of $56 million, or $3.50 per BOE, equating to 11% of pre-tax funds flow. After dividends of $107 million, net debt remained below $1 billion, representing a debt to annualized first quarter funds flow of only 0.6 times. On combination with VARIN, we are forecasting net debt of $3.5 billion at year-end based on current commodity prices, and we will provide updated forecasts when the transaction closes or shortly after. A revolving credit facility is expected to increase to $3 billion from $2 billion concurrent with the closing of the Varin combination. This will provide us with greater than $1 billion of liquidity and allows us to be opportunistic with future bond issuances to provide additional liquidity if we so choose.

Chris Bohn: We incurred cash taxes of $56 million or $3 50 per Boe.

Chris Bohn: Equating to 11% of pretax funds flow.

Chris Bohn: After dividends of $107 million net debt remained below 1 billion, representing a debt to annualized first quarter funds flow of only <unk> six times.

Chris Bohn: In combination with Valeant, we are forecasting net debt of $3 5 billion at year end based on current commodity prices.

Chris Bohn: We will provide updated forecast when the transaction closes or shortly after.

Chris Bohn: Our revolving credit facility is expected to increase to $3 billion from 2 billion concurrent with the closing of the <unk> combination.

Chris Bohn: This will provide us with greater than 1 billion of liquidity and allows us to be opportunistic with future bond issuances to provide additional liquidity if we so choose.

Chris Bohn: As grant previously discussed our number one priority is to maintain our balance sheet strength through commodity price cycles.

Thanh Kang: As Grant previously discussed, our number one priority is to maintain our balance sheet strength through commodity price cycles. We do this by ensuring that we spend less than our funds flow and keep our absolute level of debt flat. Pro forma is a variant combination, our base break even where we can fund the dividend and maintenance capital is at $55 WTI and $2 acre. We can further reduce this firstly through realizations of our 210 million identified synergies on the varying combinations. Keep in mind, this does not include any infrastructure synergies which we'd look to realize longer term.

Chris Bohn: We do this by ensuring that we said less than or fund flow and keep our absolute level of debt flat.

Chris Bohn: Pro forma the Varian combination our base breakeven, where we can fund the dividend and maintenance capital is that 55 dollar W. Ti at $2 Heiko.

Chris Bohn: We can further reduce it reduce this firstly through realizations of 210 million identified synergies on the Varian combination.

Chris Bohn: Keep in mind. This does not include any infrastructure synergies, which would look to realize longer term.

Thanh Kang: Secondly, in a sub-$50 WTI environment, drilling activity slows down significantly as returns are not supportive of growth and industry production is declining. In 2020, when oil averaged $43 per barrel, we saw our DCE and T costs decrease 13 to 15 percent. If we use 10% cost deflation on capital and 5% on operating costs, we can further reduce our break-even by $280 million. Lastly, natural gas prices have recently improved owing to the increased demand as LNG Canada nears closer to first cargos and increasing North American demand through Gulf Coast LNG. AECO natural gas prices are currently trading in excess of $3 in 2026.

Chris Bohn: Secondly, in a sub $50 W. T I environment drilling activity slows down significantly as returns are not supportive.

Chris Bohn: And industry production is declining.

Chris Bohn: 2020, when oil averaged $43 per barrel, we saw our D. C. A T cost decreased 13% to 15%.

Chris Bohn: If we use 10% cost deflation on capital and 5% on operating costs. We can further reduce our breakeven by 280 million.

Chris Bohn: Lastly, natural gas prices have recently improved owing to the increased demand as LNG, Canada nears closer to first cargos and increasing north American demand through Gulf Coast LNG.

Chris Bohn: Low natural gas prices are currently trading in excess of $3 in 2026.

Thanh Kang: By increasing the price of natural gas from $2 to $3, this would increase our funds flow by $200 million.

Speaker Change: By increasing the price of natural gas from two to $3. This would increase our funds flow by 200 million.

Speaker Change: The combination of these three factors lowered our maintenance capital requirements by $200 million to $1 7 billion and increases their funds flow by 400 million, which allows us to be fully funded both maintenance capital and dividends at U S $47 per barrel W. T I and $3 a coal price.

Thanh Kang: The combination of these three factors lowers our maintenance capital requirements by $200 million to $1.7 billion and increases our funds flow by $400 million, which allows us to be fully funded, both maintenance capital and dividends, at US$47 per barrel WTI and $3 ACO price.

Grant: With that I'll turn it over to grant for his closing remarks.

Grant Fagerheim: With that, I will turn it over to Grant for his closing remarks. Thanks, Todd. Thanks, Thanh, Chris, and Joey for your comments. The first quarter was another reminder of the strength of our asset base and our team's technical and operational expertise in extracting incremental value on these assets to provide strong returns to shareholders. While results continue to exceed expectations and successful development strategies are being transferred across the portfolio to continuously improve our inventory and long-term sustainability and profitability.

Grant: Thanks, Chris.

Grant: Thanks, Paul and Kris enjoy for your comments. The first quarter was another reminder of the strength of our asset base and our team's technical and operational expertise and extracting incremental value on these assets to provide strong returns to shareholders.

Grant: Well results continue to exceed expectations and successful development strategies are being transferred across the portfolio to continue to continuously improve our inventory and long term sustainability and profitability.

Grant Fagerheim: We are very excited to bring the best of Whitecap and Varen's technical, operating and financial teams together to drive even stronger returns for shareholders into the future and look forward to closing the transaction on May the 12th. Our teams are currently working to optimize our go-forward capital investments by seeking efficiencies in combined operations, high-grading inventory, repaging our development and rig lines and more efficiently utilizing the combined infrastructure. We look forward to sharing more of these plans along with our full 2026 budget and updated five-year plan as we progress through the balance this year.

Grant: We're very excited to bring the best of Whitecap endurance technical operating and financial teams together to drive even stronger returns for shareholders into the future and look forward to closing the transaction on may the 12.

Grant: Our teams are currently working to optimize our go forward capital investments by seeking efficiencies in the combined operations high grading inventory repaying our development rig lines and more efficiently utilizing the combined infrastructure.

Grant: We look forward to sharing more of these plans warm winter.

Grant: For 2026 budget, an updated five year plan as we progressed through the balance of this year.

Joanna: With that, I will now turn the call over to the operator, Joanna, for any questions. Thank you. We do ask that if you are using a speakerphone to please lift your handset before pressing any.

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

Grant: Thank you.

Grant: Ladies and gentlemen, as stated if you do have a question. Please press star followed by one on your Touchtone phone.

Grant: A question and.

Grant: Your question. Please press star followed by Kim.

Grant: But if you are using a speaker phone please lift your handset before pressing.

Joanna: Please go ahead and press star 1 now if you have a question.

Grant: Please go ahead and Presto will know if you have a question.

Speaker Change: The next question comes from Patrick or Mark at HED Capital markets. Please go ahead.

Patrick O'rourke: First question comes from Patrick O'Rourke at ATB Capital Markets. Please go ahead. Thanks.

Speaker Change: Thanks, Good morning, guys and congratulations on the competition Bureau approval look forward to that boat on May six and closing this transaction I guess.

Thanh Kang: Good morning, guys, and congratulations on the Competition Bureau approval. Look forward to that vote on May Closing this transaction, I guess, first question here is just with respect to the $280 million in deflationary cost savings here, I understand about two-thirds is capital, one-third would be on the operational front, if maybe you could sort of unpack what the key drivers here are on that $280 million, and then in terms of achieving that, is this something you expect right away, or is there a time frame around this milestone?

Speaker Change: First question here is just with respect to the $280 million in deflationary cost savings here I understand about two thirds as capital one third would be on the operational front. If maybe you could sort of unpack what the key drivers here are on that $280 million and then in terms.

Speaker Change: Achieving that is that is this something you expect right away or is there a timeframe around this milestone.

Speaker Change: Hey, Patrick it's a ton there and thanks for that question I mean, I think we both recognize that lots of things change when we're talking about oil below $50 W. T I and I think when you look at you know our history over the last 15 year period of time, we've been able to successfully navigate through that.

Thanh Kang: Hey Patrick, it's Tuan there. Thanks for that question. I mean, I think we both recognize that lots of things change when we're talking about oil below $50 WTI. I think when you look at our history over the last 15-year period of time, we've been able to successfully navigate through that volatility and continue to maintain our balance sheet strength, which is the primary objective as a company here. When we think about what happened in 2020, and keep in mind here, Patrick, our balance sheet is in a way better position today than it was when the COVID environment had hit.

Speaker Change: Volatility and continue to maintain our balance sheet strength, which is the primary objective as a company here.

Speaker Change: When we think about what happened in 2020 and keep in mind here, Patrick our balance sheet is in a way better position today than it was when the COVID-19 environment that had so when you look at our balance sheet at one times debt to cash flow at $50 oil it would be 1.4 times.

Thanh Kang: So when you look at our balance sheet at one time debt to cash flow, at $50 oil, it'd be 1.4 times debt to cash flow. We were slightly above 2.5 times back in 2020, not requiring any type of covenant relief from our banks here. So we do have to look at a $50 pricing environment very much holistically in terms of the sustainability and durability of our business model here. Now, what we've indicated here is our experience in 2020, which was sub $50. We saw cost deflation, both on capital and operating costs in the tune of somewhere between 13 to 15%.

Speaker Change: Debt to cash flow, we were slightly above two and a half times back in 2020, not requiring any type of covenant relief from our banks here. So we do have to look at a 50 dollar pricing environment very much holistically in terms of the sustainability and durability.

<unk> of our business model here now what we've indicated here is our experience in 2020, which was sub $50. We saw cost deflation both on capital and operating costs are in the tune of somewhere between 13% to 15% now enter in.

Thanh Kang: Now, in our analysis here, which is meant to be illustrative, the capital that we've reduced in terms of deflation was 10%, and 5% on operating costs in order to drive the $280 million. Again, it's illustrative to see what happens at $50 and our experience in 2020 there, between 13 to 15%. So just trying to show how things can quickly change. Obviously, in a higher pricing environment, we would expect to see inflation.

Speaker Change: Dialysis here, which is meant to be illustrative the capital that we've reduced in terms of deflation was 10% and 5% on operating costs in order to drive the $280 million.

Speaker Change: It's illustrative to see what happens at $50 and our experience in 2020, there are between 13% to 15%. So just trying to show how things can quickly change obviously at a higher pricing environment, we would expect to see inflation.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you and maybe in the same vein, but a little bit more philosophical you know you've got to 5% long term growth trajectory here, but you can kind of pivot around hiring and lower rates at any given time.

Patrick O'rourke: Okay, thank you.

Thanh Kang: And maybe in the same vein, but a little bit more philosophical, you know you've got the 5% long-term growth trajectory here, but you can kind of pivot that around higher and lower rates at any given time, and appreciating that some of these things are chunky and long lead time, but maybe you could give some insight into sort of the benchmarking prices where you would be at the lower end of that band, the midpoint, and the higher end of the growth trajectory at any given Yeah, Patrick, it's Thanh again here. I think ultimately when we think about growth rates, it comes back to the returns that we can achieve on the capital that we're deploying and the free cash flow that we're able to generate on these particular assets here.

Speaker Change: And appreciating that some of these things are chunky and long lead time, but maybe you could give some insight into sort of the benchmarking prices, where you would be at the lower end of that band the midpoint and the higher end of the growth trajectory at any given time.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah, Patrick it's a it's Tom again here I.

Speaker Change: I think ultimately when we think about growth rates. It comes back to the returns that we can achieve on the capital that we're deploying.

Speaker Change: Free cash flow that we're able to generate a lot of these particular assets here. So two very important parameters that are critical for us when we're looking at capital allocation number one is capital payout how quickly we get our money back and are we profitable with the capital that we're deploying so are a profit to investment ratios are important.

Thanh Kang: So two very important parameters that are critical for us when we're looking at capital allocation. Number one is capital payout, how quickly we get our money back, and are we profitable with the capital that we're deploying. So our profit-to-investment ratios are important when making these decisions here. When you look at Whitecap on a standalone basis, we're targeting between 3% to 5% growth. Varian's five-year plan had them about 7% growth. On combination, I would say that 3% to 5% makes sense on a combined basis for producing 370,000 BOEs per day. The lower end of that growth rate, I would say would be somewhere between $60 to $70 WTI, and the higher end of that growth rate would be between $70 to $80 WTI.

Speaker Change: In making these decisions here.

Speaker Change: When you look at Whitecap on a standalone basis, we're targeting between 3% to 5% growth various five year plan had them about 7% growth.

Speaker Change: On combination I would say that 3% to 5% makes sense on a combined basis.

Speaker Change: Producing 370000 viewers per day, the lower end of that growth rate I would say would be some.

Speaker Change: Were between 60 to $70 W. T I and the higher end of that growth rate would be between 70 to $80 W. T. I a that would be the band that we're working with at this time.

Thanh Kang: That would be the band that we're working with at this point.

Speaker Change: Okay. Thank you very much.

Patrick O'rourke: Okay.

Patrick O'rourke: Thank you very much. Thanks, Patrick. Thank you.

Patrick: Thanks, Patrick.

Speaker Change: Thank you as a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by the one on your Touchtone phone.

Joanna: As a reminder, ladies and gentlemen, if you do have any questions, please press star followed by the one on your touchtone phone.

Dennis Fong: Next question comes from Dennis Fong at CIBC Global markets. Please go ahead.

Dennis Fong: This question comes from Dennis Fong at CIBC Global Markets. Please go ahead. Hi, good morning, and thanks for taking my questions. I guess, first off, I appreciate that incremental color around the flexibility in a number of different commodity price environments.

Dennis Fong: Hi, good morning, and thanks for taking the questions I guess first off I appreciate that incremental color around the flexibility and a number of different commodity price environments.

Joey Wong: I wanted to shift kind of my line of questionings to a couple other things. The first is, can you talk a little bit around the cost controls that you're focused on with respect to the construction of the Latour facility? Obviously, understanding the financing structure of this facility project, but how are you guys managing some of the costs in a way that you feel are I don't want to say better necessarily, but done in a thoughtful way, whether it be for the build out of this facility or the ability to expand into a second phase further down the line.

Dennis Fong: I just wanted to shift to kind of my line of questioning as to a couple of other things. The first is can you talk a little bit around the cost controls that you're focused on with respect to the construction of the la facility, obviously understanding the financing structure.

Dennis Fong: So the project, but how are you guys managing some of the costs in a way that you feel are or I don't know.

Dennis Fong: They better necessarily but but done in a thoughtful way whether it would be for the buildout of this facility or the ability to expand.

Dennis Fong: Into a second phase are there down the line.

Speaker Change: Yeah, Dennis I can take that one it's showing long here. So I mean, the fundamental part of of the design for US has always come back to the appropriate planning and of course, drawing that back to what the facility is going to be asked to do and that comes back of course of the subsurface and the technical debt that goes into that so to that end.

Joey Wong: Yeah, Dennis, I can take that one. It's Joey Wong here. So, I mean, the fundamental part of the design for us has always come back to the appropriate planning and, of course, drawing that back to what the facility is going to be asked to do and that comes back, of course, the subsurface and the technical that goes into that. So, to that end, planning for this facility has been underway for quite some time and to your point there, in advance, of course, of the deal, the partnership we made with PGI. So, through that planning process, we've been very deliberate in terms of figuring out what that facility ought to look like and make sure that we stay on track with that because it's those shifts and changes that can introduce uncertainty in a build of this size.

Speaker Change: And planning for this facility has been underway for quite some time and add to your point. There are in advance of course of the deal or the partnership we made with Pgi.

Speaker Change: So it's through that planning process, we've been very deliberate in terms of figuring out what that facility.

To look like and made sure that we stay on track with that because its its those shifts and changes that can introduce uncertainty in a buildup of this size and you know I'll draw back on our experience with with muscle.

Joey Wong: And, you know, I'll draw back on our experience with Musrell, our 509 facility there, same story, a deep technical understanding of what the facility is going to be asked to do before we start heading down that path. And then, of course, the story there is that it came online slightly ahead of schedule and, of course, under budget like we've mentioned before. So, we're going to try to stay on the same path for Latour as well. Of course, there are macro things that can come in the way but, again, when you look at the fact that we've placed 90% of our long lead items to this date, things are looking pretty good for the overall control of costs go forward.

Speaker Change: Five and nine facility there same story, a deep technical understanding of what the facility is going to be asked to do before.

Speaker Change: Before we start heading down that path and then of course. The story. There is is that it came online slightly ahead of schedule and of course under budget like we've mentioned before so we're going to try to stay on the same path for Furloughed tour as well of course, there are macro things that they can come in the way, but again.

Speaker Change: When you look at the fact that we've placed 90% of our long lead items.

Speaker Change:

Speaker Change: To this date are things are looking pretty good for the overall control of costs go forward.

Speaker Change: And so Dennis is Joel Armstrong here, just a follow up on some comments from jewelry. So that the Latour facility is really templated from an existing facility that are same folks built a cable up. So there are some nuances that are of course different but it's not like it's something that our folks haven't built before so we have great confidence.

Joe Armstrong: And so Dennis, it's Joe Armstrong here. Just to follow up on some comments from Joey. So the Latour facility is really templated from an existing facility that our same folks built at KBOF. So there are some nuances that are, of course, different, but it's not like it's something that our folks haven't built before. So we have great confidence in our cost structure and making sure that it's on time.

Speaker Change: And our cost structure, and making sure that it's a long time.

Speaker Change: Great.

Dennis Fong: Great, thank you, I appreciate that color.

Speaker Change: Thank you I appreciate that color shifting gears, a little bit more so if if we think about a lot of the previous corporate acquisitions or even after the acquisitions you completed in the past you've you've kind of shown a track record of quickly applying like whitecap best practices to help improve efficiencies.

Joey Wong: Shifting gears a little bit more so, if we think about a lot of the previous corporate acquisitions or even asset acquisitions you've completed in the past, you've kind of shown a track record of quickly applying Whitecap best practices to help improve efficiencies. And then in this kind of last update, you've talked a lot about the Wine Rack style development, especially just the Wine Rack style development. Can you see or how have you maybe compared or contrasted your style of development versus that of Varin? And if so, what are some of the maybe the puts and takes that you see here and how quickly would you want to, we'll call it attempt, applying some of the learning that you have or so forth on the acquirers?

Speaker Change: And then in this kind of last update you've talked a lot about like the wine rack style development, especially hum.

Speaker Change: The wine rack style development can you see or have you how would you maybe compared or contrasted your style of development versus that of bearing and if so like what are some of the maybe the puts and takes that you see here and how quickly would you want to we'll call. It attempt applying some of the learnings that you have or so forth on on <unk>.

Speaker Change: The acquired lands.

Speaker Change: Hey, Dennis Joey again, so yeah with respect to the Varun assets M of.

Joey Wong: Hey Dennis, Joey again. So yeah, with respect to the VARIN assets, of course, we've been looking at those assets for quite some time, as you might imagine, just as we're observing our peers and their associated development. So as a result, we do have some ideas of what might apply on those lands. I think the important part to remind ourselves there is, as we look to combine the two companies, get the two technical teams together, figure out what has been working on these lands, and importantly, Dennis, honestly, find out what hasn't been working as well, and start to incorporate those into a go-forward, long-term development plan, which is in keeping with our strategy to date, which is really maximizing the economic returns on an acreage basis, irrespective of, you know, any sort of particular initiative.

Speaker Change: Of course, we've been looking at those assets for for quite some time as you might imagine just as where we're observing our peers and their associated development.

Speaker Change: So as a result, we we do have some ideas of what might apply on those land I think the important part to remind ourselves there as you know as we look to combine the two companies get the two technical teams together figure out what what has been working on these lands and importantly, Dennis honestly find out what hasn't been working as well and.

Speaker Change: And start to incorporate those into our go forward long term development plan, which is in keeping with our strategy to date, which is really maximizing the economic returns on an acreage basis.

Speaker Change: Irrespective of any any sort of a particular initiative and you talked about the keyboard benching one as an example, with their lands being adjacent to ours and touching in many places you can guess, we do see a certain amount of read through but just like anything else, it's not gonna be universal. So I would definitely say that there will be there.

Joey Wong: And you talk about the KBOB benching one as an example. With their lands being adjacent to ours and touching in many places, you can guess we do see a certain amount of read-through, but just like anything, it's not going to be universal. So I would definitely say that there will be things that we would like to unpack, and we'll definitely look to speak more on that as our teams get together and get a better handle on that.

Speaker Change: Things that we would like to unpack.

Speaker Change: And we'll definitely look to speak more on that is as our as our teams get together and get a better a better handle on that.

Chris Bullin: Hey Dennis, it's Chris here. So I just want to expand on Joey's comments there, just more so from the conventional perspective. Yeah, I echo a lot of those comments in particular, and for us, I mean, you know, I think that the Verron team's done such a great job, in particular with advancing their open hole multilateral initiatives. So definitely some key learnings there for us, you know, as that applies to our other Saskatchewan asset bases. You know, among some other things, of course, being some of the EOR initiatives that they've spent a lot of time and efforts on.

Speaker Change: Hey, Dennis it's Chris here, So I just want to expand on Joey's comments, there just more so from the conventional perspective, yeah Echo a lot of those comments particular in and for US I mean, you know I think that the burn team's done such a great job in particular with advancing their open hole multilateral initiatives. So definitely some some key learnings there for US you know.

Speaker Change: As that applies to our other Saskatchewan asset bases.

Speaker Change: You know among some other things are of course being some of the E. R initiatives that they've they've spent a lot of time and efforts on so we're going to continue to you know combine those those focused efforts going forward as at the end of the day. It does make us a more sustainable and stronger entity you know in the backdrop of spending that that they have spent to date on their EUR initiatives. So definitely some strengthening mechanisms there.

Chris Bullin: So we're going to continue to, you know, combine those focused efforts going forward as, at the end of the day, it does make us a more sustainable and stronger entity, you know, in the backdrop of the spending that they have, you know, spent to date in their EOR initiatives. So definitely some strengthening mechanisms there for us. And yeah, we're looking forward to this pro forma entity.

Speaker Change: For us and yeah, we're looking forward to the pro forma entity.

Speaker Change: Great.

Dennis Fong: Great. Appreciate that color. I'll turn it back.

Speaker Change: Yeah that color I'll turn it back.

Speaker Change: Okay.

Speaker Change: And at this time gentlemen, we have no other questions registered please proceed.

Joanna: And at this time, gentlemen, we have no other questions registered. Please.

Grant Fagerheim: Thank you, Joanna, and thanks to each of you on the line today who continue to support us on our journey. We look forward to reporting back to you with continued success and advancement as we move forward with the combined company coming very soon. All the best. Goodbye for now. Thank you, sir.

Speaker Change: Thank you Joanna and thanks to each of you on the line today and.

Speaker Change: We will continue to support us on our journey, we look forward to reporting back to you with continued success in advancement as we move forward with the combined company.

Speaker Change: Coming very soon.

Speaker Change: All the best Goodbye for now.

Speaker Change: Thank you Sir.

Joanna: 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.

Speaker Change: Ladies and gentlemen, this does mean.

Speaker Change: 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.