Whitecap Q1 results
Posted: Thu Apr 25, 2024 6:59 am
Whitecap reported solid Q1 results. Production is growing, the balance sheet is sound, the profitability is good, unit costs are low and high shareholder returns are high.
Production
• Q1 production (169.7 K BoE/d) was well above the Q1 outlook (163.5 K BoE/d).
• The 2024 outlook was increased by 2 K BoE/d to 169-172 K BoE/d.
• Production grew by 9% versus Q1 2023, with growth concentrated in gas (+18%) and NGL (+16%). Oil only grew by 3%.
• Whitecap has ample proven reserves (792 M BoE). Reserves are equivalent to 13.4 years of 2024 production, which is well above industry average (9.5-10 years). Whitecap can grow the next few years at a rate of 5-7% per year.
• As the Q1 composition (52/11/36) deviates from the reserves composition (40/20/39), gas and especially NGL production will continue to grow faster than oil.
Balance sheet
• The balance sheet is very healthy.
• Solvency slightly decreased, from 57% (2023) to 56.3% (Q1 2024).
• With 50% of the free cash flow heading towards the balance sheet, solvency late 2024 should be an excellent 60%.
• Debt/EBITDA ratio is a low 0.7.
• The balance sheet allows shareholder returns.
Profitability
• Whitecap reported a net profit of C$ 59.8 M (eps C$ 0.10).
• The net profit was impacted by non-cash losses (-C$ 92 M) on future oil and gas hedging. I tend to ignore these losses, as they will come back in my models as future cash losses in the rest of 2024 and in 2025/2026.
• Gas revenues are only 9% of the total revenues. Extended low gas prices therefor will not have a major impact on the future net profits.
• Unit costs are a low US$ 26.45/BoE.
• Using WTI = $ 80-85/bbl, I expect a net profit (excl. non-cash hedging) of C$ 705 -800 M (eps = C$ 1.18-1.34).
• The PE in 2024 is a medium 8.0-9.1.
• With growing production and higher gas prices, the PE in 2025/2026 can reduce to 6.0-7.5.
Shareholder returns
• Total dividends paid in Q1 equaled C$ 0.18.
• Whitecap did not buy back any shares in Q1, as the free cash flow was minimal (-C$ 8.7 M). The free cash flow in Q1 was low as 39-40% of the 2024 capex (C$ 900-1,100 M is concentrated in Q1 (C$ 393 M).
• The free cash flow in Q2 and onwards will recover towards a Whitecap 2024 estimate of C$ 700 M).
• I expect that share buybacks will restart in Q2.
• I expect for 2024 a high shareholder yield of 8.9%.
Conclusion
Whitecap ranks 7th out of 72 oil and gas companies that I track. This is due to its strong reserves, a growing production, a sound balance sheet, good profitability, and high shareholder returns, partially offset by a medium PE although this should improve.
I think Whitecap is a good investment.
Production
• Q1 production (169.7 K BoE/d) was well above the Q1 outlook (163.5 K BoE/d).
• The 2024 outlook was increased by 2 K BoE/d to 169-172 K BoE/d.
• Production grew by 9% versus Q1 2023, with growth concentrated in gas (+18%) and NGL (+16%). Oil only grew by 3%.
• Whitecap has ample proven reserves (792 M BoE). Reserves are equivalent to 13.4 years of 2024 production, which is well above industry average (9.5-10 years). Whitecap can grow the next few years at a rate of 5-7% per year.
• As the Q1 composition (52/11/36) deviates from the reserves composition (40/20/39), gas and especially NGL production will continue to grow faster than oil.
Balance sheet
• The balance sheet is very healthy.
• Solvency slightly decreased, from 57% (2023) to 56.3% (Q1 2024).
• With 50% of the free cash flow heading towards the balance sheet, solvency late 2024 should be an excellent 60%.
• Debt/EBITDA ratio is a low 0.7.
• The balance sheet allows shareholder returns.
Profitability
• Whitecap reported a net profit of C$ 59.8 M (eps C$ 0.10).
• The net profit was impacted by non-cash losses (-C$ 92 M) on future oil and gas hedging. I tend to ignore these losses, as they will come back in my models as future cash losses in the rest of 2024 and in 2025/2026.
• Gas revenues are only 9% of the total revenues. Extended low gas prices therefor will not have a major impact on the future net profits.
• Unit costs are a low US$ 26.45/BoE.
• Using WTI = $ 80-85/bbl, I expect a net profit (excl. non-cash hedging) of C$ 705 -800 M (eps = C$ 1.18-1.34).
• The PE in 2024 is a medium 8.0-9.1.
• With growing production and higher gas prices, the PE in 2025/2026 can reduce to 6.0-7.5.
Shareholder returns
• Total dividends paid in Q1 equaled C$ 0.18.
• Whitecap did not buy back any shares in Q1, as the free cash flow was minimal (-C$ 8.7 M). The free cash flow in Q1 was low as 39-40% of the 2024 capex (C$ 900-1,100 M is concentrated in Q1 (C$ 393 M).
• The free cash flow in Q2 and onwards will recover towards a Whitecap 2024 estimate of C$ 700 M).
• I expect that share buybacks will restart in Q2.
• I expect for 2024 a high shareholder yield of 8.9%.
Conclusion
Whitecap ranks 7th out of 72 oil and gas companies that I track. This is due to its strong reserves, a growing production, a sound balance sheet, good profitability, and high shareholder returns, partially offset by a medium PE although this should improve.
I think Whitecap is a good investment.