An anonymous director reports

WHITECAP RESOURCES INCREASES DIVIDEND BY 26% AND SIGNS CO2 CONTRACT EXTENSION

Whitecap Resources Inc. has increased by 26 per cent its monthly dividend as it expects to reach its $1.3-billion net debt milestone on or before Sept. 30, 2023. It has also signed a carbon dioxide supply contract extension for volumes delivered to the Weyburn unit CO2 enhanced oil recovery project, and has released its 2023 environmental, social and governance (ESG) report.

Dividend increase

Upon closing of the XTO acquisition on Aug. 31, 2022, it had established net debt targets of $1.8-billion and $1.3-billion. On achieving these targets, it committed to increasing its dividend to 58 cents per share and 73 cents per share (annualized), respectively. In January, 2023, it achieved its first net debt milestone of $1.8-billion and increased its monthly dividend to 4.83 cents per share. It expects to achieve its $1.3-billion net debt milestone on or before Sept. 30, 2023, and its board of directors has approved a 26-per-cent increase to its monthly dividend to 6.08 cents per share, effective with the October, 2023, dividend, payable in November, 2023. This equates to an annual dividend of 73 cents per share, up from 36 cents per share prior to the XTO acquisition.

Since September, 2022, it has reduced its net debt by approximately $900-million and has returned over $400-million to shareholders through dividends plus share buybacks.

Its debt target of $1.3-billion is important as it represents a debt to earnings before interest, taxes, depreciation and amortization ratio of 1.0 times at its stress-tested commodity price assumptions of $50 (U.S.) per barrel West Texas Intermediate and $3 per gigajoule Alberta Energy Company, and is currently 0.6 times at current strip prices. It is also an important milestone for its shareholders as it will return 75 per cent of free funds flow back to shareholders. Capital returns to shareholders will be composed of the increased annual dividend of 73 cents per share and will be supplemented with share buybacks and/or special dividends. Given the variability in its quarterly capital programs due to spring breakup, it plans to update progress and measurement of these returns on a semi-annual basis. With consideration of its total proven net asset value and the permanent improvement to its capital structure, its current preference is share repurchases over special dividends. It continues to be opportunistic on its share repurchases and target larger block trades when available.

Whitecap is in a very healthy position with its strong balance sheet and a balanced portfolio of high-quality drilling opportunities. Its east division (approximately 90,000 barrels of oil equivalent per day) generates significant operating free funds flow through its low-decline and high-netback assets, and its west division (approximately 70,000 boe/d), with its Montney and Duvernay assets, provides it with a large resource base, significant reserves and inventory for decades of sustainable per-share growth.

Weyburn contract extension

As operator and 65.3-per-cent working interest owner of the Weyburn project, it has signed a CO2 purchase and sale extension agreement to Dec. 31, 2034, with SaskPower for the purchase of CO2 that is captured at the Boundary dam power station, Unit 3, in Estevan, Sask. The Weyburn project has safely sequestered over 40 million tonnes of CO2 since first receiving captured CO2 emissions. This project demonstrates the commitment that the Saskatchewan government continues to provide leadership on, moving the province to a lower carbon economy while providing long-term reliable and affordable power to its constituents.

The Weyburn project has world-class attributes that provide significant benefits to Whitecap, as well as many different stakeholder groups:

• Acquisition payout: The Weyburn project currently produces approximately 15,000 boe/d (net to Whitecap) of 30-degree API crude oil and generates an annual operating netback of over $200-million at $75 (U.S.) per bbl WTI. By the end of 2023, it forecasts that the asset will have generated over $800-million of cumulative operating free funds flow to Whitecap, leading to a forecasted full payout of the $940-million purchase price in 2024 at current strip prices, which is less than seven years after acquiring the asset.
• Long-life reserves: A reliable source of CO2 supply is integral to the Weyburn project maintaining a decline rate of below 5 per cent, as well as increasing the recovery factor of an asset that was first discovered in the early 1950s. To date, the asset has recovered over 500 million barrels of oil, with its year-end 2022 independent reserve evaluation indicating the asset is expected to produce for the next 50 years and recover a total of over 700 million barrels of oil. By utilizing CO2 to enhance the recovery factor of the Weyburn oil pool, it is minimizing the surface impact required to replace production declines of a product that continues to see an increase in global demand.
• Carbon sequestration: Since first injection in the year 2000, the Weyburn project has safely sequestered over 40 million tonnes of CO2. Its internal modelling suggests that the ultimate CO2 storage capacity of this partially depleted oil reservoir is 115 million tonnes, which, at its current injection rate of approximately two million tonnes per year, provides for over 35 more years of CO2 injection capability.
• Project benefits: The Weyburn project provides significant economic benefits to the Province of Saskatchewan with a direct impact of 120 jobs and annual economic benefits of approximately $350-million. Whitecap is proud to be associated with a project that has led the way for carbon capture, utilization and storage projects, and it expects that knowledge gained from this project will provide significant benefits to future CCUS projects both in Canada and around the world.

ESG report

Whitecap has released its 2023 ESG report, which can be found on its website. Its 2022 results, discussion of objectives and commitments, and performance against its established targets are all provided in this full comprehensive report. Whitecap is proud of its recent accomplishments and will continue to advance its ESG performance in the years to come.

On behalf of employees, management team and the board of directors, the company would like to thank its shareholders for their support and looks forward to the rest of 2023 and beyond.

We seek Safe Harbor.