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Whitecap Resources Inc. announces 51% increase to 2013 year-end reserves and provides operational update

CALGARY, Jan. 21, 2014 /CNW/ - Whitecap Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) is pleased to announce the results of its 2013 year-end oil and gas reserves evaluation, a 51% increase over year-end 2012 reserves. The increases reflect exceptional organic growth through the drill-bit and the completion of several accretive oil acquisitions in 2013. Whitecap is also pleased to provide our shareholders with an operational update.

The following highlights and reserves information do not include the recent light oil Viking acquisition of a private company ("PrivateCo") which closed on January 6, 2014. The financial and operational information below is based on estimates and are unaudited.

HIGHLIGHTS

Reserves

  • Increased proved plus probable reserves by 51% to 132.5 MMboe (71% oil and NGLs) and proved reserves by 55% to 94.6 MMboe (72% oil and NGLs).
  • On a per share, fully diluted basis, increased proved plus probable reserves by 16% and proved reserves by 19%.
  • Achieved finding and development ("F&D") costs of $16.96 per proved plus probable boe, including changes in future development costs ("FDC"), which results in a recycle ratio of 2.5 times.
  • Achieved finding, development and acquisition ("FD&A") costs of $18.17 per proved plus probable boe, including FDC, which results in a recycle ratio of 2.4 times.
  • Increased the net present value discounted at 10% ("NPV10") of proved plus probable reserves by 29% to $13.33 per fully diluted share and NPV10 of proved reserves by 34% to $10.54 per fully diluted share.
  • Total proved reserves comprise 71% of total proved plus probable reserves on a reserve basis and 79% on a NPV10 basis.
  • Organic proved plus probable reserve additions replaced 284% of production in the year and proved reserve additions replaced 241% of production, excluding reserves added through acquisitions.
  • Including reserves added through acquisitions, proved plus probable reserve additions replaced 724% of production in the year and proved reserve additions replaced 568% of production.
  • Increased our reserve life index ("RLI") for proved plus probable reserves by 17% to 16.4 years and proved reserves by 19% to 11.7 years.

Operations

  • Achieved record 2013 annual production of 19,769 boe/d (69% oil and NGLs), an increase of 7% per fully diluted share compared to 2012.
  • Invested $190 million in 2013 on development capital expenditures which includes the drilling of 100 (73.3 net) wells with a 100% success rate.

2013 YEAR-END RESERVES

Whitecap's year-end 2013 reserves were evaluated by independent reserves evaluator McDaniel & Associates Consultants Ltd. ("McDaniels"). The evaluation of all of Whitecap's oil and gas properties was done in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR on or before March 31, 2014.

Summary of Reserves
(Forecast Pricing)

As at December 31, 2013(1)

   
  company interest reserves(2)
Description Oil (Mbbl) Gas (MMcf) NGL (Mbbl) Total (Mboe)
Proved producing 31,764 98,276 4,849 52,993
Proved non-producing 309 4,018 37 1,016
Proved undeveloped 27,670 59,187 3,060 40,594
Total proved(3) 59,743 161,481 7,946 94,602
Probable 22,486 72,041 3,356 37,850
Total proved plus probable(3) 82,229 233,522 11,302 132,452
(1) Based on McDaniels' January 1, 2014 forecast prices.
(2) Company interest reserves are the Company's total working interest share before the deduction of any royalties and including any royalty interests of the Company.
(3) Numbers may not add due to rounding.

Summary of Before Tax Net Present Values
(Forecast Pricing)

As at December 31, 2013(1)

     
  Before Tax Net Present Value ($MM)
  Discount Rate
Description 0% 5% 10% 15% 20%
Proved producing   2,176   1,590   1,258   1,048   905
Proved non-producing   23   14   10   8   7
Undeveloped   1,395   886   603   430   317
Total proved   3,594   2,490   1,871   1,487   1,229
Probable(2)   1,828   859   495   327   236
Total proved plus probable(2)   5,423   3,349   2,367   1,814   1,465
Per fully diluted share   $30.55   $18.87   $13.33   $10.22   $8.25
(1) Based on McDaniels' January 1, 2014 forecast prices.
(2) Numbers may not add due to rounding.

Subsequent to the year end, Whitecap closed a light oil Viking acquisition of a PrivateCo. The PrivateCo reserves at December 31, 2013, internally estimated by a member of Whitecap's management who is a qualified reserves evaluator in accordance with National Instrument 51-101 as at December 31, 2013 and based on McDaniels' January 1, 2014 forecast prices were 8.8 MMboe of proved reserves, 14.0 MMboe of proved plus probable reserves and had a net present value discounted at 10% ("NPV10") for proved plus probable reserves of $388.7 million.

Capital Program Efficiency

Based on the evaluation of our petroleum and natural gas reserves prepared in accordance with NI 51-101 by our independent reserve evaluator, McDaniels, the historical efficiency of our capital programs is summarized as follows:

               
    2013   2012   Three Year
Weighted
Average
Excluding Future Development Costs            
Proved ($/boe)            
       F&D costs(1) $ 10.73 $ 19.03 $ 14.33
       FD&A costs(2) $ 15.19 $ 22.15 $ 19.06
Proved plus probable ($/boe)            
       F&D costs(1) $ 9.10 $ 14.87 $ 11.42
       FD&A costs(2) $ 11.91 $ 16.57 $ 14.42
Recycle ratio(3)            
       Proved plus probable    3.6x   2.5x   3.0x
             
Including Future Development Costs            
Proved ($/boe)            
       F&D costs(1) $ 20.31 $ 22.74 $ 24.36
       FD&A costs(2) $ 23.16 $ 27.89 $ 26.66
Proved plus probable ($/boe)            
       F&D costs(1) $ 16.96 $ 18.07 $ 19.48
       FD&A costs(2) $ 18.17 $ 20.86 $ 18.61
Recycle ratio(3)            
       Proved plus probable   2.4x   2.0x   2.3x
             
Operating netback per boe(3) $ 42.62 $ 41.80 $ 43.46
(1) The aggregate of the exploration and development costs incurred in the financial year and change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.
(2) The capital expenditures include the announced purchase price of corporate acquisitions rather than the amounts allocated to property, plant and equipment for accounting purposes. The capital expenditures also exclude capitalized administration costs.
(3) Recycle ratio is calculated as operating netback divided by FD&A costs (proved plus probable). Operating netback is calculated as revenue (including realized hedging gains and losses) minus royalties, production and operating expenses and transportation expenses.

OPERATIONAL UPDATE

Whitecap achieved 2013 annual production of 19,769 boe/d (69% oil and NGLs) which exceeded our market guidance of 19,650 boe/d. Total capital expenditures including capitalized G&A were $190 million compared to market guidance of $188 million.

In 2013, we drilled a total of 100 (73.3 net) wells all targeting oil with a 100% success rate, including 50 (37.1 net) horizontal Viking oil wells in western central Saskatchewan, 25 (14.3 net) horizontal Cardium oil wells at Garrington, 16 (14.5 net) horizontal Cardium wells in the greater Pembina area, 5 (4.4 net) horizontal Dunvegan wells in the Deep Basin area of northwest Alberta and 2 (1.0 net) horizontal Montney oil wells at Valhalla. We have an extensive inventory currently of 2,103 low-risk development drilling opportunities providing Whitecap and our shareholders with a solid platform for long-term sustainable dividends and per share growth.

Our 2014 capital program has fully commenced with nine drilling rigs currently operating; four in west central Saskatchewan drilling the Viking formation, three in west central Alberta drilling the Cardium formation and two in northwest Alberta targeting the Dunvegan and Montney formations.

Included in the first quarter drilling program are 5 horizontal Dunvegan oil wells. The Dunvegan is an emerging core play for Whitecap where we currently have six wells producing over 1,500 boe/d on a combined basis. To date our average IP (30) rate across the Dunvegan play is 401 boe/d (87% oil and NGLs), including our initial Elmworth wells which had IP rates curtailed by third party restrictions.

In 2014 we will expand the application of extended reach horizontal ("ERH") wells across our core areas, building on the successful results achieved in 2013 where we were able to experience a greater than 20% improvement in capital efficiencies compared to the standard length horizontal wells. This improvement in capital efficiency provides strong well economics with accelerated payout of capital employed to less than one year. We have nine ERH wells planned for the first quarter, including four in the Viking formation, one in Garrington and three in Pembina targeting the Cardium and one in Simonette targeting the Dunvegan. We have 18 to 24 ERH wells in total planned for 2014.

We are off to a great start to the year and look forward to working hard at making 2014 another exceptional year for our shareholders.

Whitecap is a dividend paying, oil-weighted company focused on providing sustainable monthly dividends to its shareholders and per share growth through a combination of accretive oil-based acquisitions and organic growth on existing and acquired assets. For further information about Whitecap please visit our website at www.wcap.ca.

Note Regarding Forward-Looking Statements and Other Advisories

This press release contains forward-looking statements and forward-looking information (collectively "forward-looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of our anticipated future operations, management focus, strategies, financial, operating and production results and business opportunities. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future, including statements about our strategy, plans and focus, timing of filing the Company's annual information form, forecast annual per share growth, dividend policy, planned capital expenditures, expected well costs and economics, expected future production and product mix, and drilling, development and completion plans and the anticipated results therefrom. Statements relating to "reserves" are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

The forward-looking information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; ability to efficiently integrate assets and employees acquired through acquisitions, ability to market oil and natural gas successfully and our ability to access capital.

Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Whitecap can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. Our actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide securityholders with a more complete perspective on our future operations and such information may not be appropriate for other purposes.

It should not be assumed that the present worth of estimated future cash flow presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of Whitecap's crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.

All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein do not represent fair market value.

Finding and development costs both including and excluding acquisitions and dispositions have been presented above. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, FD&A costs have been presented because acquisitions and dispositions can have a significant impact on the Company's ongoing reserve replacement costs and excluding these amounts could result in an inaccurate portrayal of the Company's cost structure.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect our operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

These forward-looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Non-GAAP Measures

This press release contains the term "operating netbacks" which does not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other companies. Whitecap uses operating netbacks to analyze financial and operating performance. Whitecap believes these benchmarks are key measures of profitability and overall sustainability for the Company. These terms are commonly used in the oil and gas industry. Operating netbacks are not intended to represent operating profits nor should they be viewed as an alternative to funds from operations provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Operating netbacks are determined by deducting royalties, production expenses and transportation and selling expenses from oil and gas revenue.

"Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6: 1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.  

SOURCE Whitecap Resources Inc.

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