Canada’s Whitecap focuses on cost control amid oil market uncertainty

Canada's Whitecap Resources remains focused on balance sheet management and capital discipline to deal with the current oil market volatility while remaining on track for production growth, CEO Grant Fagerheim said April 24.

"Our management team has been through multiple cycles of such market dislocation with the most recent being the Covid pandemic in 2020 and prior to that in 2015 and 2016," Fagerheim said on a webcast to discuss its first-quarter 2025 earnings.

The driller produces light oil, NGLs and natural gas.

At a stress test case of WTI $50/b and a AECO price of C$2 ($1.45)/MMBtu, the company is still targeting to maintain balance sheet strength and invest in its existing assets, Fagerheim said.

"Consistent with commodity price weakness, we [also] have the flexibility to optimize our capital program for both our conventional and unconventional assets to prioritize free funds flow and return on capital," he said.

Whitecap's dividend is fully funded at or below WTI $50/b, Fagerheim said.

The company's capital spending last quarter was C$398 million, with oil and natural gas prices averaging over C$102/b and AECO at C$2/MMBtu, CFO Thanh Kang said on the same webcast.

Whietcap is expecting to maintain a base breakeven and maintain dividends long with maintenance capital at WTI $55/b, Kang said.

"In a sub-$50/b environment, drilling activity slows down significantly," Kang said.

Whitecap has three main areas of operation in the Western Canadian Sedimentary Basin: North Alberta and British Columbia; Central Alberta; and Saskatchewan. In NABC, the focus is on the Cardium, Duvernay and Montney resource plays where the company utilizes pad-based horizontal drilling and multi-stage fracking to target the light, sweet crude oil and the condensate-rich natural gas.

The broad success the company had in 2024 rolled over to the last quarter with production increasing by nearly 6,000 b/d of oil equivalent, Fagerheim said.

Q1 production was 179,051 boe/d, higher than the company's internal forecast of 173,000 boe/d on the back of strong output from new wells, he said. Whitecap had an active 14-rig, 86-well first quarter drilling program representing the strength of its assets, particularly in the Montney and Duvernay assets to name a few.

"2025 has started off with a right foot and we expect the strong performance to continue throughout the year," Fagerheim said. "Our base production continues to outperform our tight curve projections over the longer term."

Q1 output rose 5.5% year over year from 169,660 boe/d in Q1 2024, according to the earnings release. Of the Q1 production, crude oil accounted for 93,765 b/d, NGLs were 22,167 b/d, and natural gas was nearly 378 MMcf/d, it said.

The company sold its crude oil and NGL at an average price of C$93/b and C$38.09/b, respectively, while natural gas fetched C$2.39/MMBtu on average, the release said.

For its unconventional plays, new wells were drilled last quarter at Kaybob, Kakwa, and Musreau.

The newly planned Lator facility to produce 35,000 boe/d to 40,000 boe/d is progressing with 90% of long-lead items ordered and detailed engineering being advanced, the release said. Development will start in 2026 and completion is on track for late 2026/early 2027, said Joel Armstrong, senior vice president for production and operations, said on the same webcast. He said the company has plans for a second phase of development to increase capacity.

"At Kaybob, our first pad has now reached 180 days of production achieving an IP [initial production] rate of 1,100 boe/d with 39% liquids," Armstrong said.

For Whitecap's conventional plays, despite delays due to the cold weather in February, the company drilled a total of 52 wells in West and East Saskatchewan and eight Glauconite wells in Alberta, the earnings release said.

Veren deal update

In mid-March, Whitecap and fellow WCSB producer Veren announced a merger in a deal worth C$15 billion to create a leading light oil and condensate producer, reiterating the basin's growing competitiveness.

The assets are concentrated in the Alberta Montney and Duvernay plays and together the new company will have a production capacity of 370,000 b/d of oil equivalent, both companies said then, adding the new producer will also be the largest landholder in those two liquids-rich plays, a prominent light oil producer in Saskatchewan.

The Veren deal is expected to close on May 12 and the new player will emerge as a leading light oil, NGL, condensate and natural gas producer in the basin that will offer long-term sustainability and profitability to drive superior returns for shareholders, Fagerheim said.

"Our teams are currently working to optimize our go-forward capital investments by seeking efficiencies and combined operations, high-grading inventories and more efficiently utilizing the combined infrastructure," Fagerheim said.