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May 10, 2016
WHITECAP RESOURCES INC. ANNOUNCES ACQUISITION OF HIGH QUALITY LOW DECLINE OIL ASSETS, $470 MILLION FINANCING AND INCREASED 2016 GUIDANCE
CALGARY, ALBERTA -Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to announce that it has entered into an agreement to purchase premium oil assets ("Assets") in western Canada for cash consideration of $595 million. The Assets are located in southwest Saskatchewan and add 11,600 boe/d (98% oil) of low decline operated production and include significant facility infrastructure for future growth (the "Acquisition").
The Acquisition will be funded through a concurrent $470 million bought deal financing (the "Financing") and Whitecapâ€™s existing credit facilities.
The Acquisition is consistent with Whitecapâ€™s return on capital strategy focusing on large oil in place assets that have significant development upside remaining. The Assets include 11,600 boe/d (98% oil) of low decline medium gravity oil within a concentrated area, approximately 10 miles west of Swift Current, Saskatchewan. The majority of this production is operated (78%) and is processed through a vast infrastructure network consisting of 23 oil batteries and 1 gas plant. The majority of the production (92%) is under active waterflood and enhanced oil recovery ("EOR") which has resulted in a base decline that is very predictable and stable at 5% historically (conservatively forecasted in our 2016 budget at 10%). Capital spending incurred on the EOR projects to date totals approximately $600 million net or 84% of the total anticipated project costs.
The production profile characteristics of the Assets further enhance Whitecapâ€™s current suite of premium oil assets in western Canada and strengthens our ability to grow funds flow and production per share while providing a dividend to shareholders all within funds flow and without the use of a dividend reinvestment program ("DRIP"). The Acquisition immediately reduces our base decline rate and increases our production under waterflood and EOR from 54% to 63%.
There are significant growth opportunities identified on the Assets including 659 (487 net) drilling locations, as well as an additional 2,400 boe/d from 228 (157 net) optimization and recompletion opportunities.