Whitecap Resources (WCP.TO and WCPRF) Valuation Update - Oct 23

[dan_s]

At the time of this post WCP.TO was trading at $10.63Cdn and $7.58US for WCPRF.

Whitecap's Q3 Results beat my forecast with production coming in at 374,623 Boepd. The production mix was more gassy than I expected, but the financial results were strong with adjusted operating cash flow of $806.6Cdn ($0.66/share); well above my forecast.

The Company's guidance for Q4 is 370,000 Boepd to 375,000 Boepd. I am using 372,500 Boepd, but I expect them to top that.

Q4 production mix should be approximately 47.5% crude oil, 12.5% NGLs and 40.0% natural gas. < I like the production mix, and their hedging program does reduce commodity price risk.

My updated valuation is $13.50Cdn ($9.86US for WCPRF), which compares to TipRank's price target of $13.80 Cdn. < Three analysts have submitted fresh price targets of $13, $13 and $15 since Q3 results were announced.

Whitecap is a recent addition to our High Yield Income Portfolio, so I am being conservative in my forecast model until I gain more confidence in it. They have announced guidance for 2026, which is very close to my previous forecast. Whitecap intends to hold production flat and focus on generating free cash flow next year. When oil prices to rebound, which they eventually will, Whitecap can ramp up their drilling program.

Whitecap pays monthly dividends of $0.0608Cdn ($0.7296/year). Based on today's share price the annual yield is approximately 7.3%, which is very good for a company of this size that has a lot of high-quality Running Room. Free cash flow from operations should be close to $150Cdn million, which is more than enough to cover their dividend payments and they have an active stock repurchase program underway.

This one is a classic "Growth + Income" stock.

[Petroleum economist]

Dan,

I think that Whitecap had a good Q3.

Q3 was the first complete quarter after the merger of Whitecap and Veren and modelling as such was a bit tricky.
The production mix was a bit leaner as I had expected.

The Q3 production beat my expectation. The Q4 and 2026 production outlook look a bit conservative and I would be disappointed if Whitecap would not beat these.

Shareholder returns are higher than dividends only.
Whitecap bought back in Q3 10.3 M shares for C$ 182 M. This adds another 1.5% to the shareholder returns.

[dan_s]

I agree.
I do think Whitecap's production guidance for Q4 is conservative, probably just because management wants to make sure that the assets acquired through the merger with Veren hold up. I was a big fan of Veren and I do think the merger was very good for Whitecap.

Whitecap is at the top of my list to be moved into the Sweet 16. I like the size, their "Running Room", strong balance sheet, dividends and active stock repurchase plan.

If Whitecap's Q4 results and 2026 guidance match my forecast, the multiple that I use to value it should increase.