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TICKERS: WCP

Q3/19 Active, 2020 Outlook Positive for Canadian Oil Company
Research Report

Source:

The producer's Q3/19 financial and operating results are reviewed in an iA Securities report.

In an Oct. 31 research note, iA Securities analyst Michael Charlton reported that Whitecap Resources Inc.'s (WCP:TSX) Q3/19 production was a beat and its new joint venture adds potential upside.

In Q3/19, Whitecap produced about 68,255 barrels of oil equivalent per day (68,255 boe/d), which surpassed iA Securities' estimate and was within guidance, Charlton noted. This resulted from Whitecap spending less capital than expected. The company is on pace to meet its average annual production of 70,000–72,000 boe/d with capital spending at about $400 million.

"The quarter was active as Whitecap drilled 104 (89.9 net) wells, advancing all its core areas and enhancing and expanding its assets to maximize shareholder value, supportive of its long-term dividend and growth model," Charlton commented.

As for Q3/19 cash flow, it was about $154.3 million, or $0.37 per share, reflecting a sequential decrease of about 12% "but tight (within 1%) to our forecasts," indicated Charlton. This resulted from, one, lower realized prices of $52.76 per barrel of oil equivalent (boe), down about 10% from Q2/19. Lower netbacks was a second contributor. They dropped by about 15% to $27.92 per boe due to reduced realized prices and slightly higher operating and transportation costs.

Looking forward, Whitecap's 2020 budget is between $360 and $380 million, annual production guidance is about 71,000–72,000 boe/d and plans are to drill about 150 wells, Charlton pointed out. "With the 2020 capital budget set, Whitecap remains well positioned to post modest production growth and free cash flow, which is anticipated to be split between debt reductions and a return of capital to shareholders," he wrote.

Finally, Charlton summarized Whitecap's recent joint venture with a private Montney exploration firm. During the two-year earn-in period, Whitecap will garner up to a 65% working interest in 34 (21.5 net) sections in the oil window of the Montney with about 144 possible drilling locations. After the earn-in, the company will operate about 88% of the lands and have a 65% working interest in those as well as a 50% working interest in the lands it will not operate.

IA Securities has a Strong Buy recommendation and a target price of CA$7.75 per share on Whitecap Resources, whose stock is currently trading at about CA$4.05 per share.

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Disclosures from iA Securities, Whitecap Resources Inc., Research Update, October 31, 2019

Conflicts of Interest: The research analyst and or associates who prepared this report are compensated based upon (among other factors) the overall profitability of iA Securities, which may include the profitability of investment banking and related services. In the normal course of its business, iA Securities may provide financial advisory services for the issuers mentioned in this report. iA Securities may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis.

Analyst's Certification: Each iA Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst's personal views about the issuer and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analyst Trading: iA Securities permits analysts to own and trade in the securities and or the derivatives of the issuer under their research coverage, subject to the following restrictions. No trades can be executed in anticipation of coverage for a period of 30 days prior to the issuance of the report and 5 days after the dissemination of the report to our clients. For a change in recommendation, no trading is allowed for a period of 24 hours after the dissemination of such information to our clients. A transaction against an analyst's recommendation can only be executed for a reason unrelated to the outlook of the stock for the issuer and with the prior approval of the Director of Research and the Chief Compliance Officer.

The Industrial Alliance Securities Inc. research analyst(s) who cover the issuer discussed, members of the research analyst’s household, research associate(s) or other individual(s) involved directly or indirectly in producing this report: a. have a long position in its common equity securities.

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