Mr. Grant Fagerheim reports

WHITECAP RESOURCES INC. ANNOUNCES 2023 RESULTS AND RESERVES, OPERATIONS UPDATE AND UPDATED 2024 GUIDANCE

Whitecap Resources Inc. has released its operating and audited financial results for the three and 12 months ended Dec. 31, 2023.

Selected financial and operating information is outlined herein and should be read with Whitecap's audited annual consolidated financial statements and related management's discussion and analysis for the three months and year ended Dec. 31, 2023, which are available at SEDAR+ and on its website.

Message to shareholders

Two thousand twenty-three was a strong year for Whitecap both operationally and financially, highlighted by 11-per-cent production per-share growth and the achievement of its second of two net debt milestones, prompting a 26-per-cent increase to its base dividend. The continuing development of its high-quality drilling inventory has yielded exceptional results, with the team constantly evaluating options to further improve capital efficiencies and netbacks for increased profitability.

Average 2023 production of 156,501 barrels of oil equivalent per day, including 103,014 barrels per day of light oil and liquids and 320,922,000 cubic feet per day of natural gas, generated funds flow of $1.8-billion ($2.94 per share) and, after capital expenditures of $954-million, resulted in free funds flow of $838-million ($1.38 per share). Dividends declared of $373-million (62 cents per share) along with $123-million of share repurchases on its normal course issuer bid resulted in shareholder returns of approximately $500-million (81 cents per share). It is committed to strong return of capital to shareholders with a current base monthly dividend of 6.08 cents per share (73 cents per share annually), which will be supplemented with share repurchases on its NCIB.

It is also pleased to report exceptional 2023 reserve values highlighted by per-share organic growth across all three reserve categories. These organic growth additions resulted in proven developed producing and total proven production replacement of 107 per cent and 141 per cent, respectively, and reflect its strong 2023 drilling program. Three-year average finding and development recycle ratios between 2.6 times and 3.3 times highlight the robust profitability of its asset base through commodity price cycles.

Its balance sheet remains a priority and is in excellent condition with less than $1.4-billion of net debt (0.7 times debt to earnings before interest, taxes, depreciation and amortization ratio) at year-end and approximately $1.7-billion of available capacity on $3.1-billion of total debt capacity. As it continues to allocate a portion of its free funds flow toward debt reduction, this will further strengthen its balance sheet for both downside protection and value-enhancing opportunities in the future.

Near the end of the fourth quarter, it completed a tuck-in acquisition of light oil Viking assets in one of its core areas in western Saskatchewan for cash proceeds of $154-million, prior to closing adjustments. The acquisition consolidates an active area of its Viking drilling program, was completed at attractive acquisition metrics, and was highly accretive to funds flow per share and free funds flow per share. Its team is actively executing on production optimization opportunities on this 100-per-cent-light-oil asset base.

It provides the following fourth quarter and full-year 2023 financial and operating highlights:

• Funds flow: Full-year and fourth quarter funds flow netbacks of $31.36 per boe and $30.16 per boe, respectively, were strong despite average 2023 West Texas Intermediate crude oil prices being 18 per cent lower and natural gas prices being 50 per cent lower than in 2022. Operating costs of $14.10 per boe were down 3 per cent from 2022 despite inflationary pressures persisting through the year. Full-year funds flow of $1.8-billion equates to $2.94 per share while fourth quarter funds flow of $462-million equates to 76 cents per share.
• Drilling program: It was the fourth most active driller in Western Canada in 2023, drilling 215 (189.0 net) wells, including 181 (158.2 net) wells in its East division and 34 (30.8 net) wells in its West division. Of the $954-million of capital expenditures incurred in 2023, 80 per cent was allocated to drilling and completions while 17 per cent was directed to facilities spending, including initial work on its Musreau battery to support Montney production additions in 2024, as well as an expansion to its 3-27 facility supporting regional Montney and Charlie Lake development in the Peace River Arch.
• Increasing return of capital: It increased its dividend for the seventh time in three years to 73 cents per share annually in October, 2023. It has been focused on delivering a strong return of capital to shareholders since paying its first dividend at the start of 2013, returning a total of $1.8-billion in dividends over the past 11 years. These returns have been further enhanced by repurchasing over 76 million shares for $612-million since 2017. Total return to shareholders of approximately $500-million in 2023 demonstrates a continuation of this strategy.
• Balance sheet strength: Year-end net debt of $1.4-billion equated to a debt to EBITDA ratio of 0.7 times and an EBITDA to interest expense ratio of 27.0 times, both well within its debt covenants of not greater than 4.0 times and not less than 3.5 times, respectively. It has significant financial flexibility with over $1.7-billion of available capacity on $3.1-billion of total credit capacity.

2023 reserves

Operational success and a deep set of highly economic inventory have resulted in strong year-end reserve values. It continues to see the benefits of its consolidation strategy that began in late 2020 as greater scale and asset optimization opportunities have yielded consistent per-share growth and increasing net present values.

One of the benefits of consolidating acreage has been an ability to drill longer laterals in areas that were previously restricted by ownership boundaries. In addition, it is consistently expanding the applicability of increased lateral lengths to greater portions of its asset base, giving potential for improved capital efficiencies and, therefore, increased profitability. At year-end, it has identified 6,400 drilling locations in inventory, which provide for over 25 years of sustainable and profitable growth.

It highlights the following 2023 year-end reserve report results:

• Per-share focus: Debt-adjusted reserves per share increased 6 per cent on a PDP basis, 10 per cent on a TP basis and 7 per cent on a total proven plus probable basis despite net dispositions decreasing total reserves. Its focus on per-share metrics along with strong return on capital execution will maximize long-term profits for its shareholders.
• Production replacement: Prior to the impact of net dispositions, it replaced 107 per cent of production on a PDP basis, 141 per cent of production on a TP basis and 107 per cent of production on a TPP basis. Strong operational execution along with a prolific asset base provides for increased sustainability over the long term.
• Long-dated inventory: It has significant inventory life across all its assets, with a PDP reserve life index of six years, a TP RLI of 13 years and a TPP RLI of 19 years. These are consistent with the three-year average and are reflective of the expansive opportunity it has to develop these assets over time.
• Strong recycle ratios: Its PDP F&D cost of $14.68 per boe, its TP F&D cost of $17.62 per boe and its TPP F&D cost of $20.46 per boe resulted in strong recycle ratios of 2.4 times, 2.0 times and 1.8 times, respectively. The three-year average F&D recycle ratios range from 2.6 times to 3.3 times, which emphasize its strong asset base and its focus on long-term profitability.

Outlook

It has increased its 2024 average production guidance range to 165,000 to 170,000 boe/d (8-per-cent production per-share growth) to reflect the Viking tuck-in acquisition along with the reduction in capital spending. Its capital budget is expected to be $900-million to $1.1-billion, which is $100-million lower than originally budgeted, providing another year of strong operational execution underpinned by the technical enhancements undertaken in 2023.

West Texas Intermediate crude oil prices continue to be relatively volatile but have been rangebound between $70 (U.S.) per bbl and $80 (U.S.) per bbl and currently at approximately $75 (U.S.) per bbl for the balance of 2024. This, combined with the weak Canadian dollar, results in a very strong Canadian crude oil price in excess of $100 per bbl. It also anticipates light and heavy oil differentials to tighten further throughout the year with the completion of the Trans Mountain expansion project in the coming months, bringing further pricing upside to Canadian crude oil production.

Natural gas prices are currently challenged with the lack of winter demand resulting in weak Alberta Energy Company prices forecasted through to the end of the summer, and a seasonal increase into next winter is anticipated. While the liquids component of its unconventional assets currently drives the economics, its growth in natural gas volumes is anticipated to coincide with the commissioning of LNG Canada in 2025. Completion of this facility is an important step for Canada as there will be an ability to deliver natural gas to overseas markets, which should reduce gas-on-gas competition within Canada. Further to this, as part of its continuing efforts to diversify its natural gas volumes, it has joined Rockies LNG Partners to contribute 100 billion cubic feet per day of natural gas toward the Ksi Lisims LNG project and add exposure to non-North American natural gas prices.

At current strip prices, it is forecasting 2024 funds flow of approximately $1.6-billion, which results in free funds flow of $600-million after capital investments. This is more than sufficient to finance its annual dividend obligation of $435-million. It has stress tested its dividend down to $50 (U.S.) per bbl WTI and $2 per gigajoule AECO and has further flexibility to reduce its capital program to ensure dividends and capital investments are fully financed by cash flows. Its balance sheet remains in excellent shape with low leverage and ample liquidity to support the business throughout various commodity price cycles.

Its long-term organic corporate growth outlook has been updated and increased to 210,000 boe/d by the end of 2028, which represents average organic growth of 5 per cent on an annual basis, driven primarily by its liquids-rich Montney and Duvernay assets. At the end of 2028, it will still have over 20 years of drilling inventory remaining, assuming a consistent 5-per-cent annual growth rate beyond 2028.

It would like to emphasize that its objective is to provide sustainable and profitable growth to its shareholders, including a disciplined level of debt, while remaining committed to responsible development of its assets. Its strategy includes advancing its emission reduction strategy and utilizing its expertise in carbon sequestration.

On behalf of employees, the management team and the board of directors, the company would like to thank its shareholders for their support and looks forward to an exciting 2024 and beyond.

2023 reserves review

Its year-end 2023 reserves were evaluated by independent reserves evaluator McDaniel & Associates Consultants Ltd. in accordance with the definitions, standards and procedures contained in the Canadian oil and gas evaluation handbook and National Instrument 51-101 (Standards of Disclosure for Oil and Gas Activities) as of Dec. 31, 2023. The reserves evaluation was based on the average forecast pricing of McDaniel, GLJ Ltd. and Sproule Associates Ltd. and foreign exchange rates at Jan. 1, 2024, which is available on McDaniel's website.

Reserves included are company share (gross) reserves, which are the company's total working interest reserves before the deduction of any royalties and that include any royalty interests payable to the company. Additional reserve information as required under NI 51-101 will be included in its annual information form, which will be filed on SEDAR+. The numbers in the attached tables may not add due to rounding.

Future development costs

FDC reflects the best estimate of the capital cost to develop and produce reserves. FDC associated with its TP reserves at year-end 2023 is $6.6-billion undiscounted ($4.9-billion discounted at 10 per cent).

Also included in FDC are 1,590 (1,374 net) proven booked drilling locations and 323 (271 net) probable booked drilling locations.

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, Feb. 22, 2024.

The conference call dial-in number is 1-888-390-0605, 587-880-2175 or 416-764-8609.

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

We seek Safe Harbor.