Oil Co. Finds Excellent Returns in Montney Wells
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Disclosures for RBC Capital Markets, Whitecap Resources Inc., July 24, 2025

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The Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes, high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility. Distribution of ratings For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis. Distribution of ratings RBC Capital Markets, Equity Research As of 30-Jun-2025 Investment Banking Serv./Past 12 Mos. Rating Count Percent Count Percent BUY [Outperform] 866 58.87 283 32.68 HOLD [Sector Perform] 561 38.14 151 26.92 SELL [Underperform] 44 2.99 5 11.36

References to a Recommended List in the recommendation history chart may include one or more recommended lists or model portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: ADR (RL 10), and the Guided Portfolio: All Cap Growth (RL 12). The abbreviation 'RL On' means the date a security was placed on a Recommended List. The abbreviation 'RL Off' means the date a security was removed from a Recommended List. As of April 3, 2023, U.S. RBC Wealth Management's quarterly reports will serve as the primary communication for its models and will highlight any changes to the model made during the quarter. Equity valuation and risks For valuation methods used to determine, and risks that may impede achievement of, price targets for covered companies, please see the most recent company-specific research report at www.rbcinsightresearch.com or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. Whitecap Resources Inc Valuation Our $14.00/share price target maps to 0.9x Tgt/NAV (fully risked NAV) and 7.3x 2025E Target EV/DACF multiple. We believe Whitecap’s strong track record of execution, sustainable yield, and diversified portfolio strategy backstops our Outperform rating, which is supported by the implied return to our price target. Risks to rating and price target Potential risks to our stock price target and rating revolve around Whitecap’s ability to execute its plans. Key risks include: variable drilling results, a prolonged decline in oil prices, fiscal changes, access to capital, and integration of recent acquisitions. Conflicts policy RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request. To access our current policy, clients should refer to https://www.rbccm.com/global/file-414164.pdf or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time. Dissemination of research RBC Capital Markets endeavors to make all reasonable efforts to provide research content simultaneously to all eligible clients, having regard to local time zones in overseas jurisdictions. RBC Capital Markets provides eligible clients with access to Research Reports on the Firm's proprietary INSIGHT website, via email and via third-party vendors. Please contact your investment advisor or institutional salesperson for more information regarding RBC Capital Markets' research. For a list of all recommendations on the company that were disseminated during the prior 12-month period, please click on the following link: https://rbcnew.bluematrix.com/sellside/MAR.action The 12 month history of Quick Takes can be viewed at RBC Insight. Analyst certification All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report. Third-party disclaimers The Global Industry Classification Standard ("GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor's Financial Services LLC (“S&P”) and is licensed for use by RBC. Neither MSCI, S&P, nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. RBC Capital Markets disclaims all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any statements made to the media or via social media that are in turn quoted in this report, or otherwise reproduced graphically for informational purposes.

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On July 24, 2025, RBC Capital Markets analyst Michael Harvey maintained an Outperform rating on Whitecap Resources Inc. (WCP:TSX) with an unchanged target price of CA$14.00, representing 37% upside from the current share price at the time of the report of CA$10.22.

The analyst cited strong second quarter 2025 results featuring volume outperformance that drove above-street cash flow generation as the first partial quarter of Veren volumes contributed to performance.

Second Quarter 2025 Financial Performance

Whitecap Resources Inc. reported second quarter 2025 production of 292,754 barrels of oil equivalent per day, significantly exceeding RBC's estimate of 277,990 barrels of oil equivalent per day and street consensus of 275,900 barrels of oil equivalent per day. This strong production performance drove adjusted funds from operations per share ahead of expectations at CA$0.75, compared to RBC's estimate of CA$0.67 and street consensus of CA$0.64.

Capital expenditures came in below expectations at CA$409 million versus RBC's estimate of CA$500 million and street consensus of CA$489 million. The company generated CA$304 million in free cash flow during the quarter, equivalent to CA$0.32 per share, which was largely allocated to the base dividend payment.

Balance Sheet Strength and Shareholder Returns

Whitecap exited the second quarter with CA$3.3 billion in net debt, representing 1.0x debt-to-cash flow ratio, slightly below RBC's estimate of CA$3.4 billion. The company returned CA$190 million to shareholders through its base dividend of CA$0.73 per share annualized and share purchases totaling 600,000 shares valued at CA$5 million.

Harvey noted that "at current levels and at strip pricing, the company's simple and effective payout ratios map to 27% and ~100% respectively in 2026," highlighting the sustainability of the dividend policy and modest share repurchase program.

Operational Highlights and Development Progress

Key operational achievements during the quarter included positive results from the first three wine rack pads within the Duvernay formation, 12 Gold Creek Montney wells with results slightly ahead of type curve expectations, and a triple bench Montney pad achieving an initial production rate of 1.2 thousand barrels of oil equivalent per day with 65% liquids content.

In Southeast Saskatchewan, horizontal oil multi-lateral activity yielded positive results from recent Bakken wells, with plans to drill 4.9 net wells in the second half of 2025. Harvey highlighted that "with the team's success on recent Montney wells, an investor focal point will be four additional Montney wells which were spud in May in the Eastern Gold Creek field and set to be completed later this year."

2025 Guidance Confirmation and Production Outlook

Management reiterated 2025 guidance while targeting the high end of ranges, calling for production of 295-300 thousand barrels of oil equivalent per day and capital spending of CA$2.0 billion. The company's second half guidance anticipates production of 363-368 thousand barrels of oil equivalent per day supported by CA$1.2 billion in capital expenditures.

Based on the strong first half performance and updated guidance, Harvey increased his 2025 production estimates to the upper end of company guidance, which boosted his 2025 cash flow per share estimates by 6%. However, 2026 production estimates remained relatively unchanged, with minor adjustments to interest and tax assumptions decreasing 2026 cash flow per share estimates by 1%.

Valuation Methodology and Peer Comparison

The analyst's CA$14.00 price target reflects 0.9x target-to-net asset value on a fully risked basis and 7.3x 2025 estimated target enterprise value-to-debt adjusted cash flow multiple. Whitecap currently trades at 5.6x 2025 estimated enterprise value-to-debt adjusted cash flow, representing a premium to the peer average of 4.5x but justified by the company's execution track record and sustainable dividend yield.

Harvey's upside scenario of CA$18.00 assumes 10% higher recoveries from Whitecap's Montney, Duvernay, Southeast Saskatchewan, and Viking programs above type curve assumptions, resulting in improved capital efficiencies and potential dividend growth. The downside scenario of CA$7.00 reflects full development of current proven and probable reserves with all unbooked upside left untapped.

Investment Thesis and Strategic Advantages

The analyst emphasized Whitecap's "strong track record of execution, sustainable yield, and diversified portfolio strategy" as key factors supporting the Outperform rating. The company benefits from attractive drilling opportunities across multiple areas including the Montney, Duvernay, and conventional plays in Alberta and Saskatchewan that generate strong rates of return.

Harvey highlighted the company's low-risk growth profile, noting that Whitecap can deliver above-average per share growth from established light oil plays supported by waterflood and enhanced oil recovery projects. The company's acquire-and-exploit track record is reflected in an above-average recycle ratio since inception.

Risk Assessment and Potential Challenges

Key risks to the rating and price target include variable drilling results, prolonged decline in oil prices, fiscal changes, access to capital, and integration challenges from recent acquisitions. The analyst noted that potential risks revolve around "Whitecap's ability to execute its plans" across its diversified asset base.

Despite these risks, Harvey believes the company's balance sheet strength and operational diversification provide downside protection while offering significant upside potential through continued drilling success and potential accretive acquisitions.