Whitecap Resources Q2 2026 Earnings Report

Whitecap Resources EPS Results

• Actual EPS: C$0.73
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Whitecap Resources Revenue Results

• Actual Revenue: $2.35 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Whitecap Resources Announcement Details

• Quarter: Q2 2026
• Date: 7/29/2026
• Time: After Market Closes
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 11:00AM ET

Whitecap Resources (TSE:WCP) is a leading Canadian energy company committed to delivering reliable returns to shareholders through the responsible development of oil and natural gas assets in the Western Canadian Sedimentary Basin. With a strong track record of profitable growth and a sustainable dividend, Whitecap delivers long-term value to investors, supported by investment-grade financial strength.

Whitecap Resources Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record second-quarter results: Funds flow reached CAD 1.4 billion and free funds flow CAD 925 million, supported by stronger light-oil and condensate pricing, lower operating costs, and a full quarter of Veren production.
• Positive Sentiment: Whitecap raised 2026 production guidance by 5,000 BOE per day to 385,000 BOE per day, while maintaining CAD 2.0–2.1 billion capital-spending guidance and expecting to spend at the high end due to shorter cycle times and operational outperformance.
• Positive Sentiment: Net debt fell by CAD 900 million over six months to CAD 2.5 billion, or 0.5x debt to cash flow. Management said balance-sheet reduction remains the priority, while retaining flexibility for future dividends, buybacks, acquisitions, or increased growth investment.
• Positive Sentiment: Kaybob reached its 115,000–120,000 BOE per day productive-capacity range, and management estimates the asset can generate CAD 800–900 million of annual operating free cash flow at US$70–80 WTI; the Lator facility is approximately 90% complete and remains on budget for fourth-quarter startup.
• Negative Sentiment: Natural-gas market conditions remained weak, with AECO averaging only CAD 1.63 per Mcf and affected by unplanned NGTL maintenance. Whitecap’s diversified gas pricing provided some support, with realized gas prices averaging CAD 2.29 per Mcf, but gas remains a less favorable part of the portfolio than liquids.

Presentation

[Operator]

My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Whitecap Resources' second quarter 2026 results conference call. Please note that all participant lines have been placed on mute to prevent any background noise. 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 number 1 on your telephone keypad. If you would like to withdraw from the question queue, please press star, then number 2. I would like to turn the conference over to Whitecap's President and Chief Executive Officer, Mr. Grant Fagerheim. Please go ahead, sir.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Thanks very much, Sylvie. Good morning, everyone, and thank you for joining us here this morning. There are five members of our management team here with us today. Our President, Joey Wong, our Senior Vice President and CFO, Thanh Kang, our Senior Vice President, Asset Development and Information Technology, Dave Mombourquette, our Chief Operating Officer, Travis Tweit, and our Vice President, Conventional Division, Reserves and Reservoir Development, Chris Bullin. 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. We are once again pleased to report exceptionally strong operational and financial results for the second quarter of 2026. Our technical and operations teams continued to execute effectively across our second quarter capital program, with asset productivity exceeding expectations.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Our second quarter funds flow was a big number at CAD 1.4 billion, or CAD 1.11 per share, a record for Whitecap that we are very pleased with. As most are aware, disruptions to crude oil and condensate supply from the Middle East materially tightened global availability of light barrels during the quarter and is still ongoing, supporting stronger benchmark prices and increased demand for North American light oil and condensate. The combination of crude oil and condensate pricing and continuing to lower operating costs resulted in a robust operating netback of CAD 43.84 per BOE, a 48% improvement to the prior year quarter. Free funds flow of CAD 925 million was also a record for Whitecap. With these incremental funds, we will continue to execute our countercyclical approach to free funds flow allocation.

[Grant Fagerheim, President and CEO at Whitecap Resources]

During periods of elevated commodity prices, we will prioritize debt reduction, strengthen the balance sheet, and preserve maximum flexibility to enhance shareholder returns across commodity price cycles. Over the last six months, we have reduced our net debt by CAD 900 million to CAD 2.5 billion or 0.5x debt to cash flow. From an operational perspective, Whitecap delivered another strong operating quarter, with production averaging 388,894 BOE per day, comprised of 239,083 barrels of liquids, slightly under 900 million cubic feet a day of natural gas. We drilled 47 wells across the Montney, Duvernay and our conventional portfolio, using approximately seven rigs during the quarter. With spring breakup now behind us, activity is increasing as planned. We expect to use approximately 12 rigs through the third quarter and into the fourth.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Our average quarterly production exceeded our internal forecast by approximately 8,000 BOE per day, driven by strong asset-level performance at Kaybob and base production optimization in Central Alberta. More broadly, results were strong across both divisions, with new well performance, base optimization, and high infrastructure utilization contributing positively during the quarter. These results reflect consistent application of our integrated development workflow, which combines the expertise of our technical and operating teams with a deep proprietary data set and rigorous feedback loops from each well pad and pad drilled. Based on this outperformance, we are raising our 2026 production guidance for the second time this year by 5,000 BOE per day to 385,000 BOE per day. This represents a total increase from our original budget guidance of 12,500 BOE per day or 3%.

[Grant Fagerheim, President and CEO at Whitecap Resources]

From a capital spending point of view, we are not making any changes to our 2026 capital spending guidance of CAD 2 billion-CAD 2.1 billion. Having said that, given the shorter cycle times that we are seeing across our asset base, we plan to maintain activity levels and expect to spend at the high end of our capital spending range, guidance range. I will now pass the call on to Thanh for further discussion on our second quarter financial results. Thanh?

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

Thanks, Grant. Petroleum and natural gas revenue increased 93% to CAD 2.6 billion, driven by higher crude oil and condensate pricing as a result of the ongoing conflict in the Middle East, as well as the inclusion of a full quarter of production from the Veren assets. Second quarter WTI averaged $92.79 per barrel, while MSW traded at a premium to WTI of $2.52 per barrel, and condensate traded at a premium to WTI of $2.69 per barrel. Combined with a weaker Canadian dollar, this resulted in a realized crude oil and condensate price of CAD 127.82 per barrel. In the second quarter, Whitecap produced over 200,000 barrels per day of oil and condensate, with the light oil and condensate volumes realizing a premium to WTI. Total liquids accounted for approximately 93% of our revenue during the quarter, despite being only 61% of total production.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

AECO prices remained challenged during the second quarter and were also impacted by unplanned NGTL maintenance, resulting in AECO prices averaging CAD 1.63 per Mcf in the second quarter. The impact of our natural gas price diversification was seen in our realized natural gas price in the second quarter, averaging CAD 2.29 per Mcf or a CAD 0.66 premium to AECO. As Grant mentioned, we continue to improve our cost structure with operating costs at CAD 11.88 per BOE in the quarter, down 13% compared to the prior year quarter.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

Given this trend, we are reducing our full-year operating cost forecast to CAD 12 per BOE at the midpoint, which is a CAD 0.50 per BOE reduction relative to our original budget, which increases free cash flow by approximately CAD 70 million. Second quarter net income increased 186% compared to the prior year quarter to CAD 890 million or CAD 0.73 per share.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

The increase was primarily driven by higher petroleum and natural gas sales, which were partially offset by higher royalties, a lower net gain on commodity contracts, and higher DD&A. In the second quarter, we recorded an unrealized gain on commodity contracts of CAD 282 million compared to an unrealized loss of CAD 509.1 million in the first quarter. These large non-cash movements reflect the change in the mark-to-market values of our commodity contracts, resulting from significant volatility in crude oil prices. Our risk management strategy is to hedge between 25%-35% of our crude oil and natural gas production on a rolling two-year trailing basis. For the second half of 2026, we've hedged 33% of our net crude oil volumes at an average swap price of approximately CAD 94 per barrel and 28% of our net natural gas volumes at an average swap price of CAD 4 per Mcf.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

For 2027, we have hedged 26% of our net crude oil volumes at an average swap price of CAD 93 per barrel and 13% of our net natural gas volumes at an average swap price of approximately CAD 3 per Mcf. Since closing the Veren transaction, we have reduced net debt by CAD 900 million to CAD 2.5 billion, an amount equivalent to Whitecap's standalone net debt prior to the transaction and a significant achievement for our company. As Grant mentioned, we will continue to allocate our free funds flow towards the balance sheet and will continue to assess opportunities to enhance shareholder returns in the future. I will now pass it off to Joey for more remarks on our unconventional results.

[Joey Wong, President at Whitecap Resources]

Thanks, Thanh. Our unconventional division delivered another solid quarter, driven by continued strength in our Montney and Duvernay development programs. Wells brought on production since the start of the year are performing above our internal expectations on aggregate. We do not expect every well or pad to land exactly on the forecast, but we do expect to forecast aggregate performance reliably, understand the drivers of variability, and use those insights to improve the next development and capital allocation decision. Cycle times continue to improve and are supported by sustained performance across the key drilling and completion execution metrics we discussed earlier in the year. Meters drilled per day and tons of proppant placed per day during completions are now 31% and 13% above historical levels, respectively, compared with 27% and 12% as disclosed in the first quarter, demonstrating continuous improvement and better capital efficiency.

[Joey Wong, President at Whitecap Resources]

At Lator, construction of the 413 facility is now approximately 90% complete, with cost and schedule remaining on budget, with startup expected in the fourth quarter. Following startup, we will direct a five-well pad and existing area production to the new facility, freeing up capacity in the area to bring on a two-well Resthaven delineation pad prior to the end of the year. Turning to Karr, both of our initial plug-and-perf pilot pads have now been on production for more than 90 days. As we discussed, frac execution was strong, with more than 95% of each lateral effectively stimulated, and they were done at an approximate CAD 2 million per well cost advantage relative to area single-point entry completions. Early-time diagnostic data indicates that fracture geometry broadly conforms to our design.

[Joey Wong, President at Whitecap Resources]

Overall deliverability is currently tracking within the range of our internal expectations. After including the well cost savings, pad-level capital efficiency is forecasted to be better. In parallel, our teams have demonstrated improvements on single-point entry completion execution in Gold Creek as compared to legacy completions, which have improved by approximately 23% on a tons per day basis compared with the 13% improvement across our broader unconventional program I mentioned earlier. This has narrowed the expected plug-and-perf cost advantage in the Gold Creek area from approximately CAD 1 million to roughly CAD 750,000 per well. Our third plug-and-perf pilot pad at our first, the Gold Creek, is expected to spud in the coming months. As a reminder, we use plug-and-perf technology exclusively in the Duvernay and across our other Montney assets at Kakwa, Musreau, and Lator, where production results have been strong.

[Joey Wong, President at Whitecap Resources]

Our measured application of it at Karr and Gold Creek reflect the observed differences in subsurface characteristics and the need to tailor both design and execution accordingly. These pilots will expand our comparative data set and help refine where each completion approach provides the strongest risk-adjusted economic return. At Kaybob, our Duvernay asset reached its productive capacity range of 115,000-120,000 BOE per day within the second quarter. We are now very pleased to be forecasting production to average within that range through the third and fourth quarters. Our updated outlook reflects the cumulative benefit of stronger well performance, shorter cycle times, infrastructure debottlenecking, and continued base optimization. As Kaybob moves into this stable, productive range, our focus is shifting from growth towards sustaining the asset at capacity and harvesting free cash flow from our identified 700 inventory locations.

[Joey Wong, President at Whitecap Resources]

On our updated forecast, Kaybob is capable of generating between CAD 800 million and CAD 900 million of annual operating free cash flow at between $70 and $80 WTI. With that, I'll now turn it over to Chris to discuss our conventional assets.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

Thanks, Joey. Our high margin, 80% liquids-weighted conventional division was well-positioned to capitalize on strong oil prices during the second quarter. These core cash flow-generating assets continued to deliver substantial returns, contributing almost 45% of operating cash flow while only accounting for 22% of capital spending through the first six months of the year. In our Alberta conventional assets, we continue to realize the benefits of our interconnected infrastructure portfolio as the team successfully redirected portions of a planned third-party turnaround to mitigate the production impact of downtime for the quarter. In addition, we continued to advance base optimization initiatives in the Glauconite by leveraging incremental third-party capacity, which is now expected to remain available through the balance of the year. These efforts, coupled with continued strong asset performance across our Alberta conventional region, contributed to the production uplift during the quarter.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

Shared workflows and technical learnings across the business are improving capital efficiency and performance across our conventional assets. One area where we have recently achieved a step change in results is the Charlie Lake. Our three-well Charlie Lake winter drilling program at Valhalla is significantly outperforming offset wells over the first 90 days. Updated frack modeling suggested that a higher proppant intensity would result in increased conductive area and improved reservoir contact through the stacked Charlie Lake zones, leading to better well deliverability. This three-well program was completed with approximately double the intensity of previous programs and equipped with higher capacity artificial lift to accommodate the increased fluid production expected from the frack optimization. These early time results suggest an overall improvement in capital efficiency as the higher rates more than offset the increase in costs.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

We will continue to monitor production performance as additional data becomes available, but the early time results are encouraging and reinforce our optimism for the updated frack technique and its application in future Charlie Lake development. Moving over to Saskatchewan. Our assets continue to deliver strong base production performance, particularly across our EOR assets in the Bakken and Southwest Saskatchewan, driven by disciplined waterflood management and proactive field surveillance. These ongoing optimization initiatives continue to enhance base production and unlock incremental value from our existing asset base with minimal capital invested. We recently completed a full review of the Bakken multi-stage frack inventory, focusing on consolidating one-mile inventory into two-mile inventory, improving its competitiveness and enhancing economics.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

In parallel, the team is challenging current drilling and completion practices and, in some areas, looking to transition towards a monobore well design, again, with the ultimate goal to improve capital efficiency across our assets. With that, I'll turn it back over to Grant for his closing remarks.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Thanks, Thanh, Joey, Chris for your comments. The increased focus on energy security and reliability has reinforced the importance of secure, responsibly produced energy. Canada has abundant natural resources and the ability to play a meaningful role in supplying crude oil and natural gas to both domestic and international markets that we do not share the same advantages as Canada has. Other markets do not share the same advantage as Canada has. Continued progress on competitive regulations and policies is required to strengthen market access and establish Canada as a reliable, long-term supplier of energy to customers at home and around the world. Whitecap is well-positioned to participate in the growing demand for responsibly produced energy.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Our portfolio includes approximately 10,500 drilling locations across light oil, condensate rich, liquids rich natural gas, and lean natural gas assets, providing decades of growth opportunities and significant flexibility to respond to changing commodity prices and market conditions. It has been just over a year since we completed the Veren transaction on May 12th, 2025, and the combination is delivering measurable improvements across the asset base. Since closing, capital efficiency is improved by approximately 12%, from CAD 21,000 per flowing BOE to CAD 18,500 flowing BOE. While operating costs have declined by approximately 13%, from CAD 13.50 on a combination basis to below CAD 12 per BOE. These improvements demonstrate the benefits of applying Whitecap's operating practices, technical expertise and capital discipline across our expanded portfolio.

[Grant Fagerheim, President and CEO at Whitecap Resources]

A key strength of our portfolio is its exposure to light oil and condensate, which command the strongest realized prices across our product mix in the current commodity price environment and longer term. Combined with lower costs and improved capital efficiency, this exposure supports attractive operating netbacks, strong margins, and sustainable free cash flow. The outlook for Western Canada light oil and condensate remains very constructive. Expanded export capacity and growing demand for secure North American energy supply are expected to support market access and pricing for Canadian light oil. As one of the largest light oil and condensate producers in Western Canada, at approximately 120,000 barrels per day, Whitecap has significant exposure to these market fundamentals and a deep, long-duration inventory of light oil drilling opportunities.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Recently announced oil pipeline expansions are also expected to increase heavy oil transportation capacity and, in turn, the volume of condensate required as diluent. As the fourth-largest condensate producer in Western Canada with approximately 60,000 BOE per day, Whitecap has a substantial inventory of condensate-rich drilling locations positioned to benefit from the incremental demand. Our performance over the past five years demonstrates our ability to convert asset quality and disciplined execution into shareholder value. Over that period, Whitecap has delivered an 11% compound annual growth rate in production per share, well above the long-term annual growth rate of 3%-5% while maintaining prudent debt levels. Whitecap has the inventory depth, premium product exposure, financial strength, and strong technical capabilities to generate sustainable shareholder returns and capitalize on the growing demand for secure Canadian energy. With that, I will now turn the call over to Operator Sylvie for any questions.

[Operator]

Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to withdraw your question, simply press star followed by two. We do ask that if you're using a speakerphone to please lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from Travis Wood at National Bank. Please go ahead, Travis.

[Travis Wood, Analyst at National Bank]

Good morning, guys. I kind of have two and a half questions here, maybe. We've been through a few quarters of some pretty strong production beats. You've been holding capital flat. This is the second raise on guidance. Maybe could you talk to, and maybe this goes back to Joey and Chris, or maybe Thanh can navigate this, how should we be thinking about the growth through the rest of this year? Grant, you did a good rundown on the efficiencies since the Veren transaction. How should we start to manage this in terms of, is this all better well results, drilling efficiencies, or is this timing related? Just as I'm looking at the revised guidance given where Q2 volumes are, it still seems like you could beat that again.

[Travis Wood, Analyst at National Bank]

Just trying to manage that through the year, and then I'll have one follow-up for you.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

I'll take a first crack at that here, Travis. I think when we look at the outperformance, it's basically 50/50 in terms of where it's coming from the conventional and the unconventional assets. I'd say that 55% of that 8,000 BOEs per day of outperformance was driven by new production and the performance of the new wells, and then 45% on base level optimizations. As we think about the production cadence for the rest of the year, keep in mind in Q3, we still have 10,000 BOEs per day of downtime that we've incorporated in our guidance with the view that we're going to be exiting in excess of 385,000 BOEs per day this year here. We were able to uplift the back half of 2026 here by about 5,000 BOEs per day, and you see that reflected in the upward revisions to our guidance there.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

As we look at the business on a go-forward basis, as Grant talked about there, the objective here is still to grow 3%-5% on a per share basis. Our base case for next year in 2027 is this 3% growth. We can continue to evaluate that as we execute on our program for the rest of the year here.

[Travis Wood, Analyst at National Bank]

Okay. No, that makes sense. It's kind of staying with the plan and in turn seeing the upside from the operating side. Maybe the follow-up to that is since integrating, and now you're probably fully integrated from the inventory side, as you look across the areas, both Joey and Chris did a good rundown on their kind of segments. Are there any areas of surprise that's outperforming your expectations from the inventory side and kind of forcing you to look to allocate more capital than you originally planned into those assets, both on the Chris talked about the Charlie Lake as an example. How is that integration now, excuse me, looking a year out since original expectations on an asset base?

[Joey Wong, President at Whitecap Resources]

I appreciate the question there, Travis. I can take that one. I'd say that pretty consistent with what Grant said in the prepared remarks there, that the results and the beats have been pretty broad-based when you look at both the inputs, the rate at which we're able to, like I noted there, drill and complete the wells, and of course, the associated capital savings that come along with that. The resulting production across the board has been on aggregate

[Joey Wong, President at Whitecap Resources]

Beating expectations. I would say that if we're trying to focus on one area of surprise, it's not necessarily that there's been one area, whether that's on the legacy Whitecap or the legacy Veren. It's been broad, like I say there. It comes as a result of this integrated development workflow we talk about. Chris spoke to that about how plays like the Charlie there, which is a legacy Whitecap play, still seeing improvements on that play by looking to the fundamentals of the design bases that we have, trying to figure out how we can optimize those and continue to turn out new results. Ultimately, at the end of the day, does it mean that there's a tendency to want to your question there, to lean into any area more than another?

[Joey Wong, President at Whitecap Resources]

The answer is not in any specific terms, we'll just continue to do what's been working well for us, which is that continuous workflow and making everything better along the way. Anything else there, Chris?

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

No, I think you hit it there, Joey, for sure. I mean, specifically on the conventional side, I think it's just great to see that we continue to drive forward with. Just speak to the workflows a bit there, just going through that methodical process, trying to better understand from a modeling perspective, if we can incorporate different variations in frack design. Seeing the output and watching this come through in the last three wells that we had talked about there, I think that's great to see, and our teams aren't going to stop there. We'll keep looking at different iterations and keep finding ways to enhance completion optimizations, in particular on the Charlie.

[Travis Wood, Analyst at National Bank]

Okay.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

Is that all right?

[Travis Wood, Analyst at National Bank]

Okay, perfect. Appreciate that from everybody. Then my point five of the question is, if you can humor me, with the Kaybob Duvernay now at capacity, are there any kind of medium-term plans to look to expand processing capacity there, or will that kind of fall after Lator comes on stream?

[Joey Wong, President at Whitecap Resources]

We've got a list of opportunities, Travis. I guess that's a full question. I don't know if that's a half, anyway, got a list of opportunities that we can look to for expanded capacity, probably worthwhile reminding here that as it stands right now, including Lator, we have 80,000 BOE per day of capacity available to us to grow into. To think about expanding that, we would then need to look at the overall all-in economics of the expansion and then the associated development to go back in and fill that. That's why we've kind of said, this 115,000-120,000 BOE per day range is a nice place to be in the context of what we've been able to do from a debottlenecking perspective in the first place.

[Joey Wong, President at Whitecap Resources]

What I would suggest is, yeah, we'll look to fill what we can in large part. Yeah, if there are little things that crop up, little debottlenecking opportunities, like I'm talking in the range of single-digit thousands of BOEs per day. Yeah, we'd probably jump all over that. In terms of a material leg of growth, probably wouldn't be looking to do that, at least in the near term.

[Travis Wood, Analyst at National Bank]

Okay. I appreciate that. I'll turn it back. Thanks, guys.

[Operator]

Thank you. Next question will be from Michael Harvey at RBC. Please go ahead, Michael.

[Michael Harvey, Analyst at RBC]

Sure. Good morning. Couple questions from me, I guess maybe for Thanh. Lots of free cash flow generated, but really no buybacks so far this year. Maybe just walk us through how you're weighing allocating free cash to debt versus the buybacks, and kind of what we can expect for the balance of the year. Just if that's being impacted by other strategic priorities like M&A, keeping dry powder, et cetera. Second one, maybe for Joey, and just kind of tying into Travis's question. You mentioned that outperformance in the Duvernay, we can see it in the public data too. Just wondering if you can share some of the wins there, just in terms of drilling and completions and anything new that might be helping to drive that. Thanks.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

Yeah, thanks for those questions there, Michael. I will take the first one there. We are going to continue with our countercyclical approach to free cash flow allocation in this pricing environment here, where crude oil prices are elevated due to conflict in the Middle East. What that will provide us is really maximum optionality to deploy those funds in the future, whether it is on dividends, share buybacks, or smaller tuck-in acquisitions right within our core areas. We can make that determination at a future point in time. What I will say, though, is it does not preclude us from buying back shares in the back half of 2026 here. Management has been buying at these levels in the market, and I think we have to keep in mind that only 30% of our reserves is booked in our reserve report at this time.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

There is significant unbooked value for future net asset growth as we think about the business here. Consistent with what we have been communicating is we will continue with our countercyclical approach and prioritize the balance sheet at this time.

[Joey Wong, President at Whitecap Resources]

Michael, on your second question there on the Duvernay, I would say it is a mix. On the new development, it is a mix of design and execution. On the design side, and we have spoken at relative length to some of the design changes we made with respect to how we land the wells vertically. The wine racking we have spoken to, that is still yielding repeatable and some pretty impressive results. We have disclosed 10%-20% improvement, and that is still being realized where we are doing that. Also looking at adjusting spacing, drawdown targets, all of those things that go into the inputs.

[Joey Wong, President at Whitecap Resources]

Importantly as well, on the execution side, Travis and his team, when we execute these wells utilizing the centralized frack room that we have, ensuring that we are stimulating the entire lateral and not leaving anything behind and sweeping the entirety of the reservoir that we are covering. It is a combination of all those things that are coming together on the growth side. I will also say those on the optimization of the base. The base optimization benefited from a couple of things, the ability for us to use our operating practices to keep up with our artificial lift needs and optimization opportunities on existing things. In addition to that, the way we have deployed our capital, now that we have combined the two assets, and the way that we can direct flows, allows us to optimize the flowing conditions of these wells.

[Joey Wong, President at Whitecap Resources]

We can take advantage of this larger footprint to be able to keep that base sustained, and it does not feel undue pressure from new development. You see that here in the Duvernay. It is also something that Chris mentioned in Central Alberta. This is one of the benefits of having an established asset base in core areas, is that we have those degrees of flexibility to be able to navigate and, like I say, not be unduly impacted when we bring new production on.

[Michael Harvey, Analyst at RBC]

Great. Thanks, guys.

[Operator]

Next question will be from Jeremy McCrea at BMO Capital Markets. Please go ahead, Jeremy.

[Jeremy McCrea, Analyst at BMO Capital Markets]

Yeah. Hi, guys. A couple of questions here as well, too, and a bit of follow-up to Mike here. You're looking to next year, you have a lot of free cash flow, a lot of the debt has been paid down. What do you start to think about in terms of where you might allocate that capital? Is it back to more aggressive buybacks, or is it more growth? Just more thinking about how you bring the 40 years of inventory forward here a little bit more.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Yeah. Thanks, Jeremy. Just regarding next year, we're in the planning process for 2027 and the next three to five-year period of time. Right now, as far as Thanh had referenced earlier about the maximum optionality, when we have lower levels of debt that we continue to focus on dividend payments, whether it's enhancing the dividend, share buybacks, additional small scale or large scale M&A will be on the docket, as well as increasing the opportunity to increase our capital program for higher end of growth. We talk about 3%-5% per share growth, 3% at the minimum, 5% at the higher side. It allows us that full flexibility. We live in a very unstable world at this particular time. Oil prices, as Thanh had referenced earlier on, we've got 61% of our production at this particular time generating 93% of our revenue.

[Grant Fagerheim, President and CEO at Whitecap Resources]

With these elevated oil prices, are they elevated? We'll see if they're elevated. We think they are. Could this go for an extended period of time? It has to go back to, we have to think about it in that context of when we're trying to develop as much shareholder value as we can, we have to think about what's the longer-term outlook of commodity prices, both on crude oil, the weaker Canadian dollar and natural crude oil and condensate pricing. The demand, we're building demand with the build-out of the oil sands projects that we're supportive of. That requires condensate. There needs much more condensate if we're going to grow our heavy oil volumes by 1 million-2 million barrels a day. That's an incremental 300,000-500,000 BOE per day of condensate demand as well. Those are all the backdrop.

[Grant Fagerheim, President and CEO at Whitecap Resources]

It's not just one solution. We have to look at it holistically from many different components. Anything else to add, Thanh?

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

Yeah, I'd say that as we look at 2027 from a mid-cycle pricing perspective, we'll call that CAD 65-CAD 75 WTI, we've got the ability to continue to grow in that 3%-5% range there. The dividend, very comfortable with it, longer term, we do want to grow our dividend as well. If we're growing our production and our cash flow by 3%-5%, want to continue to grow that dividend at that 1%-2% on a long-term basis there. We still have enough free cash flow to continue to buy back our shares in that 2%-4%.

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

I think when we think about that pricing dynamic potential in 2027, we can grow, we can support the dividend and increase it with the increase in cash flows that we're generating, and we can continue to buy back our shares in that 2%-4%. At the same time, as we look at our debt at the end of 2026 here, it's going to be closer to CAD 2 billion is what we're anticipating. As we continue to execute in 2027, leverage still remains in that CAD 2 billion range there. We're very optimistic about not only this year, but the setup for 2027 as well in terms of that return of capital to our shareholders.

[Jeremy McCrea, Analyst at BMO Capital Markets]

Okay. Appreciate that. Maybe just a quick follow-up here. A lot of other companies have talked about using wet sand and these lightweight proppants here that have really improved some of their Permian results. I know you guys really are on the forefront of new technology, and that's why we've seen in your capital efficiency improvements. Is there any contemplation of using some of these newest U.S. designs and technology up here in Canada?

[Travis Tweit, COO at Whitecap Resources]

Jeremy, this is Travis Tweit. Yeah. With sand being about one of the largest input costs to our capital program, it's something we're looking at all the time. Currently, we're very comfortable with the operations, we're comfortable with logistics, and we see the efficiency and the cost benefit going forward.

[Jeremy McCrea, Analyst at BMO Capital Markets]

Perfect. Appreciate that, Travis. Thank you.

[Operator]

Next question will be from Aaron Bilkoski at TD Cowen. Please go ahead, Aaron.

[Aaron Bilkoski, Analyst at TD Cowen]

Thanks. Good morning. I'm going to ask a higher-level question that really ties to some of Grant's closing comments. On the large cap and midstream conference calls, there's been a fair amount of discussion about future condensate supply, obviously in context of the recent pipeline MOU. Can you guys talk a little bit about how you see Whitecap's role in meeting growing demand for diluent over the next five years? Maybe take that a step further, how much condensate could you reasonably add over that period?

[Grant Fagerheim, President and CEO at Whitecap Resources]

Yeah. Thanks, Aaron. It's Grant here. Just, I think one of the things that our federal government policies, we're acknowledging and committing the need to put a competitive policy and regulation framework in place to support meaningful growth from Canadian projects. I think that backdrop, if that continues to hold and really comes into execution versus just terminology, we're very excited about that. This is where I think Canada, this is a time for Canada to stand forward on our energy development platforms that we do have. We talk about it's not just, we'll call it the oil sands projects that can grow in Canada. We have a significant amount of natural gas.

[Grant Fagerheim, President and CEO at Whitecap Resources]

We have a significant amount of light oil that can grow in our. Where we come back to light oil and condensate, and we talk about to close the circle on growth for oil sands, that is going to require condensate. At this particular time, we talk about having approximately 60,000 BOE per day. Could we increase that maybe by somewhere between 25,000-50,000 BOE per day increase as we advance through time with our portfolio of opportunities? Yes, we can. Canada is building its own demand for its product. If we're going to actually grow the oil sands projects, we, consistent with that, want to grow our light oil, condensate, and natural gas portfolio as well. As you know, the challenge we've had with natural gas is that the demand in North America has been weak.

[Grant Fagerheim, President and CEO at Whitecap Resources]

With data center development and some of the things we're doing with developing, if the Pathways Alliance continued to, or now get on their front foot to grow, they're going to need more natural gas as well. I think that all encompassing, we are producing about just shy of 900 million of natural gas, and we have lots of growth on natural gas as well. Light oil, condensate, and natural gas opportunities for growth, I think will continue to remain our drivers as we advance forward.

[Joey Wong, President at Whitecap Resources]

Maybe I can add on that, too, is when you look at our unconventional asset base, we've got 4,700 identified inventory locations. 70% of them are within the liquids rich or condensate window that Grant talks about there. Lator is condensate rich, we've got the ability to grow within that asset base that we currently are working with at this time.

[Aaron Bilkoski, Analyst at TD Cowen]

Excellent.

[Operator]

Thank you. Next question will be from Phillips Johnston at Capital One. Please go ahead, Phillips.

[Phillips Johnston, Analyst at Capital One]

Hey, guys. Thanks for the time. Just a couple of housekeeping questions for me on the modeling front. First on CapEx, I guess we're tracking that to a figure close to the high end of your guidance range, given the compressed cycle times that you noted. That implies around CAD 1 billion or so for the rest of the year. I recall that third quarter CapEx is expected to be higher than Q4, can you maybe help us with the split for those two quarters? Should we model something around 60%/40% or so?

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

Yeah. It's Thanh here. Typically, you'll see the cadence of capital being highest in the first quarter, with breakup, it's a little bit lighter in the second quarter. Very similar in the back half of the year here. Our CapEx spending will be somewhere in that CAD 600 million in Q3, it'll be about CAD 400 million in the fourth quarter to get us to that CAD 2.1 billion on an annual basis.

[Phillips Johnston, Analyst at Capital One]

Okay, perfect. You guys affirmed your current income tax expense guidance of 6%-8% of funds flow. I know it's early to talk about 2027, but just for modeling purposes, what sort of placeholder would you recommend that we use, just assuming current strip prices hold?

[Thanh Kang, Senior VP and CFO at Whitecap Resources]

Yeah. It's really going to depend on commodity prices. I think the back half of this year, 7%-8%. At the end of the second quarter, we've got CAD 9 billion of tax pools that are available to us. It'll really depend on what the commodity price looks like next year. We've got some really good tax coverage here. I think 2027, probably too early to talk about at this time.

[Phillips Johnston, Analyst at Capital One]

Okay. Thank you.

[Operator]

Thank you. As a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. Thank you. Next question will be from Dennis Fong at CIBC. Please go ahead, Dennis.

[Dennis Fong, Analyst at CIBC]

Good morning. Thanks for taking my questions. My first one here is, you've been doing obviously a great job optimizing as we see from the prepared comments as well as the work that you did at Kaybob, again, as you had mentioned. With Lator effectively at 90% completion here, how do you think about advancing some of these future growth potential projects? So things like Lator Phase 2, the Gold Creek or Karr expansion, or the Kakwa expansion as you highlighted at your investor day. Just as we think about the next leg of growth. How do you think about balancing moving forward with a larger scale project, as well as balancing production ramp-up from existing facilities optimization, as well as a transition towards each one of those individual previous projects transitioning to a free cash flow generating asset?

[Joey Wong, President at Whitecap Resources]

Yeah, good question, Dennis. Appreciate that. Appreciate you identifying exactly that. We have this wealth of opportunity with which to be able to grow into either in the existing capacity we spoke about there earlier or with legs of growth, either a bolt-on Lator Phase 2 or other things there. In a word, I would say the decision has to be holistic. We have to look at what the underlying strength of the inventory is. Again, it's pretty widespread. We also have to look at what the forward-looking quantity prices are looking like and what we want to do corporately in terms of dispatching growth of different characteristics.

[Joey Wong, President at Whitecap Resources]

When you look at the asset base, because of the fact that we have this wide variety between the oil and condensate, like I mentioned there earlier, or down into the gas, should there be a call on gas many years down the road, however many that's going to be, we're able to make that decision as it presents itself at the time. Coming back to the word there that I said, it'll be holistic. We'll look at the inventory, we'll look at the build-out cost, and we'll look at the all-in capital returns associated with it and make a call from there. Bears repeating, like I said in the Kaybob expansion commentary, we've got a fair amount to work with in the near term.

[Dennis Fong, Analyst at CIBC]

Great. I appreciate that. Then maybe this is a bit of a follow-up to that first question and continuing around the thought process around growth is, I know historically you've talked about managing three, we'll call it pillars, associated with a strong business model in terms of managing decline rates, maximizing net back, and improving capital efficiencies. It's clear just with the upward revisions on guidance that you've been doing a really good job on the capital efficiency side. I'm just curious, if you continue to focus on growth on a go-forward basis and obviously managing the balance sheet in terms of your free cash allocation, how do you think about the decline rate component of that three-pillar view of managing the business? How is that considered on a strategic basis as you go forward?

[Joey Wong, President at Whitecap Resources]

I can start there and maybe pass to Chris for his thoughts on the conventional side there. Short answer is, between the 3%-5% growth target that we have, we don't see a lot of pressure on the decline rate. One of the many inputs that feeds into that is that isn't a high amount of growth that would lead to an undue impact on decline rate. At the same time, of course, the portfolio that we have, and this is of course very much by design, is this balance between conventional and unconventional, and on the conventional side, still having the benefit of the support of all the waterflood and EOR initiatives that we continue to support. Maybe I'll pass it over to Chris for some thoughts on that.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

Yeah, for sure. We do continue to support those. We look at that very much as a sustainability-driven initiative. When you look at the conventional portfolio, in particular, our sub-20% decline, of course, is supported by 52,000 barrels a day of dedicated waterflood plus EOR production. We continue to fund that. We continue to optimize it, as we had mentioned as part of the base optimization initiatives on the onset. Our teams are doing a great job continuing to push that forward. In Saskatchewan, there's a lot of examples of that. Older legacy plays, of course, being the Bakken and Southwest Sask. We continue to benefit, I would say, from very disciplined and proactive waterflood management, coupled with a formal reservoir management process. Our teams are doing a great job both in the field and in the office.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

They're armed with a variety of different surveillance tools, of course, to help continue to bolster that. We're starting to see the results of that. For us, it's an important part of continued decline mitigation. We continue to fund it. Those projects screen very favorably from a capital economics perspective, in particular from an optimization perspective. We have a lot of examples of that. Just base optimization, those will be some of our strongest capital efficiencies. Whether it's injector conversion optimization, sweep efficiency, just a variety of different flood optimization. We continue to focus our field and production optimization teams on that in conjunction with supported drilling growth to selective areas such as the Bakken, Cardium. Those are also waterflood-supported areas that we continue to drill and benefit from pressure response there. It helps to bolster our volumes there compared to primary.

[Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development at Whitecap Resources]

Yeah, it's something we continue to fund and look at very actively.

[Dennis Fong, Analyst at CIBC]

Great. Thanks, Joey and Chris. I really appreciate the context there.

[Operator]

Thank you. At this time, I would like to turn the conference back over to Mr. Fagerheim.

[Grant Fagerheim, President and CEO at Whitecap Resources]

Thank you, Sylvie. Thanks to each of you on the line today who continue to support our story and our team. From our entire management team, I want to once again thank our entire Whitecap staff and contractors for your dedication and efforts on delivering a very strong quarter on a continuation from what we've had over the last one-year period of time. We look forward to updating you on our progress through the remainder of the year and into the future. All the best to each of you. Enjoy your summer. Signing off for now. Cheers.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Enjoy the rest of your day.

Participants

Executives

• Grant Fagerheim, President and CEO
• Thanh Kang, Senior VP and CFO
• Joey Wong, President
• Chris Bullin, VP, Conventional Division, Reserves and Reservoir Development
• Travis Tweit, COO

Analysts

• Travis Wood, Analyst at National Bank
• Michael Harvey, Analyst at RBC
• Jeremy McCrea, Analyst at BMO Capital Markets
• Aaron Bilkoski, Analyst at TD Cowen
• Phillips Johnston, Analyst at Capital One
• Dennis Fong, Analyst at CIBC