An anonymous director reports

WHITECAP RESOURCES INC. ANNOUNCES SECOND QUARTER RESULTS

Whitecap Resources Inc. has released its operating and unaudited financial results for the three and six months ended June 30, 2023.

Selected financial and operating information is outlined herein and should be read with Whitecap's unaudited interim consolidated financial statements and related management's discussion and analysis for the three and six months ended June 30, 2023, which are available at SEDAR and on the company's website.

Message to shareholders

Whitecap benefitted from strong crude oil prices in the second quarter with our high-quality oil-weighted assets, generating $415-million of funds flow and $197-million of free funds flow after $218-million of capital expenditures.

Return of capital to shareholders consisted of $88-million of base dividends (15 cents per share), resulting in 45 per cent of free funds flow being returned to shareholders. Through the first six months of 2023, Whitecap has generated $392-million of free funds flow and returned 53 per cent ($208-million) to shareholders by way of base dividends plus share repurchases.

Second quarter production of 147,166 boe/d (barrels of oil equivalent per day) included 98,097 bbl/d (barrels of oil per day) of total liquids production (oil, condensate and NGLs (natural gas liquids)) and 294,412 mcf/d (thousand cubic feet per day) of natural gas production. Production per share increased 14 per cent compared with the same quarter in 2022. The Alberta wildfires impacted production and operations during the quarter, resulting in assets being shut in at various times throughout the month of May and into June. There was no significant damage to our assets and all production impacted by the wildfires is now back on line. We would like to acknowledge our field personnel and their families as well as the first responders and emergency response agencies for their efforts in the affected communities over the past several months.

We spudded a total of 43 (41.6 net) wells during the second quarter, 34 (32.6 net) wells in our East division (formerly the central Alberta and Saskatchewan business units), and nine (9.0 net) wells in our West division (formerly the Northern Alberta business unit) including our first three-well Duvernay pad at Kaybob as well as a three-well Montney pad at Kakwa. Break-up conditions subsided early, allowing our East division operations team to resume our capital program in June. Second quarter capital expenditures of $218-million included $177-million of drilling capital and $37-million of facilities expenditures.

We continue to fortify the balance sheet, further reducing net debt by $110-million to $1.36-billion at the end of the quarter which results in a debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 0.6 times and $1.74-billion of unused capacity.

We provide the following second quarter 2023 financial and operating highlights:

• Funds flow. Whitecap's second quarter funds flow of $415-million, or 68 cents per share, continued to benefit from stronger liquids production than internally forecasted. Second quarter WTI (West Texas Intermediate) prices in Canadian dollars averaged almost $100 per barrel, with differentials on our sour and medium grades of crude oil production narrowing toward historical averages and contributing to our crude oil realized price of over $90 per barrel.
• Strong liquids production. Production of 147,166 boe/d was higher than internal expectations, after giving effect to the wildfire impact, with higher liquids production contributing to the strong second quarter funds flow. Our southeast Saskatchewan conventional and central Alberta Glauconite assets were the main drivers of the liquids outperformance during the quarter.
• Return of capital focus. Whitecap's second quarter dividends of 15 cents per share (58 cents per share annualized) totalled $88-million, with year-to-date dividends plus share repurchases under our normal course issuer bid (NCIB) equating to $208-million, or 34 cents per share. During the second quarter, we renewed our NCIB which allows for the purchase of up to 59.7 million shares, or 10 per cent of the public float, to May 22, 2024.
• Balance sheet strength. Quarter-end net debt of $1.36-billion equated to a debt to EBITDA ratio of 0.6 times and an EBITDA to interest expense ratio of 28.8 times, both well within our debt covenants of not greater than 4.0 times and not less than 3.5 times, respectively. Over 60 per cent of our long-term debt is not exposed to interest rate fluctuations, keeping our interest and financing costs low at just over $1.00 per boe in the second quarter.

Outlook

The company's 2023 capital budget of $900-million to $950-million is unchanged, while its production guidance of 157,000 to 159,000 boe/d has been adjusted from 160,000 to 162,000 boe/d to reflect the impact of the Alberta wildfires during the second quarter.

Whitecap has an extensive inventory of high-quality unconventional drilling opportunities in the liquids-rich Alberta Montney and Duvernay, supplemented by oil-weighted conventional opportunities in the Peace River Arch, central Alberta and Saskatchewan. For the full year 2023, the company plans to drill 187 (160.0 net) wells in its East division, from the 3,562 (2,974 net) wells in inventory and 32 (28.9 net) wells in its West division, from the 3,022 (2,701 net) wells in inventory. The company's balanced portfolio of opportunities allows the company to generate significant free funds flow while growing sustainably at 3-per-cent to 8-per-cent production per share.

Since entering the Montney resource play at Kakwa in mid-2021, the company has drilled 24 wells of which 17 wells have more than three months of production history. Of these 17 wells, 82 per cent have achieved or are expected to achieve capital payout in less than 12 months. The economics of this play continue to rank top quartile within Whitecap's portfolio and, in addition, the company has identified multiple opportunities to further enhance its capital efficiencies in this play. For the second half of 2023, the company plans to spud 15 (15.0 net) Montney wells and bring eight (8.0 net) wells on production prior to the end of the year.

Commencement of the company's Duvernay program occurred during the second quarter with completions operations on the company's first three-well pad recently concluding while the drilling on the company's second pad (four wells) started in late June. Capital execution on the company's Duvernay program has been strong and the company is encouraged by progress to date, with the first pad expected to be on production through permanent facilities later in the third quarter and the second pad expected to be tied-in and on production in the fourth quarter.

As a result of the operational and financial impacts of the Alberta wildfires, the company now expects to reach the company's $1.3-billion net debt milestone in the second half of 2023 at current strip prices. The company remains committed to its return of capital framework which will result in 75 per cent of free funds flow being returned to shareholders upon reaching its $1.3-billion net debt milestone, including the targeted 26-per-cent dividend increase to 73 cents per share annually.

On behalf of the company's employees, management team and board of directors, the company would like to thank its shareholders for their support and looks forward to updating you on the company's progress throughout the remainder of the year.

Conference call and webcast

Whitecap has scheduled a conference call and webcast to begin promptly at 9 a.m. MT (11 a.m. ET) on Thursday, July 27, 2023. The conference call dial-in number is: 1-888-390-0605 or 587-880-2175 or 416-764-8609

A live webcast of the conference call will be accessible on Whitecap's website by selecting investors, then presentations and events. Shortly after the live webcast, an archived version will be available for approximately 14 days.

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