TSE:WCP Whitecap Resources Q4 2023 Earnings Report C$9.28 -0.28 (-2.93%) As of 03:17 PM Eastern ProfileEarnings HistoryForecast Whitecap Resources EPS ResultsActual EPSC$0.49Consensus EPS C$0.30Beat/MissBeat by +C$0.19One Year Ago EPSN/AWhitecap Resources Revenue ResultsActual Revenue$914.10 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AWhitecap Resources Announcement DetailsQuarterQ4 2023Date2/21/2024TimeN/AConference Call DateThursday, February 22, 2024Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckAnnual ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Whitecap Resources Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 22, 2024 ShareLink copied to clipboard.Key Takeaways Production up 11% per share in 2023 to 156,501 BOE/day (66% oil/liquids), driven by 215 new wells. Net debt down over $500 million to ~$1.4 billion, leverage at 0.7× EBITDA, with $1.7 billion undrawn capacity, and dividend increased to $0.73/share whilst returning $500 million to shareholders. Acquired 4,000 BOE/day of high-netback light Viking assets at 1.7× cash flow, enhancing funds flow accretion and expanding the 2024 drilling inventory. 2024 guidance raised: production of 165,000–170,000 BOE/day, $900–1,100 million capex, and forecasted $1.6 billion funds flow with $600 million free funds flow at US$75 WTI and CA$2 AECO. Natural gas weak at US$1.60–2.00 GJ, representing 36% of production but only 9% of revenue, prompting a shift toward oil-weighted drilling locations. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallWhitecap Resources Q4 202300:00 / 00:00Speed:1x1.25x1.5x2xThere are 11 speakers on the call. Operator00:00:00Good morning. Speaker 100:00:00My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Whitecap Resources 2023 Results and Reserves Conference Call. I would now like to turn over to Whitecap's President and CEO, Mr. Grant Fagerheim. Please go ahead, sir. Speaker 200:00:38Thanks, Sylvie, and good morning, everyone, and thank you for joining us this morning. Here on the call with me are five members of our management team: our Senior Vice President and CFO, Thanh Kang our Senior Vice President of Production and Operations, Joel Armstrong our Senior Vice President, Business Development and Information Technology, Dave Lundbergett. We also have Joey Wong, our Vice President of West Division and Chris Bullen, our Vice President of East Division joining us as well. 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 that was issued yesterday afternoon. We are very pleased to report strong operational and financial results for 2023. Speaker 200:01:28Our assets in each of our East and West divisions have performed exceptionally well with average production for the year at 156,501 BOE per day, comprised of 66% oil and liquids, 34% natural gas, which equates to 11% growth on a per share basis over 2022. Of the 215 wells drilled, 181 were in our 80% Oil and Liquids East division and 34 wells in our West division, which is 60% natural gas, 40% liquids highlighted by our Montney and Duvernay assets. From a financial perspective, we reduced debt by over $500,000,000 since the end of 2022. And upon reaching our 2nd internally set net debt milestone in the second Speaker 300:02:35Yes. It looks like we're having a bit of technical difficulties here. So I'll just continue on behalf of Grant. It's Thanh Kang here. So from a financial perspective, we reduced debt by over $500,000,000 since the end of 2022 and upon reaching our 2nd internally set net debt milestone in the second half of twenty twenty three, we increased our dividend to $0.73 per share annually. Speaker 300:02:59We also returned $500,000,000 to shareholders in 2023, 3 quarters was returned through our base dividend and the remainder or $123,000,000 was returned through share repurchases. In addition to our focus on strong operational performance, our priorities include disciplined debt management. Our net debt is currently just below $1,400,000,000 and we have over $1,700,000,000 of undrawn capacity on our credit facilities. Our leverage is low at 0.7 times debt to EBITDA and the available capacity of $1,700,000,000 provides us ample flexibility to manage through commodity price volatility and to capture strategic opportunities should they present themselves in the future. One of those strategic opportunities that we executed on in the 4th quarter was the acquisition of 4,000 barrel per day high netback 100% light oil Viking production in the El Rose area. Speaker 300:03:54This acquisition made a lot of sense for us as it consolidated an active area of development and was completed at very attractive acquisition metrics of 1.7 times cash flow, resulting in strong accretion to both funds flow and free funds flow as well as a healthy drilling inventory that we plan to capitalize in 2024 and beyond. 2023 was a very important year for operational execution and we are very proud of our results and the contributions made by our employees. We look forward to building off the success in 2024 as we continue to enhance our development strategy across our deep portfolio of opportunities. The continued refinement and optimization of our drilling and completion designs are expected to ultimately result in improving sustainability and profitability of the business. This includes well spacing and development design, increasing both lateral lengths and the number of horizontal legs and secondary and tertiary recovery pilot projects. Speaker 300:04:54Both Joey and Chris will further elaborate on initiatives that their teams are undertaking. We also had a very strong year from a reserves perspective, especially on organic basis, which reflects strong operational execution and a high quality drilling inventory. Prior to the impact of net dispositions completed in 2023, we had greater than 100% production replacement as well as strong reserves per share growth. On a debt adjusted basis, we grew PDP reserves by 6%, total proven reserves by 10% and 2P reserves by 7% per share. Our inventory life ranges from 6 years on a PDP basis up to 19 years on a 2P basis and coupled with long term recycle ratios averaging 2.6 to 3.3 times demonstrates our commitment to long term growth that is both profitable and sustainable into the future. Speaker 300:05:52Our 2023 funds flow was approximately 1,800,000,000 dollars or $2.94 per share and after capital expenditures of $950,000,000 we generated $840,000,000 of free funds flow. This along with the net dispositions completed in the year contributed to our ability to reduce debt by 500,000,000 dollars while also returning $500,000,000 to shareholders over the course of 2023. For the Q4, we achieved production just shy of 167,000 BOEs per day and funds flow of $462,000,000 or $0.76 per diluted share. After capital expenditures of $200,000,000 we generated $262,000,000 of free funds flow, returning 76% of back to shareholders through our base dividend and buybacks during the quarter. We recorded current income tax expense of $65,000,000 in 2023 and we had $3,600,000,000 of tax pools at the end of the year to shelter future income. Speaker 300:06:53With the closing of the Viking acquisition late in Q4, we are adjusting our guidance for 2024. Our production guidance has been increased to 165,000 to 170,000 BOEs per day, while we reduced our capital expenditures by approximately $100,000,000 to $900,000,000 to $1,100,000,000 to partially offset the cost of the acquisition. The capital reductions will primarily come from our second half program and we're now forecasting $600,000,000 of capital in the first half of the year and approximately $400,000,000 in the second half. The midpoint of our updated guidance represents production per share growth of 8% year over year. However, our capital program remains flexible to changing market conditions. Speaker 300:07:37Our funds flow forecast at a price deck of US75 dollars WTI and $2 AECO per GJ Gas is $1,600,000,000 resulting in $600,000,000 of free funds flow after $1,000,000,000 of capital investments. With currently weak natural gas prices, we have been focused on drilling oil weighted locations in our East division and in our West division, we're drilling liquids rich portions of our acid base. So the liquids content is currently driving the economics of our 2024 program. For context, although natural gas represents 36% of our production, it only represents 9% of our revenues. For 2024, our price sensitivities are as follows. Speaker 300:08:20For every $5 increase in WTI, our funds flow increases by $130,000,000 For every $0.50 increase in AECO, our funds flow increases by $40,000,000 and for every penny decrease in the Canadian to U. S. Dollar exchange rate, our funds flow increases by 25,000,000 dollars As we mentioned previously, our balance sheet is in excellent shape with significant liquidity on our credit facility. While our variable cost of debt has increased, we enter it with the broader interest rate environment. We have cushioned this impact through our private placement notes and interest rate swaps totaling $800,000,000 with a weighted average interest rate of only 3.25%. Speaker 300:09:00I will now pass it off to Joey for remarks on our West Division results. Speaker 400:09:07Thanks, Son. On an asset level, our performance in the West Division in 2023 was very strong with initial well results above our expectations across multiple areas of unconventional Montney and Duvernay development. Our most recent results at Kakwa are so far validating our updated development strategy for the area. The 226B 3 well pad has achieved IP120 rates were 26% above our expectations, while test results for our most recent 3 of 21 B pad 3 well pad were also quite encouraging. That pad was tied into permanent facilities earlier this month. Speaker 400:09:42For these 2 pads, we have adjusted our inter well spacing to 2 50 meters from 200 meters following a detailed review of these lands from a reservoir, geological, operational and economic perspective. Our asset base will continue to undergo continuous review with the goal of maximizing economic return characteristics of this extensive inventory set. A significant amount of technical work has gone into the development of our Musgro asset to the north of Kakwa. Design factors such as well spacing, benching and completion design have all been informed by a similar rigorous technical process that incorporates these localized characteristics on a pad by pad basis. Given its higher liquids content, we expect Musgro to generate strong economics in the current environment. Speaker 400:10:26We spud our first two four well pads for 8 net wells at Musgro in the 4th quarter, while a third pad was spud in January of this year. We plan to complete a total of 44 well pads for a total of 16 net wells in Musgro in 2024. These pads will flow through our 20,000 BOE a day battery, which is expected to come online in the Q2. Moving down to the northwest portion of our Resthaven land block, we are seeing strong initial results at Latour, which is encouraging for future Montney development in the latter half of this decade. The initial production results of our 2 well pad is approximately 15% above our expectations after 60 days on production. Speaker 400:11:03And these results along with offset results are giving us more confidence in the liquids profile and the potential deliverability of this asset. We plan to drill an additional 2 wells at Latour in 2024. These initial well results along with the success that we've been seeing throughout the refinement of our development strategy is key to ensuring efficiency and the maximization of profitability across a full field development on this asset. Initial engineering and commercial work for an infrastructure solution at Latour has commenced and we're looking forward to the completion of the design work on this next stage of development. We plan to grow this asset to approximately 30,000 BOEs a day by the end of 2028, drilling an initial 50 to 60 high quality Montney wells with a huge land base to grow further and or faster as warranted. Speaker 400:11:50Moving on to the Duvernay at Kaybob, Our first seven wells that we drilled into the Duvernay are continuing to outperform expectations. The 7 wells now all have IP90 rates with results coming in 24% above our expectations at 1600 BOEs per day per well of which 36% is liquids. Plan to drill a 3 well pad and a 5 well pad in the Duvernay in the first half of twenty twenty four. The first three wells will be drilled to a 4,200 meter lateral length, which is over 20% longer than our first 7 Duvernay wells. Optimization of our development plan in the Duvernay is ongoing and increasing lateral lengths is expected to improve capital efficiency while not sacrificing the total resource covered over the life of the well. Speaker 400:12:33We currently have approximately 200 locations in inventory and plan to spud 13 Duvernay wells in 2024. Lastly, I did want to touch on our water management strategy for 2024 and beyond given the recent headlines from the Alberta government on the topic. We have been developing a water management strategy as an ongoing initiative in preparation for this year's activity for some time, which included engagement with both industry and regulatory stakeholders. At this time, we feel comfortable given our existing licenses and established water infrastructure in the area, both owned and third party, that we can effectively mitigate the impact of marginal limitations not only for this year, but by having a long term strategy in place, we will be able to minimize disruptions to our operations on a go forward basis. I will now pass it on to Chris for his comments on the East Division. Speaker 500:13:19Thanks, Joy. These divisions had a very successful 2023 and we are looking to follow that up with a strong 2024. Our division is comprised of assets that produce over 80% crude oil and NGLs and combined with a low decline rate of less than 20%, this division drives a significant portion of free funds flow for the company. Our technical teams have done a fantastic job in 2023, not only from a well results perspective, but also by continuing to push our ceiling higher through extensive work on technical initiatives and deepening our understanding of our assets. We highlighted in yesterday's release a significant portion of East Division well results that exceeded our expectations, with over 80% of well results in 2023 being focused on high netback, short cycle and quick payout light oil assets and with oil at approximately $100 per barrel on a Canadian dollar basis means that the profitability of our East Division drilling program is extremely robust. Speaker 500:14:17Allocating capital to decline mitigation and inventory enhancement initiatives will continue in 2024 with several recent initiatives being implemented upon success. Increasing reservoir contact through longer laterals as well as increasing the number of horizontal legs has been ongoing for the last few years. Synergistic asset consolidations across our land base over the last few years has also provided the opportunity to drill longer laterals in multiple horizons across a greater portion of our assets leading to improved capital efficiencies. As an example of strategic capital to enhance our load decline profile, we are very encouraged by the initial response of our CO2 pilot project targeting the Frobisher formation, which lies beneath the existing Weyburn CO2 project targeting the Midale formation. We drilled 2 producer wells early in 2023. Speaker 500:15:06After drilling 3 injection wells, initiated CO2 injection in late 2023. Production response was exceptional with an uplift of over 4 times the initial oil production rate peaking at 500 barrels per day between the 2 producers before being facility restricted. Although in its infancy, this resource has the potential to be meaningful with 20,000,000 to 40,000,000 barrels of incremental volumes based on our preliminary internal success case assessments. This is a good example of allocating strategic capital to further enhance low decline initiatives that will likely lead to broader implementation in the future upon success. Out of the $110,000,000 of investments in secondary and tertiary recovery initiatives in 2023, it's worth noting that nearly 60% of this is for drilling producers in waterflood areas such as West Pamela Cardium or Carrobert and Dodge Land Viking along with producer optimizations. Speaker 500:16:00These projects are highly competitive and would be top quartile from a pale perspective while also having the added advantage of reduced declines and enhanced recoveries when compared to our primary drills due to historical and or ongoing pressure support. The remaining 40% involves spending on injector drills and conversions, base maintenance, facilities as well as CO2 and polymer procurement for tertiary assets such as Weyburn and Southwest Saskatchewan. Our 2024 East Division drilling program is well underway and we are currently running 11 rigs to drill 95 gross, 87 net wells in the Q1. With that, I will turn it back over to Grant for his closing remarks. Speaker 200:16:40Thanks very much, Chris, and I am back. I apologize with the I don't drop off again. But anyway, thanks very much, Chris. As discussed, our recent well results are performing better than expectations, while technical initiatives undertaken within our respective divisions are exploring ways to further improve sustainability and profitability going forward. As we look out over the next 5 years, we are targeting organic growth to an excess of 210,000 BRE per day by the end of 2028. Speaker 200:17:11Growth in our West division, primarily from our unconventional Montney and Duvernay development will be at an annual rate of 12% to 15%, increasing production from approximately 70,000 BOE per day currently to over 110,000 BOE per day. In our East division, which is light oil focused and generates significant free cash flow, we plan to increase production organically from 95,000 BOE per day currently to approximately 100,000 BOE per day over the next 5 years. We operate our business in a proactive way to effectively develop our assets for increasing profitability and believe that at a measured pace of growth is sustainable and appropriately manages risk over the longer term. At the same time, we also maintain the flexibility to be reactive to unexpected market events and we'll continue to allocate capital to the assets and projects to provide the highest returns. Our current corporate production split of 64% oil and liquids and 36% natural gas will increase towards 40% natural gas weighting at the end of the 5 years. Speaker 200:18:17At that time, we forecast to be producing approximately 500,000,000 cubic feet a day of natural gas. With joining the Rockies LNG Partners Group, we aim to be to have approximately 20% of our natural gas production exposed to non North American natural gas prices once the Salinas LNG project off the West Coast of British Columbia is operational near the term of the decade. Our inventory set is very robust with over 6,400 locations in inventory at year end 2023. This inventory has been modified for some of our updated spacing assumptions along with further technical analysis across our asset base. While we expect our full location count to always be evolving, we do believe that the recoverable resource at our asset base can support 5% annualized organic growth for at least the next 25 year period of time. Speaker 200:19:15As a Canadian energy producer, we are nearing an inflection point with the Trans Mountain expansion pipeline nearing completion and reports that the LNG Canada facility will begin commissioning prior to the end of 2024. Both export facilities off Canada's West Coast will open new markets for responsibly produced Canadian oil and natural gas, and we are excited to see these projects come to fruition. With that, I will now turn the call over to our operator, Silvi, for any questions. Speaker 100:19:45Thank you, And your first question will be from Dennis Fong at CIBC World Markets. Please go ahead. Speaker 600:20:16Hi, good morning and thanks for taking my questions. The first one is just in the press release and I appreciate the commentary that you've highlighted through the conference call. There's been a lot of focus on applying new technologies and techniques to improve operations, costs and even while productivity. Can you discuss a little bit more about, we'll call it, the stage of deployment across your entire asset base as well as how quickly you think some of the kind of latest developments can be applied, whether it be the longer horizontals, more use of multilateral legs, and even kind of changing up or tweaking completion design can drive improvements in capital efficiency and maybe the upper bound of 5 year CAGR growth? Speaker 400:21:01Yes, Dennis, it's Joey Wong here. I can take that one. So I mean our approach to these assets going back to the acquisition has been to ensure we're maximizing overall economic returns. So we do that as we kind of discussed using a case by case design that includes all of the models that we had kind of talked about whether we're talking geological models, reservoir models, observation of offset results and of course the economic considerations and of course the one example is the one that we highlighted in the call where the 2 recent three well pads in Kakwa, those 6 wells previously would have had 8 wells assigned. And it's our belief that through those 6 wells we'll recover the same overall resource that we would have with the initial 8 wells. Speaker 400:21:49So that's an example of what we're looking to do with respect to opportunities where we think we can influence that frac geometry to kind of work with the rock, work with the fluids to the point where we're not unduly giving up any overall reserves and pushing that overall economic return profile upwards. So to go a little bit further in saying that where it has worked in one place, we'll look to see where similar things can work in other places. But again, we have to recognize that with such a wide asset base, it's going to be something that we're going to have to consider in each area as the rock and the fluids interact. Speaker 300:22:30And from a CAGR perspective over the next 5 year period of time here, we're targeting 3% to 8% production per share growth, using the mid case right now, 5% growth to get us to that 210,000 BOEs per day and that's premised on a $75 WTI environment there. So we certainly have the ability to flex our growth rate depending on what the economic returns look like on the capital that we're deploying. In a low commodity and price environment, dollars 50 WTI, we wouldn't be growing at all. We would just be maintaining our production. And if oil is in excess of $75 then we could potentially be growing at the higher end of that 3% to 8% per share growth that we're targeting. Speaker 600:23:15Great. Appreciate that color. My second question here is just on net debt. You continue to make progress on lowering outstanding leverage. As you highlight on the call, it's being $1,300,000,000 kind of partway through the year. Speaker 600:23:29Understandably, year end net debt increased modestly on the back of the Viking acquisition. My question relates towards at Q3, you highlighted $1,000,000,000 in 2024. Obviously, there's a few moving parts here. Was just curious as to how you fundamentally think about aggregate leverage for the company? Where is kind of a good level or is lower just always better? Speaker 600:23:55And how does that potentially change how you envision returning free cash to shareholders? Thanks. Speaker 300:24:01Yes. Thanks for that, Dennis. I think our balance sheet, as I mentioned, is in excellent shape right now with 0.7 times debt to EBITDA, dollars 1,700,000,000 of liquidity that's available to us. I think as we think about the business going forward here, commodity prices remain volatile. There's going to be opportunities for us to be able to use our balance sheet to create value for on behalf of our shareholders over the next 3 to 5 year period of time. Speaker 300:24:27And so I think as we continue to allocate 75% back to shareholders, 25% on the balance sheet, we'll continue to build that dry powder. And if there's no opportunities that present themselves, then ultimately we'll have a better balance sheet to be able to run our business here. As we think about 2024, our leverage will be below 1 $300,000,000 As you mentioned, we took that up a little bit with the acquisition, with the L Rose Viking acquisition. They are consolidating a core area for us. But those are the type of opportunities with a very strong balance sheet that we can capitalize on very quickly, where we're buying assets at 1.7x cash flow right within our core areas, whether it's synergistic with our lands and we're the operator. Speaker 300:25:14So that's what we're focused on from a balance sheet perspective. Speaker 600:25:22Great. Thank you. I'll turn it back. Appreciate the color. Speaker 300:25:27Thanks, Dennis. Speaker 100:25:29Next question will be from Patrick O'Rourke at ATB Capital Markets. Please go ahead. Speaker 700:25:37Hi, guys. Good morning and thank you for taking my question here. Just with respect to the ability to flex capital here, I'm just wondering if you can walk us through some of the levers. I think in the past, maybe there's been a bit of shift between East and West and with the East being oily, Is there any ability still within the 2024 framework or calendar year to shift some capital between those two units or even if there would be desire to do that? And I just wondered because you did make a comment earlier with respect to sort of 60% of the capital budget being in the first half of the year? Speaker 700:26:10And I would assume given breakup type conditions and planning that that's predominantly in the Q1 here. Speaker 200:26:20Yes, Patrick. Thanks for your question on that. I mean, one of the areas that one of the strengths of Wakecap actually is the ability to be able to swing capital between natural gas and oil. And because we're oil and liquids over 64%, we talk about what we wanted to do. We position the company for the first half of the year and we'll make the evaluations in the back half of the year if there's a need to shift any other capital in any way, shape or form. Speaker 200:26:52I mean, we see that we've got depressed natural gas prices here trading about $1.65 or $1.60 at this particular time and could end up even lower than that through the summer. But the majority of our revenue, 91% to 92% is still driven through oil and liquids. So it does it has a small impact on us. We talk about the sensitivities in our presentation. But the biggest areas that is going to drive revenue for our company going forward is oil and liquids. Speaker 200:27:25So we'll continue to monitor this as we move through the year. But we do think that there could be quite a significant delta change in natural gas prices as we move forward from this $1.60 level currently to potentially be north of $3 in 2,000 where it's trading at today in 2025. So you don't want to switch this really quickly. You want to monitor it and see what we're doing. But in the meantime, we're focused on our long term assets in the Montney and Duvernay that have a high component of liquids. Speaker 200:28:01We'll continue on with those programs. Speaker 700:28:07Great. Thank you. And maybe just to build on the comment that you made there with respect to recovery in natural gas prices. There's pretty steep contango in the price curve here. From your risk management perspective, what is sort of your appetite right now for hedging into that Fort Contango? Speaker 700:28:25Or do you see further upside there? Speaker 300:28:29Yes. It's Ton here, Patrick. Thanks for that question. I think from a risk management perspective, what we're really looking to do is protect our shareholders from the downside perspective. So making sure that we have the cash flows, both on the oil and the gas to be able to fund our maintenance capital as well as our dividend down to $50 WTI. Speaker 300:28:51For 2024 here, we're fully funded at that level even with 18% of our oil hedged and roughly 17% of our gas hedged there. We started to layer on incremental positions. As you've mentioned, it is contango right now, especially on the gas side. Just recently entered into some positions. We're actually now about 14% in 2025 on 2025 on the natural gas and we're about 9% hedged on the crude oil there. Speaker 300:29:19Our objective is to hedge about 20% of our production, again to make sure that we can fully fund both our maintenance capital as well as our dividends there. So we're not really taking a speculative view on whether we think commodity prices are too high or too low. It's a very systematic program that allows us to protect our cash flows from an outside perspective. Speaker 700:29:44Okay. Thank you very much. Operator00:29:46Yes. Thanks, Patrick. Speaker 100:29:48Next question will be from Cody Kwan at Stifel. Please go ahead. Speaker 800:29:54Hi, guys. Thanks for taking my call here. I got a question for you on the 5 year plan. I see that you've updated the production numbers. How did the capital numbers behind that look with this update here kind of in terms of quantum and maybe shape of the capital investment profile over the 5 years? Speaker 300:30:17Yes. Thanks for that question there, Cody. I think as we think about investments in the East and the West division there, as Grant had mentioned, the growth area will certainly come from our West side, taking our production from 70,000 BOEs per day to in excess of 110,000 BOEs per day. And in order to do that, we're spending about 55% of our capital program over the next 5 year period of time. When we look at the East division there, we'll be growing that from 95,000 BOEs per day to about in excess of 100,000 BOEs per day and we're spending about 45% of our capital over the next 5 year period of time here. Speaker 300:30:58What's important to note as we continue to invest in our EOR projects as Chris has mentioned there, our decline rate being currently in that 24% there, it really doesn't go higher than 24% to 26% over the next 5 year period of time. So the maintenance capital requirements is very low. Our capital efficiencies that we're running at are somewhere in that 21,000 to 22,000 BOEs per day over the next few years here. I think another important aspect of our 5 year plan is infrastructure requirements, specifically in the West division there. We're looking at completing the Musgrove battery in the second quarter here or late Q1, commensurate with the production coming online in Musgrove here. Speaker 300:31:47So we're going to be focusing from a drilling perspective in the Montney there and in the Musgrove and our Latour areas there. From an infrastructure, this year, we're spending about $130,000,000 I would expect on an annual basis, net to us from a Whitecap expenditure somewhere in that $100,000,000 to $150,000,000 on an annual basis over the next 5 year period of time. Speaker 800:32:13Okay. So is it safe to assume here that the capital kind of ranges that we would expect over the next 5 years would still be kind Speaker 700:32:20of in that Speaker 800:32:21same $900,000,000 to $1,100,000,000 range for the next 5 years. There's no one year that's super lumpy, dollars range for the next 5 years? There's no 1 year that's super lumpy with extra infrastructure or anything like that? Speaker 300:32:32That's correct. Yes, somewhere in that I would say $900,000,000 to $1,200,000,000 on an annual basis is what we're expecting CapEx to be. Speaker 800:32:40Okay. Awesome. Thank you very much. Speaker 300:32:42Thanks, Cody. Speaker 100:32:44Next question will be from Jackson Austin at Jack A Capital. Please go ahead. Operator00:32:51Hey, guys. The first question kind of answered my question there, but I was just I'll ask anyways. So I can see that your assumptions at $75 you got $150,000,000 to the balance sheet and only $50,000,000 to share repurchases with the high case for $250,000,000 for the balance sheet and then $315,000,000 for share repurchase. And I feel it's really unlikely that we had $90,000,000 or $100,000,000 unless we get some geopolitical events. And you did $123,000,000 in buybacks in 2023. Operator00:33:22So I'm just curious, is there possibility to do any accelerated buybacks at all? Like we're at even a $10 share price or about 7.2 percent dividend, right? So I was just curious if there was any or you could even go to 100% ever, but you kind of said no already given that you just want to build up some dry powder there. So thank you. Speaker 200:33:44Yes. Share buybacks, I mean, that is a way for us to add value as well. But what we want to make sure, as we've talked about here numerous times, is balance sheet is the priority one. So from our perspective, when we talk about our returns, 75%, 20%, 25% of our funds flow going back to our balance sheet on a continual basis. And we look to be opportunistic with our share buybacks as we advance forward. Speaker 200:34:16The if that is the best way to do it versus growing our business, if that's the best method that's available to us versus growing our business or paying down debt. We want to make sure in this order that leverage, first of all, consistent growing dividend as we grow our business going forward into the future and then share buybacks. So we'll look at that. And you have to look at it relative to the value of our company, Toni. But on a before tax basis, where total proved value is approximately $12 a share, so on a before tax basis. Speaker 200:34:56So we have room to buy back shares, but at this particular time, our focus is on continuing to reduce our leverage to prepare our balance sheet for other opportunities as we move forward. Operator00:35:11Okay, awesome. Thank you. And you're right, even at like 0.7 times, that's pretty low. So I was wondering like and you'd mentioned that you were looking to keep some dry powder. So I was wondering, I know you can't say directly, but are you looking to do like a big M and A deal or just keep doing tuck ins like the license running fast over there? Speaker 200:35:28Yes. We're not looking at big transactions. What we're doing is if there's working interest uptakes or consolidation opportunities in and around the assets that we currently have like we did as we referenced on the Elros Saskatchewan acquisition we did and closed in December. Those are the style of acquisitions that we would look at, again focused on longer term sustainability and profitability of our asset base. Operator00:35:53Okay, awesome. Thank you so much. Speaker 100:36:04And your next question will be from Joseph Schachter at Schachter Energy Research. Please go ahead. Speaker 900:36:10Thank you very much. Good morning and thanks for taking my question. On the abatement line, I'm just trying to get my head around I'm comparing the 2022 AIF and the 2023 AIF. And it looks like you knocked off 417 gross oil wells and 142 gross natural gas for a total of 559. Are you looking to do similar kinds of numbers each year and effectively have a 10 year game plan to knock that down? Speaker 900:36:42Or what is a reasonable assumption on how many wells will be reclaimed each year? And how much CapEx would you consider spending in 'twenty or going forward? Thanks very much. Speaker 1000:36:55Hey, Joseph, it's Joel Armstrong. Probably better to answer in terms of amount spent, we're looking at spending $40,000,000 in a combination of reclamation, facility decommissioning and well abandonment. In terms of absolute well counts, it would be somewhere in the 200. A lot of the early government funded programs, we look at our low hanging fruit if you want to call it and bang off as many wells as we possibly can. But as time goes on, we'll continue to deploy in and around $40,000,000 to help retire those assets. Speaker 900:37:35And is there any government requirements that have changed requiring you to change in terms of where you abandon, how many wells you abandon or is this all within your own control? Speaker 1000:37:49There are requirements and we intend to meet all those requirements, correct. Speaker 900:37:55That's it for me. Thank you very much. Speaker 100:37:58Thank you. And at this time, Mr. Fagerheim, we have no further questions registered. Please proceed. Speaker 200:38:05Okay. Thanks very much Sylvia. And once again, I would like to thank everyone on the call for taking the time and interest to listen to this call today. 2024 is off to a great start, and we look forward to updating you on our progress with the Q1 results at the end of April and throughout the balance of 2024 year. All the best. Speaker 200:38:26Take good care. Bye for now. Speaker 100:38:29Thank 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 that you please disconnect your lines.Read morePowered by Earnings DocumentsSlide DeckAnnual report Whitecap Resources Earnings HeadlinesWhitecap Resources' (TSE:WCP) Dividend Will Be CA$0.0608June 21 at 6:34 PM | finance.yahoo.comAnalysts Set Whitecap Resources Inc. (TSE:WCP) Target Price at C$12.88June 21 at 1:49 AM | americanbankingnews.comWe’ve Entered the Most Bullish Phase of the CycleIt happens like clockwork. 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Sign up for Earnings360's daily newsletter to receive timely earnings updates on Whitecap Resources and other key companies, straight to your email. Email Address About Whitecap ResourcesWhitecap Resources (TSE:WCP) Inc is engaged in the business of acquiring, developing, and holding interests in petroleum and natural gas properties and assets. The company acquires assets with discovered petroleum initially in place and low current recovery factors. Light oil is the primary byproduct of Whitecap's Canadian assets. To extract petroleum products from its resources, the company uses horizontal drilling, in addition to multistage fracturing technology. 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There are 11 speakers on the call. Operator00:00:00Good morning. Speaker 100:00:00My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Whitecap Resources 2023 Results and Reserves Conference Call. I would now like to turn over to Whitecap's President and CEO, Mr. Grant Fagerheim. Please go ahead, sir. Speaker 200:00:38Thanks, Sylvie, and good morning, everyone, and thank you for joining us this morning. Here on the call with me are five members of our management team: our Senior Vice President and CFO, Thanh Kang our Senior Vice President of Production and Operations, Joel Armstrong our Senior Vice President, Business Development and Information Technology, Dave Lundbergett. We also have Joey Wong, our Vice President of West Division and Chris Bullen, our Vice President of East Division joining us as well. 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 that was issued yesterday afternoon. We are very pleased to report strong operational and financial results for 2023. Speaker 200:01:28Our assets in each of our East and West divisions have performed exceptionally well with average production for the year at 156,501 BOE per day, comprised of 66% oil and liquids, 34% natural gas, which equates to 11% growth on a per share basis over 2022. Of the 215 wells drilled, 181 were in our 80% Oil and Liquids East division and 34 wells in our West division, which is 60% natural gas, 40% liquids highlighted by our Montney and Duvernay assets. From a financial perspective, we reduced debt by over $500,000,000 since the end of 2022. And upon reaching our 2nd internally set net debt milestone in the second Speaker 300:02:35Yes. It looks like we're having a bit of technical difficulties here. So I'll just continue on behalf of Grant. It's Thanh Kang here. So from a financial perspective, we reduced debt by over $500,000,000 since the end of 2022 and upon reaching our 2nd internally set net debt milestone in the second half of twenty twenty three, we increased our dividend to $0.73 per share annually. Speaker 300:02:59We also returned $500,000,000 to shareholders in 2023, 3 quarters was returned through our base dividend and the remainder or $123,000,000 was returned through share repurchases. In addition to our focus on strong operational performance, our priorities include disciplined debt management. Our net debt is currently just below $1,400,000,000 and we have over $1,700,000,000 of undrawn capacity on our credit facilities. Our leverage is low at 0.7 times debt to EBITDA and the available capacity of $1,700,000,000 provides us ample flexibility to manage through commodity price volatility and to capture strategic opportunities should they present themselves in the future. One of those strategic opportunities that we executed on in the 4th quarter was the acquisition of 4,000 barrel per day high netback 100% light oil Viking production in the El Rose area. Speaker 300:03:54This acquisition made a lot of sense for us as it consolidated an active area of development and was completed at very attractive acquisition metrics of 1.7 times cash flow, resulting in strong accretion to both funds flow and free funds flow as well as a healthy drilling inventory that we plan to capitalize in 2024 and beyond. 2023 was a very important year for operational execution and we are very proud of our results and the contributions made by our employees. We look forward to building off the success in 2024 as we continue to enhance our development strategy across our deep portfolio of opportunities. The continued refinement and optimization of our drilling and completion designs are expected to ultimately result in improving sustainability and profitability of the business. This includes well spacing and development design, increasing both lateral lengths and the number of horizontal legs and secondary and tertiary recovery pilot projects. Speaker 300:04:54Both Joey and Chris will further elaborate on initiatives that their teams are undertaking. We also had a very strong year from a reserves perspective, especially on organic basis, which reflects strong operational execution and a high quality drilling inventory. Prior to the impact of net dispositions completed in 2023, we had greater than 100% production replacement as well as strong reserves per share growth. On a debt adjusted basis, we grew PDP reserves by 6%, total proven reserves by 10% and 2P reserves by 7% per share. Our inventory life ranges from 6 years on a PDP basis up to 19 years on a 2P basis and coupled with long term recycle ratios averaging 2.6 to 3.3 times demonstrates our commitment to long term growth that is both profitable and sustainable into the future. Speaker 300:05:52Our 2023 funds flow was approximately 1,800,000,000 dollars or $2.94 per share and after capital expenditures of $950,000,000 we generated $840,000,000 of free funds flow. This along with the net dispositions completed in the year contributed to our ability to reduce debt by 500,000,000 dollars while also returning $500,000,000 to shareholders over the course of 2023. For the Q4, we achieved production just shy of 167,000 BOEs per day and funds flow of $462,000,000 or $0.76 per diluted share. After capital expenditures of $200,000,000 we generated $262,000,000 of free funds flow, returning 76% of back to shareholders through our base dividend and buybacks during the quarter. We recorded current income tax expense of $65,000,000 in 2023 and we had $3,600,000,000 of tax pools at the end of the year to shelter future income. Speaker 300:06:53With the closing of the Viking acquisition late in Q4, we are adjusting our guidance for 2024. Our production guidance has been increased to 165,000 to 170,000 BOEs per day, while we reduced our capital expenditures by approximately $100,000,000 to $900,000,000 to $1,100,000,000 to partially offset the cost of the acquisition. The capital reductions will primarily come from our second half program and we're now forecasting $600,000,000 of capital in the first half of the year and approximately $400,000,000 in the second half. The midpoint of our updated guidance represents production per share growth of 8% year over year. However, our capital program remains flexible to changing market conditions. Speaker 300:07:37Our funds flow forecast at a price deck of US75 dollars WTI and $2 AECO per GJ Gas is $1,600,000,000 resulting in $600,000,000 of free funds flow after $1,000,000,000 of capital investments. With currently weak natural gas prices, we have been focused on drilling oil weighted locations in our East division and in our West division, we're drilling liquids rich portions of our acid base. So the liquids content is currently driving the economics of our 2024 program. For context, although natural gas represents 36% of our production, it only represents 9% of our revenues. For 2024, our price sensitivities are as follows. Speaker 300:08:20For every $5 increase in WTI, our funds flow increases by $130,000,000 For every $0.50 increase in AECO, our funds flow increases by $40,000,000 and for every penny decrease in the Canadian to U. S. Dollar exchange rate, our funds flow increases by 25,000,000 dollars As we mentioned previously, our balance sheet is in excellent shape with significant liquidity on our credit facility. While our variable cost of debt has increased, we enter it with the broader interest rate environment. We have cushioned this impact through our private placement notes and interest rate swaps totaling $800,000,000 with a weighted average interest rate of only 3.25%. Speaker 300:09:00I will now pass it off to Joey for remarks on our West Division results. Speaker 400:09:07Thanks, Son. On an asset level, our performance in the West Division in 2023 was very strong with initial well results above our expectations across multiple areas of unconventional Montney and Duvernay development. Our most recent results at Kakwa are so far validating our updated development strategy for the area. The 226B 3 well pad has achieved IP120 rates were 26% above our expectations, while test results for our most recent 3 of 21 B pad 3 well pad were also quite encouraging. That pad was tied into permanent facilities earlier this month. Speaker 400:09:42For these 2 pads, we have adjusted our inter well spacing to 2 50 meters from 200 meters following a detailed review of these lands from a reservoir, geological, operational and economic perspective. Our asset base will continue to undergo continuous review with the goal of maximizing economic return characteristics of this extensive inventory set. A significant amount of technical work has gone into the development of our Musgro asset to the north of Kakwa. Design factors such as well spacing, benching and completion design have all been informed by a similar rigorous technical process that incorporates these localized characteristics on a pad by pad basis. Given its higher liquids content, we expect Musgro to generate strong economics in the current environment. Speaker 400:10:26We spud our first two four well pads for 8 net wells at Musgro in the 4th quarter, while a third pad was spud in January of this year. We plan to complete a total of 44 well pads for a total of 16 net wells in Musgro in 2024. These pads will flow through our 20,000 BOE a day battery, which is expected to come online in the Q2. Moving down to the northwest portion of our Resthaven land block, we are seeing strong initial results at Latour, which is encouraging for future Montney development in the latter half of this decade. The initial production results of our 2 well pad is approximately 15% above our expectations after 60 days on production. Speaker 400:11:03And these results along with offset results are giving us more confidence in the liquids profile and the potential deliverability of this asset. We plan to drill an additional 2 wells at Latour in 2024. These initial well results along with the success that we've been seeing throughout the refinement of our development strategy is key to ensuring efficiency and the maximization of profitability across a full field development on this asset. Initial engineering and commercial work for an infrastructure solution at Latour has commenced and we're looking forward to the completion of the design work on this next stage of development. We plan to grow this asset to approximately 30,000 BOEs a day by the end of 2028, drilling an initial 50 to 60 high quality Montney wells with a huge land base to grow further and or faster as warranted. Speaker 400:11:50Moving on to the Duvernay at Kaybob, Our first seven wells that we drilled into the Duvernay are continuing to outperform expectations. The 7 wells now all have IP90 rates with results coming in 24% above our expectations at 1600 BOEs per day per well of which 36% is liquids. Plan to drill a 3 well pad and a 5 well pad in the Duvernay in the first half of twenty twenty four. The first three wells will be drilled to a 4,200 meter lateral length, which is over 20% longer than our first 7 Duvernay wells. Optimization of our development plan in the Duvernay is ongoing and increasing lateral lengths is expected to improve capital efficiency while not sacrificing the total resource covered over the life of the well. Speaker 400:12:33We currently have approximately 200 locations in inventory and plan to spud 13 Duvernay wells in 2024. Lastly, I did want to touch on our water management strategy for 2024 and beyond given the recent headlines from the Alberta government on the topic. We have been developing a water management strategy as an ongoing initiative in preparation for this year's activity for some time, which included engagement with both industry and regulatory stakeholders. At this time, we feel comfortable given our existing licenses and established water infrastructure in the area, both owned and third party, that we can effectively mitigate the impact of marginal limitations not only for this year, but by having a long term strategy in place, we will be able to minimize disruptions to our operations on a go forward basis. I will now pass it on to Chris for his comments on the East Division. Speaker 500:13:19Thanks, Joy. These divisions had a very successful 2023 and we are looking to follow that up with a strong 2024. Our division is comprised of assets that produce over 80% crude oil and NGLs and combined with a low decline rate of less than 20%, this division drives a significant portion of free funds flow for the company. Our technical teams have done a fantastic job in 2023, not only from a well results perspective, but also by continuing to push our ceiling higher through extensive work on technical initiatives and deepening our understanding of our assets. We highlighted in yesterday's release a significant portion of East Division well results that exceeded our expectations, with over 80% of well results in 2023 being focused on high netback, short cycle and quick payout light oil assets and with oil at approximately $100 per barrel on a Canadian dollar basis means that the profitability of our East Division drilling program is extremely robust. Speaker 500:14:17Allocating capital to decline mitigation and inventory enhancement initiatives will continue in 2024 with several recent initiatives being implemented upon success. Increasing reservoir contact through longer laterals as well as increasing the number of horizontal legs has been ongoing for the last few years. Synergistic asset consolidations across our land base over the last few years has also provided the opportunity to drill longer laterals in multiple horizons across a greater portion of our assets leading to improved capital efficiencies. As an example of strategic capital to enhance our load decline profile, we are very encouraged by the initial response of our CO2 pilot project targeting the Frobisher formation, which lies beneath the existing Weyburn CO2 project targeting the Midale formation. We drilled 2 producer wells early in 2023. Speaker 500:15:06After drilling 3 injection wells, initiated CO2 injection in late 2023. Production response was exceptional with an uplift of over 4 times the initial oil production rate peaking at 500 barrels per day between the 2 producers before being facility restricted. Although in its infancy, this resource has the potential to be meaningful with 20,000,000 to 40,000,000 barrels of incremental volumes based on our preliminary internal success case assessments. This is a good example of allocating strategic capital to further enhance low decline initiatives that will likely lead to broader implementation in the future upon success. Out of the $110,000,000 of investments in secondary and tertiary recovery initiatives in 2023, it's worth noting that nearly 60% of this is for drilling producers in waterflood areas such as West Pamela Cardium or Carrobert and Dodge Land Viking along with producer optimizations. Speaker 500:16:00These projects are highly competitive and would be top quartile from a pale perspective while also having the added advantage of reduced declines and enhanced recoveries when compared to our primary drills due to historical and or ongoing pressure support. The remaining 40% involves spending on injector drills and conversions, base maintenance, facilities as well as CO2 and polymer procurement for tertiary assets such as Weyburn and Southwest Saskatchewan. Our 2024 East Division drilling program is well underway and we are currently running 11 rigs to drill 95 gross, 87 net wells in the Q1. With that, I will turn it back over to Grant for his closing remarks. Speaker 200:16:40Thanks very much, Chris, and I am back. I apologize with the I don't drop off again. But anyway, thanks very much, Chris. As discussed, our recent well results are performing better than expectations, while technical initiatives undertaken within our respective divisions are exploring ways to further improve sustainability and profitability going forward. As we look out over the next 5 years, we are targeting organic growth to an excess of 210,000 BRE per day by the end of 2028. Speaker 200:17:11Growth in our West division, primarily from our unconventional Montney and Duvernay development will be at an annual rate of 12% to 15%, increasing production from approximately 70,000 BOE per day currently to over 110,000 BOE per day. In our East division, which is light oil focused and generates significant free cash flow, we plan to increase production organically from 95,000 BOE per day currently to approximately 100,000 BOE per day over the next 5 years. We operate our business in a proactive way to effectively develop our assets for increasing profitability and believe that at a measured pace of growth is sustainable and appropriately manages risk over the longer term. At the same time, we also maintain the flexibility to be reactive to unexpected market events and we'll continue to allocate capital to the assets and projects to provide the highest returns. Our current corporate production split of 64% oil and liquids and 36% natural gas will increase towards 40% natural gas weighting at the end of the 5 years. Speaker 200:18:17At that time, we forecast to be producing approximately 500,000,000 cubic feet a day of natural gas. With joining the Rockies LNG Partners Group, we aim to be to have approximately 20% of our natural gas production exposed to non North American natural gas prices once the Salinas LNG project off the West Coast of British Columbia is operational near the term of the decade. Our inventory set is very robust with over 6,400 locations in inventory at year end 2023. This inventory has been modified for some of our updated spacing assumptions along with further technical analysis across our asset base. While we expect our full location count to always be evolving, we do believe that the recoverable resource at our asset base can support 5% annualized organic growth for at least the next 25 year period of time. Speaker 200:19:15As a Canadian energy producer, we are nearing an inflection point with the Trans Mountain expansion pipeline nearing completion and reports that the LNG Canada facility will begin commissioning prior to the end of 2024. Both export facilities off Canada's West Coast will open new markets for responsibly produced Canadian oil and natural gas, and we are excited to see these projects come to fruition. With that, I will now turn the call over to our operator, Silvi, for any questions. Speaker 100:19:45Thank you, And your first question will be from Dennis Fong at CIBC World Markets. Please go ahead. Speaker 600:20:16Hi, good morning and thanks for taking my questions. The first one is just in the press release and I appreciate the commentary that you've highlighted through the conference call. There's been a lot of focus on applying new technologies and techniques to improve operations, costs and even while productivity. Can you discuss a little bit more about, we'll call it, the stage of deployment across your entire asset base as well as how quickly you think some of the kind of latest developments can be applied, whether it be the longer horizontals, more use of multilateral legs, and even kind of changing up or tweaking completion design can drive improvements in capital efficiency and maybe the upper bound of 5 year CAGR growth? Speaker 400:21:01Yes, Dennis, it's Joey Wong here. I can take that one. So I mean our approach to these assets going back to the acquisition has been to ensure we're maximizing overall economic returns. So we do that as we kind of discussed using a case by case design that includes all of the models that we had kind of talked about whether we're talking geological models, reservoir models, observation of offset results and of course the economic considerations and of course the one example is the one that we highlighted in the call where the 2 recent three well pads in Kakwa, those 6 wells previously would have had 8 wells assigned. And it's our belief that through those 6 wells we'll recover the same overall resource that we would have with the initial 8 wells. Speaker 400:21:49So that's an example of what we're looking to do with respect to opportunities where we think we can influence that frac geometry to kind of work with the rock, work with the fluids to the point where we're not unduly giving up any overall reserves and pushing that overall economic return profile upwards. So to go a little bit further in saying that where it has worked in one place, we'll look to see where similar things can work in other places. But again, we have to recognize that with such a wide asset base, it's going to be something that we're going to have to consider in each area as the rock and the fluids interact. Speaker 300:22:30And from a CAGR perspective over the next 5 year period of time here, we're targeting 3% to 8% production per share growth, using the mid case right now, 5% growth to get us to that 210,000 BOEs per day and that's premised on a $75 WTI environment there. So we certainly have the ability to flex our growth rate depending on what the economic returns look like on the capital that we're deploying. In a low commodity and price environment, dollars 50 WTI, we wouldn't be growing at all. We would just be maintaining our production. And if oil is in excess of $75 then we could potentially be growing at the higher end of that 3% to 8% per share growth that we're targeting. Speaker 600:23:15Great. Appreciate that color. My second question here is just on net debt. You continue to make progress on lowering outstanding leverage. As you highlight on the call, it's being $1,300,000,000 kind of partway through the year. Speaker 600:23:29Understandably, year end net debt increased modestly on the back of the Viking acquisition. My question relates towards at Q3, you highlighted $1,000,000,000 in 2024. Obviously, there's a few moving parts here. Was just curious as to how you fundamentally think about aggregate leverage for the company? Where is kind of a good level or is lower just always better? Speaker 600:23:55And how does that potentially change how you envision returning free cash to shareholders? Thanks. Speaker 300:24:01Yes. Thanks for that, Dennis. I think our balance sheet, as I mentioned, is in excellent shape right now with 0.7 times debt to EBITDA, dollars 1,700,000,000 of liquidity that's available to us. I think as we think about the business going forward here, commodity prices remain volatile. There's going to be opportunities for us to be able to use our balance sheet to create value for on behalf of our shareholders over the next 3 to 5 year period of time. Speaker 300:24:27And so I think as we continue to allocate 75% back to shareholders, 25% on the balance sheet, we'll continue to build that dry powder. And if there's no opportunities that present themselves, then ultimately we'll have a better balance sheet to be able to run our business here. As we think about 2024, our leverage will be below 1 $300,000,000 As you mentioned, we took that up a little bit with the acquisition, with the L Rose Viking acquisition. They are consolidating a core area for us. But those are the type of opportunities with a very strong balance sheet that we can capitalize on very quickly, where we're buying assets at 1.7x cash flow right within our core areas, whether it's synergistic with our lands and we're the operator. Speaker 300:25:14So that's what we're focused on from a balance sheet perspective. Speaker 600:25:22Great. Thank you. I'll turn it back. Appreciate the color. Speaker 300:25:27Thanks, Dennis. Speaker 100:25:29Next question will be from Patrick O'Rourke at ATB Capital Markets. Please go ahead. Speaker 700:25:37Hi, guys. Good morning and thank you for taking my question here. Just with respect to the ability to flex capital here, I'm just wondering if you can walk us through some of the levers. I think in the past, maybe there's been a bit of shift between East and West and with the East being oily, Is there any ability still within the 2024 framework or calendar year to shift some capital between those two units or even if there would be desire to do that? And I just wondered because you did make a comment earlier with respect to sort of 60% of the capital budget being in the first half of the year? Speaker 700:26:10And I would assume given breakup type conditions and planning that that's predominantly in the Q1 here. Speaker 200:26:20Yes, Patrick. Thanks for your question on that. I mean, one of the areas that one of the strengths of Wakecap actually is the ability to be able to swing capital between natural gas and oil. And because we're oil and liquids over 64%, we talk about what we wanted to do. We position the company for the first half of the year and we'll make the evaluations in the back half of the year if there's a need to shift any other capital in any way, shape or form. Speaker 200:26:52I mean, we see that we've got depressed natural gas prices here trading about $1.65 or $1.60 at this particular time and could end up even lower than that through the summer. But the majority of our revenue, 91% to 92% is still driven through oil and liquids. So it does it has a small impact on us. We talk about the sensitivities in our presentation. But the biggest areas that is going to drive revenue for our company going forward is oil and liquids. Speaker 200:27:25So we'll continue to monitor this as we move through the year. But we do think that there could be quite a significant delta change in natural gas prices as we move forward from this $1.60 level currently to potentially be north of $3 in 2,000 where it's trading at today in 2025. So you don't want to switch this really quickly. You want to monitor it and see what we're doing. But in the meantime, we're focused on our long term assets in the Montney and Duvernay that have a high component of liquids. Speaker 200:28:01We'll continue on with those programs. Speaker 700:28:07Great. Thank you. And maybe just to build on the comment that you made there with respect to recovery in natural gas prices. There's pretty steep contango in the price curve here. From your risk management perspective, what is sort of your appetite right now for hedging into that Fort Contango? Speaker 700:28:25Or do you see further upside there? Speaker 300:28:29Yes. It's Ton here, Patrick. Thanks for that question. I think from a risk management perspective, what we're really looking to do is protect our shareholders from the downside perspective. So making sure that we have the cash flows, both on the oil and the gas to be able to fund our maintenance capital as well as our dividend down to $50 WTI. Speaker 300:28:51For 2024 here, we're fully funded at that level even with 18% of our oil hedged and roughly 17% of our gas hedged there. We started to layer on incremental positions. As you've mentioned, it is contango right now, especially on the gas side. Just recently entered into some positions. We're actually now about 14% in 2025 on 2025 on the natural gas and we're about 9% hedged on the crude oil there. Speaker 300:29:19Our objective is to hedge about 20% of our production, again to make sure that we can fully fund both our maintenance capital as well as our dividends there. So we're not really taking a speculative view on whether we think commodity prices are too high or too low. It's a very systematic program that allows us to protect our cash flows from an outside perspective. Speaker 700:29:44Okay. Thank you very much. Operator00:29:46Yes. Thanks, Patrick. Speaker 100:29:48Next question will be from Cody Kwan at Stifel. Please go ahead. Speaker 800:29:54Hi, guys. Thanks for taking my call here. I got a question for you on the 5 year plan. I see that you've updated the production numbers. How did the capital numbers behind that look with this update here kind of in terms of quantum and maybe shape of the capital investment profile over the 5 years? Speaker 300:30:17Yes. Thanks for that question there, Cody. I think as we think about investments in the East and the West division there, as Grant had mentioned, the growth area will certainly come from our West side, taking our production from 70,000 BOEs per day to in excess of 110,000 BOEs per day. And in order to do that, we're spending about 55% of our capital program over the next 5 year period of time. When we look at the East division there, we'll be growing that from 95,000 BOEs per day to about in excess of 100,000 BOEs per day and we're spending about 45% of our capital over the next 5 year period of time here. Speaker 300:30:58What's important to note as we continue to invest in our EOR projects as Chris has mentioned there, our decline rate being currently in that 24% there, it really doesn't go higher than 24% to 26% over the next 5 year period of time. So the maintenance capital requirements is very low. Our capital efficiencies that we're running at are somewhere in that 21,000 to 22,000 BOEs per day over the next few years here. I think another important aspect of our 5 year plan is infrastructure requirements, specifically in the West division there. We're looking at completing the Musgrove battery in the second quarter here or late Q1, commensurate with the production coming online in Musgrove here. Speaker 300:31:47So we're going to be focusing from a drilling perspective in the Montney there and in the Musgrove and our Latour areas there. From an infrastructure, this year, we're spending about $130,000,000 I would expect on an annual basis, net to us from a Whitecap expenditure somewhere in that $100,000,000 to $150,000,000 on an annual basis over the next 5 year period of time. Speaker 800:32:13Okay. So is it safe to assume here that the capital kind of ranges that we would expect over the next 5 years would still be kind Speaker 700:32:20of in that Speaker 800:32:21same $900,000,000 to $1,100,000,000 range for the next 5 years. There's no one year that's super lumpy, dollars range for the next 5 years? There's no 1 year that's super lumpy with extra infrastructure or anything like that? Speaker 300:32:32That's correct. Yes, somewhere in that I would say $900,000,000 to $1,200,000,000 on an annual basis is what we're expecting CapEx to be. Speaker 800:32:40Okay. Awesome. Thank you very much. Speaker 300:32:42Thanks, Cody. Speaker 100:32:44Next question will be from Jackson Austin at Jack A Capital. Please go ahead. Operator00:32:51Hey, guys. The first question kind of answered my question there, but I was just I'll ask anyways. So I can see that your assumptions at $75 you got $150,000,000 to the balance sheet and only $50,000,000 to share repurchases with the high case for $250,000,000 for the balance sheet and then $315,000,000 for share repurchase. And I feel it's really unlikely that we had $90,000,000 or $100,000,000 unless we get some geopolitical events. And you did $123,000,000 in buybacks in 2023. Operator00:33:22So I'm just curious, is there possibility to do any accelerated buybacks at all? Like we're at even a $10 share price or about 7.2 percent dividend, right? So I was just curious if there was any or you could even go to 100% ever, but you kind of said no already given that you just want to build up some dry powder there. So thank you. Speaker 200:33:44Yes. Share buybacks, I mean, that is a way for us to add value as well. But what we want to make sure, as we've talked about here numerous times, is balance sheet is the priority one. So from our perspective, when we talk about our returns, 75%, 20%, 25% of our funds flow going back to our balance sheet on a continual basis. And we look to be opportunistic with our share buybacks as we advance forward. Speaker 200:34:16The if that is the best way to do it versus growing our business, if that's the best method that's available to us versus growing our business or paying down debt. We want to make sure in this order that leverage, first of all, consistent growing dividend as we grow our business going forward into the future and then share buybacks. So we'll look at that. And you have to look at it relative to the value of our company, Toni. But on a before tax basis, where total proved value is approximately $12 a share, so on a before tax basis. Speaker 200:34:56So we have room to buy back shares, but at this particular time, our focus is on continuing to reduce our leverage to prepare our balance sheet for other opportunities as we move forward. Operator00:35:11Okay, awesome. Thank you. And you're right, even at like 0.7 times, that's pretty low. So I was wondering like and you'd mentioned that you were looking to keep some dry powder. So I was wondering, I know you can't say directly, but are you looking to do like a big M and A deal or just keep doing tuck ins like the license running fast over there? Speaker 200:35:28Yes. We're not looking at big transactions. What we're doing is if there's working interest uptakes or consolidation opportunities in and around the assets that we currently have like we did as we referenced on the Elros Saskatchewan acquisition we did and closed in December. Those are the style of acquisitions that we would look at, again focused on longer term sustainability and profitability of our asset base. Operator00:35:53Okay, awesome. Thank you so much. Speaker 100:36:04And your next question will be from Joseph Schachter at Schachter Energy Research. Please go ahead. Speaker 900:36:10Thank you very much. Good morning and thanks for taking my question. On the abatement line, I'm just trying to get my head around I'm comparing the 2022 AIF and the 2023 AIF. And it looks like you knocked off 417 gross oil wells and 142 gross natural gas for a total of 559. Are you looking to do similar kinds of numbers each year and effectively have a 10 year game plan to knock that down? Speaker 900:36:42Or what is a reasonable assumption on how many wells will be reclaimed each year? And how much CapEx would you consider spending in 'twenty or going forward? Thanks very much. Speaker 1000:36:55Hey, Joseph, it's Joel Armstrong. Probably better to answer in terms of amount spent, we're looking at spending $40,000,000 in a combination of reclamation, facility decommissioning and well abandonment. In terms of absolute well counts, it would be somewhere in the 200. A lot of the early government funded programs, we look at our low hanging fruit if you want to call it and bang off as many wells as we possibly can. But as time goes on, we'll continue to deploy in and around $40,000,000 to help retire those assets. Speaker 900:37:35And is there any government requirements that have changed requiring you to change in terms of where you abandon, how many wells you abandon or is this all within your own control? Speaker 1000:37:49There are requirements and we intend to meet all those requirements, correct. Speaker 900:37:55That's it for me. Thank you very much. Speaker 100:37:58Thank you. And at this time, Mr. Fagerheim, we have no further questions registered. Please proceed. Speaker 200:38:05Okay. Thanks very much Sylvia. And once again, I would like to thank everyone on the call for taking the time and interest to listen to this call today. 2024 is off to a great start, and we look forward to updating you on our progress with the Q1 results at the end of April and throughout the balance of 2024 year. All the best. Speaker 200:38:26Take good care. Bye for now. Speaker 100:38:29Thank 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 that you please disconnect your lines.Read morePowered by