Whitecap runs ahead of the pack

The XTO acquisition is a barn burner

Whitecap (WCP.TO) just announced the purchase of the XTO Energy assets from Exxon (XOM) and Imperial Oil (IMO.TO) for a net purchase price of CAD$1.7 billion, easily financed on Whitecap’s pristine balance sheet enhanced by a CAD$1 billion term loan. The metrics are compelling, with 2023 production rising to 174,000 Boe/Day (according to the company - I model 178,000) of which 65% is oil and liquids. The company foresees 2023 cash flow of CAD$2.1 billion with free cash flow (likely directed to retiring the acqusition debt) of CAD$1.1 billion after a ~CAD$1 billion capital program.

The acquired assets in the Montney and Duvernay plays are among the best in Canada, and come 20 years of drilling inventory and with processing facilities for up to 165 million cubic feet a day of natural gas. I have roughly modeled this massive acquisition using an average commodity price of CAD$75 per Boe and come up with a 2023 per share value in the range of CAD$18 to CAD$19 and year end 2023 debt a modest 0.6 times free cash flow. Whitecap saw the opportunity and seized it, and shareholders should benefit from their courage if commodity prices don’t fall off a cliff.

I own 15,000 Whitecap shares but will likely add.