Whitecap Resources Inc...Update

Whitecap Resources Inc...Oct 29, 2021

(WCP-T) C$7.35

Slight Q3 Beat. Strong Strategic Moves Made Over the Past Q

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Event

Reports Q3 Results

Impact: SLIGHTLY POSITIVE

Q3 production of 115.9 mBOE/d was in line with TD/Consensus (~114.5 mBOE/d). Third quarter CFPS of $0.46 beat TD ($0.43) and was modestly ahead of consensus ($0.45). The stronger-than-expected CF was driven by a lower cost structure across the board (see Exhibit 1).

This past quarter saw Whitecap materially advance its strategy - including articulating a return of capital plan, divesting a GORR, demonstrating strong Montney results and inking a MOU to expand its CCUS business.

■ 50% of FCF Returned to Equity Holders: As previously announced, the company not-only increased its dividend by 38%, but articulated a strategy whereby it committed to returning 50% of discretionary CF to shareholders in 2022. [see here]

■ WCP divested a 5% GORR at Weyburn for $188mm, helping to reduce YE-2021 net debt to $1.0 Bn (YE-2021E D/CF 1.0x, falling to 0.2x at YE-2022E).

■ On its Montney assets, WCP brought on four wells at Karr with an average IP30 rate of 1,195 BOE/d (47% liquids). Wells were $10 million or ~7% below the original budget with WCP suggesting there is room for further improvement. While it may not be the most appropriate benchmark given geological/geographical differences, for context, ARX is budgeting ~$9.5mm/well at Kakwa.

■ Progressing Its Carbon Infrastructure & Storage Business: Earlier this month it announced a partnership with FCL to capture/transport CO2. Although this is a pre-FEED MOU, it could see 0.5 Mtpa captured from FCL and used to expand Weyburn. Furthermore, it has capacity to expand beyond the current agreement to include incremental third-parties. [see below]

TD Investment Conclusion

WCP is a strong operator and run by forward-thinking tacticians. Not only is WCP progressing its upstream E&P assets (Montney expansion, cost reductions...), its also looking to the future by exploring ways to grow its unique position as a material transporter (and provider of storage) of CO2. The business trades at an attractive valuation 3.7x 2022E EV/DACF, 18% 2022E FCF yield. Whitecap offers modest 4% y/y growth while spending only 36% of CF on capex.

Oct 29, 2021

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Source

https://marketsandresearch.td.com/tdwca/Reports/Report?documentKey=63-20211029_MR-WaterhouseAMPackage

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Whitecap Resources Inc...Oct 21, 2021

(WCP-T) C$7.66

CO2 Deal Highlights the Importance of EOR in Net Zero Future - Corrected Version

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Event

Preliminary Agreement to Pursue Carbon Capture/Storage with Federated COOP Impact: SLIGHTLY POSITIVE (Long Dated Preliminary Initiative) WCP & FCL Sign 0.5 MTPA CCUS Memorandum of Understanding: In a press release and subsequent press conference, WCP and Federated Co-operatives Ltd. (FCL), announced that they have entered a memorandum of understanding (MOU) to capture, transport, and sequester CO2 from the FCL Ethanol Complex near Belle Plaine and the FCL Refinery Complex in Regina.

■ Initial Deal with FCL Has the Potential to Grow Into Something Larger: The carbon will be transported to Whitecap's EOR project in Weyburn and support future expansions. Beyond the two FCL facilities, the agreement contemplates infrastructure that could be used as a trunk line by other industrial emitters and/ or could provide CO2 to third-party upstream EOR projects. It was suggested on the public conference call that this infrastructure could be scaled up to ~2 MTPA should enough additional third-parties sign up.

■ Commercial Details Being Negotiated, But Combined Preliminary Capital Cost of ~$800 million (40% WCP): At this time, the details are limited with the terms of commercial agreements likely dependent on yet-to-be-announced federal government carbon credit initiatives. We anticipate the timing of such an announcement around year-end.

■ On a joint public conference call, we understand that FCL will own/fund the pre-combustion carbon capture infrastructure at its facilities at a cost of ~$510 million (preliminary), with Whitecap funding the compression, transportation, and storage of the carbon for EOR purposes at Weyburn for ~$300 million.

■ Project Timing Mid-Decade: FCL anticipates that its carbon capture facilities would be online at the Ethanol Complex in 2024 and the Refinery Complex in 2026, respectively.

We continue to recommend Whitecap for conventional oil exposure, given its diverse high-quality asset base, emerging exposure to liquid-rich Montney plays at Karr and Kawka, low balance-sheet leverage, and unique (and growing) carbon storage credentials. The company also features a long-standing track record of generating FCF and returning cash to shareholders through consistent dividend growth (increased earlier this month) and active NCIB participation.

Oct 21, 2021

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Source

https://tdsecurities.bluematrix.com/docs/pdf/32eb34de-79e9-4b10-b9bc-b699eb1f2a65.pdf?