Whitecap Resources Inc. — Audit Report / Information 2021

Feb 24, 2022

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Independent auditor’s report

To the Shareholders of Whitecap Resources Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Whitecap Resources Inc. and its subsidiaries (together, the Company) as at December 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

What we have audited

The Company’s consolidated financial statements comprise:

• the consolidated balance sheets as at December 31, 2021 and 2020;

• the consolidated statements of comprehensive income (loss) for the years then ended;

• the consolidated statements of changes in equity for the years then ended;

• the consolidated statements of cash flows for the years then ended; and

• the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

PricewaterhouseCoopers LLP 111-5th Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3 T: +1 403 509 7500, F: +1 403 781 1825

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

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Key audit matter

The impact of oil and natural gas reserves on net petroleum and natural gas properties for the cash generating units (CGUs) of the Company

Refer to note 2 - Use of estimates and judgments, note 3 – Significant accounting policies, note 4 – Determination of fair values and note 7 – Property, plant and equipment to the consolidated financial statements.

The Company’s oil and natural gas assets consist of $6,377.9 million of net petroleum and natural gas properties (PP&E) as at December 31, 2021. Depletion expense for the Company was $537.7 million for the year then ended. PP&E is depleted using the unit-of-production method based on estimated proved plus probable oil and natural gas reserves.

The Company’s PP&E assets are grouped for recoverability assessment purposes into CGUs. The Company reviews its PP&E for any indication of impairment or impairment reversal at each reporting date. If such an indication exists, the estimated recoverable amount is calculated. An impairment loss is recognized in the consolidated statement of comprehensive income (loss) if the carrying amount of a CGU exceeds its estimated recoverable amount. An impairment loss is reversed to the extent that the asset’s new carrying amount does not exceed the original carrying amount, net of related accumulated depletion, depreciation and amortization. The recoverable amount of PP&E is determined as the fair value less costs of disposal (FVLCD) using a discounted cash flow method. The calculation is based on estimates of proved plus probable reserves, which are prepared by independent petroleum consultants (management’s experts).

How our audit addressed the key audit matter

Our approach to addressing the matter included the following procedures, among others:

• The work of management’s experts was used in performing the procedures to evaluate the reasonableness of the proved and probable oil and natural gas reserves used to determine depletion expense and the recoverable amount of PP&E assets. As a basis for using this work, the competence, capabilities and objectivity of management’s experts were evaluated, the work performed was understood and the appropriateness of the work as audit evidence was evaluated. The procedures performed also included evaluation of the methods and assumptions used by management’s experts, tests of the data used by management’s experts and an evaluation of their findings.

• Tested how management determined the recoverable amount of the Company’s CGUs and depletion expense, which included the following:

• Evaluated the appropriateness of the methods used by management in making these estimates.

• Tested the data used in determining these estimates.

• Evaluated the reasonableness of significant assumptions used in developing the underlying estimates, including:

  • Production rates and future costs, by considering the past performance of the CGUs of the Company, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

  • Forecast benchmark commodity prices, by comparing those forecasts with third party industry forecasts.

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Key audit matter

As a result of an increase in forward benchmark commodity prices as at September 30, 2021, compared to December 31, 2020, as well as increases to proved plus probable reserves within certain CGUs, an impairment test on the Company’s PP&E assets was performed. The impairment test concluded that the FVLCD of the Company’s CGUs exceeded their carrying amounts and the Company recorded an impairment reversal of $1,851.2 million.

How our audit addressed the key audit matter

• Discount rate, through the assistance of professionals with specialized skill and knowledge in the field of valuation.

• Recalculated the unit-of-production rates used to calculate depletion expense for each of the Company’s CGUs.

As at December 31, 2021, management evaluated its PP&E assets for any indicators of impairment or impairment reversal and concluded that no indicators existed.

Significant assumptions developed by management used to determine the recoverable amount of the CGU include estimates of proved plus probable reserves, production rates, forecast benchmark commodity pricing, discount rates and future costs.

We determined that this is a key audit matter due to (i) the significant judgment made by management, including the use of management’s experts, when developing the expected future cash flows to determine the recoverable amount and the proved plus probable reserves; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures relating to the significant assumptions; and (iii) the audit effort that involved the use of professionals with specialized skill and knowledge in the field of valuation.

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Key audit matter

Valuation of PP&E assets acquired in business combinations

Refer to note 2 - use of estimates and judgments, note 3 - Significant accounting policies, note 4 - Determination of fair values and note 6 - Acquisitions to the consolidated financial statements.

In 2021, the Company made the following significant business combinations:

• NAL Resources Limited;

• TORC Oil & Gas Ltd.;

• Kicking Horse Oil & Gas Ltd.; and

• HighRock Resources Ltd.

The total consideration for each acquisition was $283.2 million, $731.9 million, $245.4 million and $66.7 million, respectively.

The fair value of identifiable PP&E assets acquired was $422.5 million, $955.0 million, $354.2 million and $78.1 million, respectively.

The assumptions and estimates with respect to determining the fair value of PP&E generally require the most judgment and include estimates of reserves acquired, forecast benchmark commodity prices and discount rates. The fair value of PP&E is generally estimated with reference to the discounted cash flows expected to be derived from oil and natural gas production based on internally and externally prepared reserve reports that were prepared by qualified individuals (management’s experts).

We determined that this is a key audit matter due to (i) the significant judgment made by management, including the use of management’s experts, when developing the significant assumptions and estimating the fair value of the PP&E assets; (ii) a

How our audit addressed the key audit matter

Our approach to addressing the matter included the following procedures, among others:

• Tested how management estimated the fair value of the PP&E assets, which included the following:

• Evaluated the appropriateness of the method used by management in determining the fair value of PP&E assets acquired.

• Evaluated the reasonableness of assumptions used in determining the underlying fair value:

  • Forecast benchmark commodity prices, by comparing those forecasts with third party industry forecasts.

  • Discount rates, through the assistance of professionals with specialized skill and knowledge in the field of valuation.

• Obtained and read the purchase agreements.

• Tested the underlying data used by management in the determination of the fair value of PP&E.

- The work of management’s experts was used in performing the procedures to evaluate the reasonableness of reserves. As a basis for using this work, the competence, capabilities and objectivity of management’s experts were evaluated, the work performed was understood and the appropriateness of the work as audit evidence was evaluated. The procedures performed also included evaluation of the methods and assumptions used by

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Key audit matter	How our audit addressed the key audit matter
high degree of auditor judgment, subjectivity and	management’s experts, tests of the data
effort in performing procedures relating to the	used by management’s experts and an
significant assumptions; and (iii) the audit effort that	evaluation of their findings
involved the use of professionals with specialized
skill and knowledge in the field of valuation.

Other information

Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

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Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Calvin Blain Jacober.

/s/PricewaterhouseCoopers LLP

Chartered Professional Accountants

Calgary, Alberta February 23, 2022

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FINANCIAL STATEMENTS

As at and for the years ended December 31, 2021 and 2020

WHITECAP RESOURCES INC.

CONSOLIDATED BALANCE SHEET

As at		December 31,	December 31,
(CAD $000s)	Note	2021	2020
Assets
Current Assets
Accounts receivable		304,821	115,958
Deposits and prepaid expenses		10,478	30,240
Risk management contracts	4 & 5	12,636	4,415
Total current assets		327,935	150,613
Property, plant and equipment	6 & 7	6,382,258	2,645,190
Exploration and evaluation	8	56,073	16,738
Right-of-use assets	9	27,736	64,819
Risk management contracts	4 & 5	10,409	4,277
Deferred income tax	19	73,817	499,773
Total assets		6,878,228	3,381,410
Liabilities
Current Liabilities
Accounts payable and accrued liabilities		400,418	122,133
Share awards liability	14	25,350	9,953
Dividends payable		13,856	5,832
Deferred gain	13	2,306	-
Lease liabilities	11	3,498	11,688
Risk management contracts	4 & 5	94,146	15,854
Total current liabilities		539,574	165,460
Risk management contracts	4 & 5	2,346	4,111
Long-term debt	10	1,055,662	1,101,262
Lease liabilities	11	26,170	59,906
Decommissioning liability	12	1,455,767	1,046,659
Share awards liability	14	4,495	7,061
Deferred gain	13	54,752	-
Total liabilities		3,138,766	2,384,459
Shareholders’ Equity
Share capital	14	4,961,257	3,867,343
Contributed surplus	14	11,022	13,022
Deficit		(1,232,817 )	(2,883,414)
Total shareholders’equity		3,739,462	996,951
Total liabilities and shareholders’ equity		6,878,228	3,381,410

Commitments (Note 21)

See accompanying notes to the consolidated financial statements

Approved on behalf of the Board:

(signed) “Stephen C. Nikiforuk”

Stephen C. Nikiforuk Director

(signed) “Grant B. Fagerheim” Grant B. Fagerheim Director

Whitecap Resources Inc. | 2021

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WHITECAP RESOURCES INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) For the years ended December 31

(CAD $000s, except per share amounts) Note 2021 2020	(CAD $000s, except per share amounts) Note 2021 2020
Revenue Petroleum and natural gas sales 15 2,694,018 931,898 Royalties (415,930 ) (121,004)
Petroleum and natural gas sales, net of royalties 2,278,088 810,894 Other Income Net gain (loss) on commodity contracts 5 (294,227 ) 83,544 Gain on corporate acquisition 6 - 28,147
Total revenue and other income	1,983,861 922,585
Expenses
Operating 17 Transportation Marketing General and administrative 17 Stock-based compensation 5 & 14 Transaction costs Interest and financing 5 & 10 Accretion of decommissioning liabilities 12 Depletion, depreciation, and amortization 7 & 9 Impairment (reversal) 7 Exploration and evaluation 8 Net gain on asset dispositions 6 & 13	556,320 297,512 90,159 59,215 155,798 23,635 41,025 20,675 19,253 18,117 12,097 1,115 36,887 55,303 24,288 12,636 546,017 357,651 (1,851,216 ) 2,492,106 4,373 2,602 (23,346 ) (2)
Total expenses	(388,345 ) 3,340,565
Income (loss) before income taxes 2,372,206 (2,417,980) Taxes
Deferred income tax expense (recovery) 19	595,539 (573,007)
Net income(loss)and other comprehensive income(loss)	1,776,667 (1,844,973)
Net Income (Loss) Per Share ($/share) 18
Basic Diluted	2.97 (4.52) 2.95 (4.52)

See accompanying notes to the consolidated financial statements

Whitecap Resources Inc. | 2021

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WHITECAP RESOURCES INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the years ended December 31

(CAD $000s) Note 2021 2020	(CAD $000s) Note 2021 2020
Share Capital 14(b)
Balance, beginning of year Common shares repurchased 14(c) Issued on the acquisition of NAL 6 Issued on the acquisition of TORC 6 Issued on the acquisition of Kicking Horse 6 Issued on the acquisition of HighRock 6 Issued on acquisition of other assets 6 Contributed surplus adjustment on vesting of share awards Share issue costs, net of deferred income tax Share award liability adjustment on vesting of share awards	3,867,343 3,860,962 (164,226 ) (10,197) 283,195 - 731,877 - 189,201 - 22,286 - 19,525 - 12,679 16,048 (623 ) - - 530
Balance,end ofyear	4,961,257 3,867,343
Contributed Surplus 14(e) Balance, beginning of year 13,022 18,413 Stock-based compensation 10,679 10,657 Share award vesting (12,679 ) (16,048)
Balance,end ofyear	11,022 13,022
Deficit
Balance, beginning of year Net income (loss) and other comprehensive income (loss) Dividends	(2,883,414 ) (951,165) 1,776,667 (1,844,973) (126,070 ) (87,276)
Balance,end ofyear	(1,232,817 ) (2,883,414)

See accompanying notes to the consolidated financial statements

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WHITECAP RESOURCES INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the years ended December 31

(CAD $000s) Note 2021 2020	(CAD $000s) Note 2021 2020
Operating Activities Net income (loss) for the year 1,776,667 (1,844,973) Items not affecting cash:
Depletion, depreciation, and amortization 7 & 9 Impairment (reversal) 7 Exploration and evaluation 8 Deferred income tax expense (recovery) 19 Stock-based compensation 5 & 14 Accretion of decommissioning liabilities 12 Unrealized loss on risk management contracts 5 Net gain on asset dispositions 6 & 13 Gain on corporate acquisition 6 Settlement of decommissioning liabilities 12 Net change in non-cash working capital items 20	546,017 357,651 (1,851,216 ) 2,492,106 4,373 2,602 595,539 (573,007) 7,958 7,547 24,288 12,636 30,584 13,164 (23,346 ) (2) - (28,147) (12,233 ) (5,696) 25,288 16,294
Cash flow from operating activities	1,123,919 450,175
Financing Activities
Decrease in long-term debt Common shares repurchased 14 Share issue costs Dividends Principal portion of lease payments Repayment of acquired debt 6 Net change in non-cash working capital items 20	(45,600 ) (74,938) (164,226 ) (10,197) (823 ) - (126,070 ) (87,276) (6,919 ) (10,892) (400,921 ) - 8,024 (5,842)
Cash flow used in financing activities	(736,535 ) (189,145)
Investing Activities
Expenditures on property, plant and equipment Expenditures on property acquisitions 6 Cash from property dispositions 13 Expenditures on corporate acquisitions, net of cash acquired 6 Net change in non-cash working capital items 20	(428,408 ) (195,886) (130,807 ) (5,381) 186,437 - (85,980 ) (17,003) 71,374 (42,760)
Cash flow used in investing activities	(387,384 ) (261,030)
Change in cash, during the year Cash, beginning of year	- - - -
Cash,end ofyear	- -
Cash Interest Paid 43,651 43,352

See accompanying notes to the consolidated financial statements

Whitecap Resources Inc. | 2021

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

1. NATURE OF BUSINESS

Whitecap Resources Inc. (also referred to herein as “Whitecap” or the “Company”) is a Calgary based oil and gas company that is engaged in the business of acquiring, developing and holding interests in petroleum and natural gas properties and assets. Whitecap's common shares are traded on the Toronto Stock Exchange (“TSX”) under the symbol WCP. The Company’s principal place of business is located at 3800, 525 – 8th Avenue SW, Calgary, Alberta, Canada, T2P 1G1.

2. BASIS OF PRESENTATION

a) Statement of Compliance

These consolidated financial statements have been prepared under International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board as at and for the year ended December 31, 2021, including 2020 comparative periods. The policies applied in these consolidated financial statements are based on IFRS issued and outstanding as of February 23, 2022, the date the Board of Directors approved the statements.

b) Basis of Measurement

The financial statements have been prepared on the historical cost basis except for derivative financial instruments and stock-based transactions which are measured at fair value. The methods used to measure fair values are discussed in Note 4.

c) Functional and Presentation Currency

The financial statements are presented in Canadian dollars which is the Company’s functional currency.

d) Use of Estimates and Judgments

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, and revenues and expenses during the reporting year. Actual results could differ from those estimated.

i) Cash Generating Units

Oil and natural gas assets are grouped into cash generating units (“CGUs”) that have been identified as being the smallest identifiable group of assets that generate cash flows that are independent of cash flows of other assets or groups of assets. The determination of these CGUs was based on management’s judgment in regard to shared infrastructure, geographical proximity, commodity type and similar exposure to market risk and materiality. The Company’s CGUs consist of the following:

• Northern Alberta and British Columbia;

• Eastern Saskatchewan;

• Central Alberta; and

• Western Saskatchewan.

ii) Future Net Cash Flows

Estimates of future net cash flows used in the calculation of the estimated recoverable amount are based on reserve evaluation reports prepared by independent petroleum consultants. Discounted future net cash flows are based on forecast benchmark commodity prices and costs over the expected economic life of the reserves and discounted using market-based rates to reflect a market participant’s view of the risks associated with the assets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

iii) Business Combinations

Management’s determination of whether a transaction constitutes a business combination or asset acquisition is determined based on the criteria in IFRS 3 Business Combinations (“IFRS 3”). Business combinations are accounted for using the acquisition method of accounting. The determination of fair value often requires management to make assumptions and estimates about future events. The assumptions and estimates with respect to determining the fair value of property, plant and equipment (“PP&E”) and exploration and evaluation (“E&E”) assets acquired generally require the most judgment and include estimates of reserves acquired, forecast benchmark commodity prices, and discount rates. Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities and goodwill. Future net earnings can be affected as a result of changes in future depletion, depreciation and amortization (“DD&A”), asset impairment or reversal, or goodwill impairment.

iv) Decommissioning Liability

Amounts recorded for decommissioning costs and the related accretion expense require the use of estimates with respect to the amount and timing of asset retirements, site remediation and related cash flows, as well as the selection of a risk-free discount rate.

v) Financial Derivative Instruments

The estimated fair values of derivative instruments resulting in financial assets and liabilities, by their very nature, are subject to measurement uncertainty.

vi) DD&A

Estimated DD&A charges are based on estimates of oil and gas reserves that the Company expects to recover in the future and the future development costs required to produce the reserves.

vii) Stock-based Compensation

Compensation costs accrued for long-term stock-based compensation plans, including share awards and stock options, are subject to the estimation of what the ultimate payout will be using pricing models such as the BlackScholes model, which is based on significant assumptions such as volatility, forfeiture and expected term.

The Company’s performance share awards are subject to estimation relating to the performance multiplier, which will determine the ultimate equity payout at the vesting date. This multiplier, ranging from zero to two, will be applied at vesting and is dependent on the performance of the Company relative to pre-defined corporate performance measures for a particular period and the Board of Directors’ discretion. Assumptions on the forfeiture rate at the time of grant are also subject to management estimates.

viii) Income Tax

Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. As such, income taxes are subject to measurement uncertainty.

ix) Impairment

The impairment calculation is based on significant assumptions of proved plus probable oil and natural gas reserves, production rates, benchmark commodity prices, future costs, discount rates and other relevant assumptions. By their nature, these significant assumptions are subject to measurement uncertainty and the impact on the financial statements of future periods could be material.

x) Sale of Royalty Interests

When the Company sells a royalty interest linked to production at a specific property, judgment is required in assessing the appropriate accounting treatment of the transaction on the closing date and in future periods. We consider the specific terms of each arrangement to determine whether we have disposed of an interest in the reserves of the respective property. This assessment considers whether the counterparty is entitled to the associated risks and rewards attributable to them over the life of the property including the contractual terms and implicit obligations related to production over the life of the property, the holder of the royalty having the option of either being paid in cash or in kind and the associated commitments, if any, to develop future expansions or projects at the property.

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WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

xi) Revenue and Expenditures

The Company's reported revenues and expenditures, including expenditures on property, plant and equipment, are subject to estimation as at a specific reporting date, but for which actual revenues and expenditures have not yet been received.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all years presented in these financial statements.

a) Jointly Controlled Operations

Substantially all of the Company’s exploration and production activities are conducted under joint operating agreements, whereby two or more parties jointly control the assets. These financial statements reflect only the Company’s share of these jointly controlled assets and, once production commences, a proportionate share of the relevant revenue and related costs.

b) Financial Instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired, or when the Company has transferred substantially all risks and rewards of ownership.

Financial assets and liabilities are offset and the net amount is reported on the balance sheet when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

i) Cash, Accounts Receivable, Loans and Other Receivables Cash and cash equivalents comprise cash on hand and other short-term highly liquid investments. Accounts receivable, loans and other receivables, which are non-derivative financial assets that have fixed or determinable payment terms and are not quoted in an active market, are classified as financial assets at amortized cost and are reported at amortized cost. They are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non-current assets.

ii) Financial Derivative Instruments

Financial derivative instruments are included in current assets and liabilities except for those with maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets and liabilities. The Company has not designated any of its financial derivative contracts as hedging instruments. The Company's financial derivative instruments are classified as financial assets or liabilities at fair value through profit or loss and are reported at fair value with changes in fair value recorded in net income or loss.

The Company has accounted for its forward physical delivery sales contracts, which were entered into and continue to be held for the purpose of receipt or delivery of non-financial items, in accordance with its expected purchase, sale or usage requirements as executory contracts. As such, these contracts are not considered to be derivative financial instruments and have not been recorded at fair value on the consolidated balance sheet. Realized gains or losses from physically settled commodities sales contracts are recognized in petroleum and natural gas sales as the contracts are settled.

iii) Accounts Payable, Accrued Liabilities and Long-term Debt

These financial instruments are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers or repay borrowings from lenders. They are classified as current liabilities if payment is due within one year or less. These financial instruments are classified as financial liabilities at amortized cost and are reported at amortized cost.

iv) Impairment of Financial Assets

Whitecap applies the simplified approach to providing for expected credit losses prescribed by IFRS 9 Financial Instruments (“IFRS 9”) which permits the use of the lifetime expected loss provision for all trade receivables carried at amortized cost.

Whitecap Resources Inc. | 2021

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

At each reporting date, the Company measures the lifetime expected loss provision taking into consideration Whitecap’s historical credit loss experience as well as forward-looking information in order to establish loss rates. The impairment loss (or reversal) is the amount of expected credit losses that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

c) Oil and Gas Exploration and Evaluation Expenditures

Oil and gas E&E expenditures are accounted for in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources , whereby costs associated with the exploration for and evaluation of oil and gas reserves are accumulated on an area-by-area basis and are capitalized as either tangible or intangible E&E assets when incurred. Costs incurred in advance of land acquisition are charged to the statement of comprehensive income (loss); however, all other costs, including directly attributable general and administrative costs, are added to E&E assets.

When an area is determined to be technically feasible and commercially viable, the accumulated costs are tested for impairment and transferred to PP&E. When an area is determined not to be technically feasible and commercially viable or the Company decides not to continue to work in the area, the unrecoverable costs are recognized on the statement of comprehensive income (loss).

No depletion or depreciation is provided for E&E assets.

d) PP&E

PP&E, which includes oil and natural gas development and production assets, represents costs incurred in developing oil and natural gas reserves and maintaining or enhancing production from such reserves. Future decommissioning costs, related to producing assets, are also capitalized to PP&E. PP&E is carried at cost, less accumulated DD&A and accumulated net impairment losses.

Gains and losses on disposal of PP&E are determined as the difference between proceeds from disposal and the carrying amount of the asset sold and are recognized as a gain or loss on disposal in the statement of comprehensive income (loss).

i) DD&A

The net carrying value of the oil and gas assets is depleted using the unit-of-production method based on estimated proved plus probable oil and natural gas reserves, taking into account the future development costs required to produce the reserves.

Proved plus probable oil and natural gas reserves are determined by independent petroleum consultants in accordance with Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities . Production and reserves of natural gas are converted to equivalent barrels of crude oil on the basis of six thousand cubic feet of gas to one barrel of oil. Changes in estimates used in prior periods, such as proved and probable reserves, that affect the unit-of-production calculations are dealt with on a prospective basis.

e) Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. A lease liability is recognized at the commencement of the lease term at the present value of the lease payments that are not paid at that date. At the commencement date, a corresponding rightof-use asset is recognized at the amount of the lease liability, adjusted for lease incentives received, retirement costs and initial direct costs. Depreciation is recognized on the right-of-use asset over the lease term. Interest expense is recognized on the lease liabilities using the effective interest rate method and payments are applied against the lease liability.

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9

WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

f) Assets Held for Sale

Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is met when the sale is highly probable, and the asset is available for immediate sale in its present condition. For the sale to be highly probable, management must be committed to a plan to sell the asset and an active program to locate a buyer has been initiated. The asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value and the sale should be expected to be completed within one year from the date of classification.

Non-current assets classified as held for sale are measured at the lower of the carrying amount and fair value less costs of disposal (“FVLCD”), with impairments recognized in the statement of comprehensive income (loss) in the period measured. Non-current assets held for sale are presented in current assets and liabilities within the balance sheet. Assets held for sale are not depleted, depreciated or amortized.

g) Goodwill

The Company records goodwill relating to a business combination when the purchase price exceeds the fair value of the net identifiable assets and liabilities and contingent liabilities of the acquired business. Goodwill is reported at cost less any impairment and is not amortized. Goodwill is evaluated when facts and circumstances indicate that it is impaired, or at least on an annual basis. Goodwill impairments are not reversed.

h) Impairment

The carrying amounts of PP&E are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the estimated recoverable amount is calculated. For the purpose of impairment testing, PP&E assets are grouped together into the smallest group of assets that generates cash inflows that are largely independent of the cash flows of other assets or group of assets. The estimated recoverable amount of an asset or CGU is the greater of its FVLCD and its value in use (“VIU”). FVLCD is the amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal or in the case of a lack of comparable transactions, based upon discounted after tax cash flows. VIU is determined by estimating the present value of the future net cash flows expected to be derived from the continued use of the asset or CGU. An impairment loss is recognized in the statement of comprehensive income (loss) if the carrying amount of an asset or CGU exceeds its estimated recoverable amount.

Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, or indicators suggest that the carrying amount exceeds the estimated recoverable amount. E&E assets are tested for impairment immediately prior to costs being transferred to PP&E. Exploration and evaluation assets are tested for impairment at the CGU level by referencing the fair value of current arm’s length transactions in the market to the carrying amount of E&E assets. Impairments of E&E assets are reversed when there has been a subsequent increase in the estimated recoverable amount, but only to the extent of what the carrying amount would have been had no impairment been recognized.

The estimated recoverable amount of goodwill is determined as the FVLCD using a discounted cash flow method. Goodwill is evaluated at a corporate level as management does not track or manage goodwill at a CGU level.

Impairment losses previously recognized are assessed at each reporting date for indications that the loss has decreased or no longer exists. An impairment loss is reversed to the extent that the asset’s new carrying amount does not exceed the original carrying amount, net of related accumulated DD&A, if there has been an increase in the estimate of the estimated recoverable amount. An impairment loss in respect of goodwill is not reversed.

i) Business Combinations

Business combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. The excess of the cost of the acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets acquired, the difference is recognized immediately in net income or loss. Transaction costs associated with a business combination are expensed as incurred.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

j) Decommissioning Liability

Decommissioning liabilities include present obligations where the Company will be required to retire tangible longlived assets. Decommissioning liabilities are measured at the present value of the expenditure expected to be incurred using the relevant risk-free rate. The associated cost is capitalized as part of the cost of the related longlived asset. Changes in the estimated obligation resulting from revisions to estimated timing, amount of cash flows, or changes in the discount rate are recognized as a change in the decommissioning liability.

Amortization of decommissioning costs is included in depreciation, depletion and amortization in the statement of comprehensive income (loss). Increases resulting from the passage of time are recorded as accretion of decommissioning liabilities in the statement of comprehensive income (loss).

Actual expenditures incurred are charged against the accumulated decommissioning liability.

k) Borrowing Costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets that require greater than a year to be ready for their intended use are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognized as interest and financing expense in the statement of comprehensive income (loss) in the period in which they are incurred.

l) Stock-based Compensation

The Company’s stock-based compensation program consists of share awards. Share awards issued to insiders are accounted for as cash-settled transactions. Share awards issued to employees are accounted for as equity-settled transactions.

Time-based and performance share awards granted under the Award Incentive Plan are accounted for at fair value. Stock-based compensation expense is determined based on the estimated fair value of shares on the date of grant using the Black-Scholes option pricing model. The fair value of awards issued to insiders that are accounted for as cash-settled transactions are subsequently adjusted to reflect the fair value at each period end. Fair value is based on the prevailing Whitecap share price. Forfeitures are estimated at the grant date and are subsequently adjusted to reflect actual forfeitures. The expense is recognized on a straight–line basis over the vesting period, with a corresponding increase to contributed surplus in the case of awards accounted for as equity-settled, or share awards liability in the case of awards accounted for as cash-settled. The Company capitalizes the portion of stock-based compensation directly attributable to development activities, with a corresponding decrease to stock-based compensation expense.

Share awards are either time-based or performance based. Performance based awards are granted with a performance multiplier. This multiplier, ranging from zero to two, will be applied at vesting and is dependent on the performance of the Company relative to pre-defined corporate performance measures for a particular period and the Board of Directors’ discretion.

m) Flow-through Shares

Periodically, the Company finances a portion of its exploration and development activities through the issuance of flow-through shares. Under the terms of the flow-through share agreements, the tax attributes of the related expenditures are renounced to subscribers. The stated capital recorded on flow-through share issuances is equal to the estimated fair value of the common shares, exclusive of the flow-through component, on the date of issue. The difference between the gross proceeds received and the stated capital recorded is a liability (“flow-through share liability”) until qualifying expenditures are incurred. When the expenditures are incurred, the resulting deferred tax liability is recorded through income tax expense less the reversal of the flow-through share liability previously reported.

n) Income Tax

Income tax comprises current and deferred taxes. Income tax is recognized in the statement of comprehensive income (loss) except to the extent that it relates to items recognized directly in other comprehensive income (loss) or elsewhere in shareholders’ equity, in which case the related income tax expense or recovery is also recognized directly in other comprehensive income (loss) or elsewhere in shareholders’ equity.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

Current tax expense is the expected cash tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

In general, the deferred tax expense and related liability are recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the reporting date and are expected to continue to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered.

Tax on income in interim periods is accrued using the tax rate that would be applicable to expected total annual earnings.

o) Share Capital

Proceeds from the issuance of common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.

p) Revenue from Petroleum and Natural Gas Sales

Revenue from the sale of crude oil, natural gas and natural gas liquids is measured based on the consideration specified in contracts with customers. Whitecap recognizes revenue when control of the product transfers to the buyer and collection is reasonably assured. This is generally at the point in time when the customer obtains legal title to the product which is when it is physically transferred to the pipeline or other transportation method agreed upon. Revenues from processing activities are recognized over time as processing occurs and are generally billed monthly.

Whitecap has applied the practical expedient to recognize revenue in the amount to which the Company has the right to invoice. As such, no disclosure is included relating to the amount of transaction price allocated to remaining performance obligations and when these amounts are expected to be recognized as revenue.

q) Net Income/Loss per Share

Net income/loss per share is calculated by dividing the net income/loss for the period by the weighted average number of common shares outstanding during the period.

Diluted net income/loss per share is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The Company’s potentially dilutive common shares comprise stock options and share awards granted to employees and directors. The number of shares included with respect to options and share awards is computed using the treasury stock method.

r) Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries and any reference to the Company throughout these consolidated financial statements refers to the Company and its subsidiaries. All intercompany balances, transactions, revenue and expenses are eliminated on consolidation. The consolidated accounts are prepared using uniform accounting policies.

s) Government Grants

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to it, and that the grant will be received. Grants related to income are presented in the Consolidated Statement of Comprehensive Income (Loss) and are deducted in reporting the related expense. Grants related to assets are presented in the Consolidated Balance Sheet by deducting the grant in arriving at the carrying amount of the asset.

t) Changes in Accounting Policies

There were no changes that had a material effect on the reported net income/loss or net assets of the Company.

Whitecap Resources Inc. | 2021

12

WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

4. DETERMINATION OF FAIR VALUES

A number of the Company’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The Company’s financial instruments recorded at fair value require disclosure about how the fair value was determined based on significant levels of inputs described in the following hierarchy:

• Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and value to provide pricing information on an ongoing basis.

• Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations for commodity, interest and foreign exchange (“FX”) contracts are based on inputs including quoted forward prices for commodities, forward interest rates and forward exchange rates, respectively, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

• Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

The carrying value of deposits, accounts receivable, bank debt, dividends payable, accounts payable and accrued liabilities included in the balance sheet approximate fair value due to the short-term nature of those instruments or the indexed rate of interest on the bank debt. The fair value measurement of the risk management contracts and the senior notes have a fair value hierarchy of Level 2. The fair value measurement of PP&E, E&E, right-of-use assets and future cash flows of development and operating costs used in determining deferred gain on sale of royalty interests have a fair value hierarchy of Level 3. The Company's finance department is responsible for performing the valuation of financial instruments, including the calculation of Level 3 fair values. Refer to Notes 7, 8, 9 and 13 for changes in the Company's Level 3 assets.

a) PP&E and E&E Assets

The fair value of PP&E recognized is based on market values. The market value of PP&E is the estimated amount for which PP&E could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of oil and natural gas interests (included in PP&E) are generally estimated with reference to the discounted cash flows expected to be derived from oil and natural gas production based on internally and externally prepared reserve reports. The risk-adjusted discount rate is specific to the asset with reference to general market conditions. The market value of E&E assets is estimated with reference to the market values of current arm’s length transactions in comparable locations.

b) Deposits, Accounts Receivable, Long-term Debt, Dividends Payable, Accounts Payable and Accrued Liabilities

The fair value of deposits, accounts receivable, bank debt, senior notes, dividends payable, accounts payable and accrued liabilities is estimated as the present value of future net cash flows, discounted at the market rate of interest at the reporting date. As at December 31, 2021 and December 31, 2020, the fair value of these balances, other than senior notes, approximated their carrying value. The fair value of the bank debt is equal to its carrying amount as the bank debt bears interest at floating rates and credit spreads within the facility are indicative of market rates.

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13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

c) Derivatives

The fair value of financial derivatives are recurring measurements and are determined whenever possible based on observable market data. If not available, the Company uses third party models and valuation methodologies that utilize observable market data including forward benchmark commodity prices, forward interest rates and forward exchange rates to estimate the fair value of financial derivatives. In addition to market information, the Company incorporates transaction specific details that market participants would utilize in a fair value measurement, including the impact of non-performance risk. The valuation technique used has not changed in the year.

d) Share Awards

The fair values of share awards are measured using a Black-Scholes option pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility, weighted average expected life of the instruments, expected dividends and the risk-free interest rate.

5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

a) Financial Assets and Financial Liabilities Subject to Offsetting

Financial assets and liabilities are only offset if Whitecap has the current legal right to offset and intends to settle on a net basis or settle the asset and liability simultaneously. Whitecap offsets risk management assets and liabilities when the counterparty, commodity, currency and timing of settlement are the same. The following table summarizes the gross asset and liability positions of the Company’s financial derivatives by counterparty that are offset on the balance sheet as at December 31, 2021 and December 31, 2020:

			December 31, 2021	December 31, 2021	December 31, 2021			December	31, 2020
($000s)	Asset		Liability		Net		Asset	Liability	Net
Gross amount	23,066		(96,513 )		(73,447 )		14,485	(25,758)	(11,273)
Amount offset	(21 )		21		-		(5,793)	5,793	-
Net amount	23,045		(96,492 )		(73,447 )		8,692	(19,965)	(11,273)

b) Credit Risk

Credit risk is the risk of financial loss to Whitecap if a partner or counterparty to a product sales contract or financial instrument fails to meet its contractual obligations. Whitecap is exposed to credit risk with respect to its cash, accounts receivable and risk management contracts. Most of Whitecap’s accounts receivable relate to oil and natural gas sales or joint interest billings and are subject to typical industry credit risks. Whitecap manages this credit risk as follows:

• By entering into sales contracts with only established creditworthy counterparties as verified by a third-party rating agency, through internal evaluation or by requiring security such as letters of credit;

• By limiting exposure to any one counterparty; and

• By restricting cash equivalent investments and risk management transactions to counterparties that, at the time of transaction, are not less than investment grade.

The maximum exposure to credit risk is as follows:

	December 31,	December 31,
($000s)	2021	2020
Accounts receivable	304,821	115,958
Risk management contracts	23,045	8,692
Total exposure	327,866	124,650

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

Joint interest receivables are typically collected within one to three months following production. The majority of the credit exposure on accounts receivable at December 31, 2021 pertains to accrued revenue for December 2021 production volumes. Whitecap transacts with a number of oil and natural gas marketing companies and commodity end users (“Commodity Purchasers”). Commodity Purchasers typically remit amounts to Whitecap by the 25[th ] day of the month following production. The Company monitors the exposure to any single counterparty along with its financial position. If it is deemed that a counterparty has become materially weaker, the Company will work to reduce the credit exposure to that counterparty. At December 31, 2021, two Commodity Purchasers accounted for 22 percent of the total accounts receivable balance. None are considered a credit risk.

Whitecap applies the simplified approach to providing for expected credit losses prescribed by IFRS 9 which permits the use of the lifetime expected loss provision for all trade receivables. Prior credit losses in the collection of accounts receivable by Whitecap have been negligible and the Company does not anticipate any significant future credit losses based on forward looking information. Accordingly, no provision has been recorded for expected credit losses.

When determining whether amounts that are past due are collectable, management assesses the creditworthiness and past payment history of the counterparty, as well as the nature of the past due amount. Whitecap considers all amounts greater than 90 days to be past due. At December 31, 2021, there was $5.0 million (December 31, 2020 – $1.6 million) of receivables aged over 90 days. Subsequent to December 31, 2021, approximately $2.1 million (December 31, 2020 – $0.5 million) has been collected and the remaining balance is not considered to be a credit risk.

c) Liquidity Risk

Liquidity risk is the risk that Whitecap will not be able to meet its financial obligations as they become due. Whitecap actively manages its liquidity through cash and debt management strategies. Such strategies include continuously monitoring forecasted and actual cash flows from operating, financing and investing activities, available credit under existing banking arrangements and opportunities to issue long-term debt. Whitecap actively monitors its credit and working capital facilities to ensure that it has sufficient available funds to meet its dividend payments and financial requirements at a reasonable cost. Management believes that future funds generated from these sources will be adequate to settle Whitecap’s financial liabilities.

The following table details the contractual maturities of Whitecap’s financial liabilities as at December 31, 2021:

($000s) <1 year	1- 2 years	2+ years	Total
Accounts payable and accrued liabilities 400,418 Dividends payable 13,856 Long-term debt(1) 214,761 Lease liabilities(1) 4,728 Share awards liability 25,350 Risk management contracts(2) 94,146	-	-	400,418
	-	-	13,856
	14,685	881,177	1,110,623
	6,405	22,522	33,655
	3,761	734	29,845
	2,346	-	96,492
Total financial liabilities 753,259	27,197	904,433	1,684,889

Notes:

(1) These amounts include the notional principal and interest payments.

(2) Interest rate swaps are included in risk management contracts.

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15

WHITECAP RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

The following table details Whitecap’s financial liabilities as at December 31, 2020:

($000s)	<1 year	1-2 years	2+years	Total
Accounts payable and accrued liabilities	122,133	-	-	122,133
Dividends payable	5,832	-	-	5,832
Long-term debt(1)	21,605	214,761	941,462	1,177,828
Lease liabilities(1)	14,651	14,984	51,106	80,741
Share awards liability	9,953	6,483	578	17,014
Risk management contracts(2)	15,854	1,968	2,143	19,965
Total financial liabilities	190,028	238,196	995,289	1,423,513

Notes:

(1) These amounts include the notional principal and interest payments.

(2) Interest rate swaps are included in risk management contracts.

d) Market Risk

Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk is composed of commodity price risk, interest rate risk, equity price risk and foreign exchange risk as discussed below.

Whitecap’s consolidated balance sheet included the following risk management assets recorded at fair value:

	December 31,	December 31,
($000s)	2021	2020
Current Assets
Crude oil	2,004	728
Natural gas	-	2,110
Equity	10,632	1,577
Total current assets	12,636	4,415
Long-term Assets
Interest	5,022	-
Equity	5,387	4,277
Total long-term assets	10,409	4,277
Total fair value	23,045	8,692
Whitecap’s consolidated balance sheet included the following risk management liabilities recorded at fair value:
	December 31,	December 31,
($000s)	2021	2020
Current Liabilities
Crude oil	80,346	12,506
Natural gas	12,590	1,123
Interest	1,210	2,225
Total current liabilities	94,146	15,854
Long-term Liabilities
Crude oil	2,346	-
Interest	-	4,111
Total long-term liabilities	2,346	4,111
Total fair value	96,492	19,965

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

Whitecap’s net income (loss) includes the following realized and unrealized gains (losses) on risk management contracts:

Year ended December 31 ($000s) 2021 2020	Year ended December 31 ($000s) 2021 2020
Realized gain (loss) on commodity contracts Unrealized loss on commodity contracts	(243,330 ) 90,925 (50,897 ) (7,381)
Net gain (loss) on commodity contracts Realized loss on interest rate contracts(1) Unrealized gain (loss) on interest rate contracts(1) Realized gain (loss) on equity contracts(2) Unrealized gain on equity contracts(2)	(294,227 ) 83,544 (3,345 ) (1,397) 10,148 (10,380) 6,205 (5,526) 10,165 4,597
Netgain(loss)on risk management contracts	(271,054 ) 70,838

Notes:

(1) The gain (loss) on interest rate risk management contracts is included in interest and financing expense.

(2) The gain (loss) on equity contracts is included in stock-based compensation expenses.

i) Commodity Price Risk

The Company’s operational results and financial condition are largely dependent on the commodity price received for its oil and natural gas production. Commodity prices have fluctuated widely in recent years due to global and regional factors including supply and demand fundamentals, inventory levels, weather, economic and geopolitical factors.

Whitecap manages the risks associated with changes in commodity prices by entering into a variety of risk management contracts. The Company assesses the effects of movement in commodity prices on income before tax. When assessing the potential impact of these commodity price changes, the Company believes a ten percent volatility is a reasonable measure. A ten percent increase or decrease in commodity prices would have resulted in the following impact to unrealized gains (losses) on risk management contracts and net income (loss) before tax:

	Twelve months ended December 31,	Twelve months ended December 31,
($000s)		2021
	Increase 10%	Decrease 10%
Commodity Price
Crude oil	(42,580)	40,540
Natural gas	(3,447)	3,447
Differential
Crude oil	1,873	(1,873)

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17

WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

At December 31, 2021, the following commodity risk management contracts were outstanding with an asset fair market value of $2.0 million and liability fair market value of $95.3 million (December 31, 2020 – asset of $2.8 million and liability of $13.6 million):

1) WTI Crude Oil Derivative Contracts

			Bought Put
		Volume	Price	Sold Call Price	Swap Price
Type	Remaining Term	(bbls/d)	(C$/bbl)(1)	(C$/bbl)(1)	(C$/bbl)(1)
Swap	Jan - Jun 2022	9,000			68.36
Swap	Jan - Dec 2022	750			52.11
Swap	Jul - Dec 2022	750			73.55
Swap	Jan - Jun 2023	1,000			80.00
Swap	Jul - Dec 2023	1,000			82.02
Collar	Jan - Jun 2022	7,000	63.21	81.17
Collar	Jul - Dec 2022	6,500	62.85	82.76
Collar	Jan - Jun 2023	2,000	67.50	98.58
Collar	Jan-Dec 2023	1,000	65.00	100.65

Note:

(1) Prices reported are the weighted average prices for the period.

2) WTI Crude Oil Differential Derivative Contracts

		Volume		Swap Price
Type	Remaining Term	(bbls/d)	Basis(1)	(C$/bbl)(2)
Swap	Jan-Dec 2022	3,000	WCS	15.32

Notes:

(1) Western Canadian Select (“WCS”).

(2) Prices reported are the weighted average prices for the period.

• 3) Natural Gas Derivative Contracts

		Volume	Swap Price
Type	Remaining Term	(GJ/d)	(C$/GJ)(1)
Swap	Jan - Mar 2022	16,000	2.90
Swap	Jan-Dec 2022	25,000	1.95

Note:

(1) Prices reported are the weighted average prices for the period.

• 4) Contracts entered into subsequent to December 31, 2021

a) WTI Crude Oil Derivative Contracts

			Bought Put
		Volume	Price	Sold Call Price	Swap Price
Type	Remaining Term	(bbls/d)	(C$/bbl)(1)	(C$/bbl)(1)	(C$/bbl)(1)
Swap	Jan - Dec 2023	1,000			95.05
Collar	Jan - Jun 2023	3,500	75.00	100.13
Collar	Jan - Dec 2023	2,000	75.00	100.00
Collar	Jul-Dec 2023	3,000	76.67	101.85

Note:

(1) Prices reported are the weighted average prices for the period.

b) Natural Gas Derivative Contracts

		Volume	Swap Price
Type	Remaining Term	(GJ/d)	(C$/GJ)(1)
Swap	Jan - Mar 2022	8,000	3.77
Swap	Apr-Oct 2022	25,000	4.30

Note:

(1) Prices reported are the weighted average prices for the period.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

ii) Interest Rate Risk

The Company is exposed to interest rate risk on its credit facility. The credit facility consists of a $1.53 billion revolving syndicated facility and a $75 million revolving operating facility. The revolving syndicated facility and revolving operating facility bear interest at the bank's prime lending or bankers' acceptance rates plus applicable margins. Changes in interest rates could result in an increase or decrease in the amount Whitecap pays to service the variable interest rate debt. The Company mitigates its exposure to interest rate changes by entering into interest rate swap transactions and/or fixed rate debt.

If interest rates applicable to floating rate debt at December 31, 2021 were to have increased or decreased by 25 basis points, it is estimated that the Company’s income before tax would change by approximately $1.2 million for the year ended December 31, 2021, ($1.3 million for the year ended December 31, 2020). This assumes that the change in interest rate is effective from the beginning of the year and the amount of floating rate debt is at December 31, 2021.

When assessing the potential impact of forward interest rate changes on the Company’s interest rate swaps, the Company believes an interest rate volatility of 25 basis points is a reasonable measure. A 25 basis point increase or decrease in forward interest rates would have resulted in the following impact to unrealized gains (losses) on risk management contracts and net income (loss) before tax:

	Twelve months	ended December 31,
($000s)		2021
	Increase 0.25%	Decrease 0.25%
Interest rate swaps	2,971	(2,971)

At December 31, 2021, the following interest rate risk management contracts were outstanding with an asset fair market value of $5.0 million and liability fair market value of $1.2 million (December 31, 2020 – liability of $6.3 million):

1) Interest Rate Contracts

			Amount	Fixed Rate
Type	Term		($000s)	(%)(1)	Index(2)
Swap	Aug 6, 2019	Aug 6, 2024	200,000	1.5540	CDOR
Swap	May 5, 2021	May 5, 2025	200,000	1.2315	CDOR

Notes:

(1) Rates reported are the weighted average rates for the period.

(2) Canadian Dollar Offered Rate (“CDOR”).

iii) Equity Price Risk

The Company is exposed to equity price risk on its own share price in relation to awards issued under the award incentive plan, which affects earnings through the revaluation of awards that are accounted for as cash-settled transactions at each period end. Changes in share price could result in an increase or decrease in the amount that Whitecap recognizes as stock-based compensation and the amount Whitecap pays to cash settle awards. The Company mitigates its exposure to fluctuations in its share price by entering into equity derivative contracts such as total return swaps.

When assessing the potential impact of share price on the Company’s total return swaps, the Company believes a share price volatility of ten percent is a reasonable measure. A ten percent increase or decrease in share price would have resulted in the following impact to unrealized gains (losses) on risk management contracts and net income (loss) before tax:

	Twelve months	ended December 31,
($000s)		2021
	Increase 10%	Decrease 10%
Total return swaps	3,344	(3,344)

Whitecap Resources Inc. | 2021

19

WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

At December 31, 2021, the following equity risk management contracts were outstanding with an asset fair market value of $16.0 million (December 31, 2020 – asset of $5.9 million):

1) Equity Derivative Contracts

			Notional Amount	Share Volume
Type	Remaining Term		($000s)(1)	(000s)
Swap	Jan 1, 2022	Oct 1, 2022	15,338	3,467
Swap	Jan 1, 2022	Oct 1, 2023	2,083	997

Note: (1) Notional amount is calculated as the share volume for the period multiplied by the weighted average prices for the period.

iv) Foreign Exchange Risk

The Company is exposed to the risk of changes in the U.S./Canadian dollar exchange rate on crude oil sales based on U.S. dollar benchmark prices and commodity contracts that are settled in U.S. dollars. Foreign exchange risk is mitigated by entering into Canadian dollar denominated commodity risk management contracts or foreign exchange contracts. At December 31, 2021, Whitecap did not have any foreign exchange contracts outstanding.

e) Capital Management

The Company’s policy is to maintain a strong capital base for the objectives of maintaining financial flexibility, creditor and market confidence and to sustain the future development of the business. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying petroleum and natural gas assets. The Company considers its capital structure to include shareholders’ equity, long-term debt and working capital.

i) Net Debt and Total Capitalization

Management considers net debt a key Capital management measure to assess the Company's liquidity. Total capitalization is a Capital management measure used by Management and investors in analyzing the Company's balance sheet strength and liquidity.

The following is a breakdown of the Company’s capital structure:

The following is a breakdown of the Company’s capital structure:
	December 31,	December 31,
($000s)	2021	2020
Long-term debt	1,055,662	1,101,262
Accounts receivable	(304,821 )	(115,958)
Deposits and prepaid expenses	(10,478 )	(30,240)
Accounts payable and accrued liabilities	400,418	122,133
Dividends payable	13,856	5,832
Net debt	1,154,637	1,083,029
Shareholders’equity	3,739,462	996,951
Total capitalization	4,894,099	2,079,980

ii) Funds Flow

Management considers funds flow to be a key Capital management measure of operating performance as it demonstrates Whitecap’s ability to generate the cash necessary to pay dividends, repay debt, make capital investments, and/or to repurchase common shares under the Company’s normal course issuer bid (“NCIB”). Management believes that by excluding the temporary impact of changes in non-cash operating working capital, funds flow provides a useful measure of Whitecap’s ability to generate cash that is not subject to short-term movements in non-cash operating working capital. Funds flow is not a standardized measure and, therefore, may not be comparable with the calculation of similar measures by other entities.

Whitecap Resources Inc. | 2021

20

WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

Funds flow for the years ended December 31, 2021 and 2020 is calculated as follows:

Twelve Months Ended December 31, ($000s) 2021 2020	Twelve Months Ended December 31, ($000s) 2021 2020
Cash flow from operating activities Net change in non-cash working capital items	1,123,919 450,175 (25,288 ) (16,294)
Funds flow	1,098,631 433,881
Funds flow per share, basic Funds flowper share,diluted	1.84 1.06 1.82 1.06

6. ACQUISITIONS

The revenue and operating income for the post-acquisition period of the acquisitions listed below are included in the statement of comprehensive income (loss).

The below amounts are estimates which were made by management at the time of the preparation of these consolidated financial statements based on information then available. Amendments may be made to these amounts as values subject to estimate are finalized for a period of up to one year. The pro-forma information disclosed below is not necessarily indicative of the actual results that would have been achieved had the business combinations closed on January 1, 2021.

a) 2021 Acquisitions

i) NAL Resources Limited (“NAL”)

On January 4, 2021, the Company closed the acquisition of NAL. Whitecap issued 58.3 million Whitecap common shares to the Manufacturers Life Insurance Company in exchange for all the issued and outstanding NAL shares. The acquisition of NAL has been accounted for as a business combination under IFRS 3.

The acquisition of NAL has contributed revenues of $381.1 million and operating income of $224.1 million since January 4, 2021. Had the acquisition of NAL closed on January 1, 2021, estimated contributed revenues would have been $383.5 million and estimated contributed operating income would have been $225.6 million for the year ended December 31, 2021.

Net assets acquired ($000s):
Right-of-use assets	802
Working capital	29,201
Petroleum and natural gas properties	422,547
Exploration and evaluation	9,071
Decommissioning liability	(150,162 )
Deferred income tax	(27,462 )
Lease liabilities	(802 )
Total identifiable net assets acquired	283,195
Consideration:
Share consideration	283,195
Total consideration	283,195

ii) TORC Oil & Gas Ltd. (“TORC”)

On February 24, 2021, the Company closed the acquisition of TORC. Whitecap issued 129.8 million Whitecap common shares in exchange for all the issued and outstanding TORC shares and the assumption of net debt. The acquisition of TORC has been accounted for as a business combination under IFRS 3.

Whitecap Resources Inc. | 2021

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

The acquisition of TORC has contributed revenues of $536.4 million and operating income of $315.5 million since February 24, 2021. Had the acquisition of TORC closed on January 1, 2021, estimated contributed revenues would have been $603.3 million and estimated contributed operating income would have been $352.6 million for the year ended December 31, 2021.

Net assets acquired ($000s):
Right-of-use assets	6,991
Working capital	(4,826 )
Petroleum and natural gas properties	955,035
Exploration and evaluation	11,185
Risk management contracts	(7,578 )
Decommissioning liability	(96,190 )
Bank debt	(361,768 )
Deferred income tax	236,019
Lease liabilities	(6,991 )
Total identifiable net assets acquired	731,877
Consideration:
Share consideration	731,877
Total consideration	731,877

iii) Kicking Horse Oil & Gas Ltd. (“Kicking Horse”)

On May 14, 2021, the Company closed the agreement to indirectly acquire all the issued and outstanding shares of Kicking Horse. The aggregate consideration consists of 34.5 million Whitecap common shares, $56.2 million in cash and the assumption of net debt. The acquisition of Kicking Horse has been accounted for as a business combination under IFRS 3.

The acquisition of Kicking Horse has contributed revenues of $88.4 million and operating income of $67.2 million since May 14, 2021. Had the acquisition of Kicking Horse closed on January 1, 2021, estimated contributed revenues would have been $133.8 million and estimated contributed operating income would have been $93.5 million for the year ended December 31, 2021.

Net assets acquired ($000s):
Working capital	(31,722 )
Petroleum and natural gas properties	354,212
Exploration and evaluation	18,316
Risk management contracts	(24,012 )
Decommissioning liability	(5,774 )
Bank debt	(39,153 )
Deferred income tax	(26,473 )
Total identifiable net assets acquired	245,394
Consideration:
Cash consideration	56,193
Share consideration	189,201
Total consideration	245,394

iv) HighRock Resources Ltd. (“HighRock”)

On July 2, 2021, the Company closed the acquisition of all the issued and outstanding common shares of HighRock for consideration consisting of 3.6 million Whitecap common shares and $44.4 million in cash. The acquisition of HighRock has been accounted for as a business combination under IFRS 3.

Whitecap Resources Inc. | 2021

22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

The acquisition of HighRock has contributed revenues of $21.5 million and operating income of $14.5 million since July 2, 2021. Had the acquisition of HighRock closed on January 1, 2021, estimated contributed revenues would have been $41.5 million and estimated contributed operating income would have been $28.2 million for the year ended December 31, 2021.

Net assets acquired ($000s):
Working capital	3,311
Petroleum and natural gas properties	78,054
Exploration and evaluation	345
Decommissioning liability	(2,344 )
Deferred income tax	(12,701 )
Total identifiable net assets acquired	66,665
Consideration:
Cash consideration	44,379
Share consideration	22,286
Total consideration	66,665

v) Other Acquisitions

In the twelve months ended December 31, 2021, the Company acquired assets for total cash consideration of $72.1 million, primarily consisting of certain production facilities in the Central Alberta and Western Saskatchewan cash generating units that were previously leased. See Note 9 – “Right-Of-Use Assets” and Note 11 – “Lease Liabilities” for additional information regarding the Company’s leases.

Additionally, in the year ended December 31, 2021, the Company closed the acquisitions of various assets located in its core areas of Eastern Saskatchewan, Western Saskatchewan and Central Alberta for consideration consisting of $58.7 million of cash consideration and 2.7 million Whitecap common shares. The acquisitions were accounted for as business combinations under IFRS 3.

Net assets acquired ($000s):	Net assets acquired ($000s):
Petroleum and natural gas properties Decommissioning liability	160,116
	(7,407 )
Total net assets acquired	152,709
Consideration:
Cash consideration Share consideration Other non-cash consideration(1)	130,807
	19,525
	2,377
Total consideration	152,709

Note:

(1) Other non-cash consideration relates to asset swaps.

b) 2020 Acquisitions

i) Hyak Energy ULC (“Hyak”)

On January 15, 2020, the Company closed the acquisition of Hyak by acquiring all of the issued and outstanding common shares of Hyak for cash consideration of $16.2 million, net of acquired working capital. The corporate acquisition has been accounted for as a business combination under IFRS 3.

Whitecap Resources Inc. | 2021

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

The acquisition of Hyak contributed revenues of $8.5 million and operating income of $2.4 million from January 15, 2020 to December 31, 2020. Had the acquisition closed on January 1, 2020, estimated contributed revenues would have been $8.7 million and estimated contributed operating income would have been $2.6 million for the year ended December 31, 2020.

Net assets acquired ($000s):
Working capital	835
Petroleum and natural gas properties	18,267
Exploration and evaluation	150
Decommissioning liability	(2,217)
Deferred income tax	28,131
Total identifiable net assets acquired	45,166
Gain on acquisition	(28,147)
	17,019
Consideration:
Cash consideration	17,019
Total consideration	17,019

The gain on acquisition represents the excess of the $45.2 million total identifiable net assets acquired over the $17.0 million cash consideration paid.

ii) Other Acquisitions

In the twelve months ended December 31, 2020, the Company acquired properties and consolidated working interests on existing assets in the Northwest Alberta and British Columbia, West Central Alberta, and Southwest Saskatchewan cash generating units. The acquisitions were accounted for as business combinations under IFRS 3.

Net assets acquired ($000s):
Petroleum and natural gas properties	6,446
Decommissioning liability	(1,065)
Total net assets acquired	5,381
Consideration:
Cash consideration	5,381
Total consideration	5,381

7. PROPERTY, PLANT AND EQUIPMENT

a) Net Carrying Amount

a) Net Carrying Amount
	December 31,	December 31,
Net book value ($000s)	2021	2020
Petroleum and natural gas properties	11,233,957	8,813,291
Other assets	9,731	5,676
Property, plant and equipment, at cost	11,243,688	8,818,967
Less: accumulated depletion, depreciation, amortization and impairment	(4,861,430 )	(6,173,777)
Total net carryingamount	6,382,258	2,645,190

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WHITECAP RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

b) Cost

b) Cost	b) Cost	b) Cost
Cost ($000s) Petroleum and natural gas properties Other assets Total
Balance at December 31, 2019 8,420,443 4,857 8,425,300
Additions 367,026 819 367,845 Property acquisitions 6,446 - 6,446 Corporate acquisitions 18,267 - 18,267 Transfer from evaluation and exploration assets 1,109 - 1,109
Balance at December 31, 2020 8,813,291 5,676 8,818,967
Additions 569,263 4,055 573,318 Property acquisitions 160,116 - 160,116 Corporate acquisitions 1,809,848 - 1,809,848 Transfer from evaluation and exploration assets 1,559 - 1,559 Disposals (120,120) - (120,120)
Balance at December 31, 2021	11,233,957 9,731	11,243,688

c) Accumulated Depletion, Depreciation, Amortization and Impairment

c) Accumulated Depletion, Depreciation, Amortization and Impairment	c) Accumulated Depletion, Depreciation, Amortization and Impairment	c) Accumulated Depletion, Depreciation, Amortization and Impairment
Accumulated depletion, depreciation, amortization and impairment ($000s) Petroleum and natural gas properties Other assets Total
Balance at December 31, 2019 3,457,400 3,542 3,460,942
Depletion, depreciation and amortization 342,728 683 343,411 Impairment 2,801,593 - 2,801,593 Impairment reversal (432,169) - (432,169)
Balance at December 31, 2020 6,169,552 4,225 6,173,777
Depletion, depreciation and amortization 537,712 1,157 538,869 Impairment reversal (1,851,216) - (1,851,216)
Balance at December 31, 2021	4,856,048 5,382	4,861,430

At December 31, 2021, $417.1 million of salvage value (December 31, 2020 – $227.8 million) was excluded from the depletion calculation. Future development costs of $5.2 billion (December 31, 2020 – $4.1 billion) were included in the depletion calculation. The Company capitalized $20.0 million (December 31, 2020 – $12.9 million) of administrative costs directly relating to development activities which includes $9.4 million (December 31, 2020 – $5.5 million) of stock-based compensation.

d) Impairment Test of Property, Plant and Equipment

At December 31, 2021, there were no indicators of impairment or impairment reversal for PP&E assets.

At September 30, 2021, as a result of an increase in forward benchmark commodity prices compared to December 31, 2020 as well as increases to proved plus probable oil and natural gas reserves within certain CGUs, an impairment test on the Company’s PP&E assets was performed.

Whitecap Resources Inc. | 2021

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

The following table outlines the forecast benchmark commodity prices used in the impairment calculation of property, plant and equipment at September 30, 2021. Forecast benchmark commodity price assumptions tend to be stable because short-term increases or decreases in prices are not considered indicative of long-term price levels, but are nonetheless subject to change. The Company used after-tax discount rates ranging from 14.5-15 percent.

	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030(2)
WTI crude oil (US$/bbl)(1)	75.17	71.00	67.77	65.57	66.88	68.22	69.58	70.97	72.39	73.84
AECO natural gas ($/MMBtu)(1)	4.57	3.83	3.26	2.99	3.05	3.12	3.17	3.24	3.31	3.37
Exchange Rate (CAD/USD)	0.80	0.80	0.80	0.80	0.80	0.80	0.80	0.80	0.80	0.80

Notes:

(1) The forecast benchmark commodity prices listed are adjusted for quality differentials, heat content, transportation and marketing costs and other factors specific to the Company’s operations in performing the Company’s impairment tests.

(2) Forecast benchmark commodity prices are assumed to increase by 2 percent in each year after 2030 to the end of the reserve life. Forecast exchange rate is assumed to remain at 0.80 CAD/USD each year after 2030 to the end of the reserve life.

The impairment test of PP&E at September 30, 2021 concluded that the FVLCD of each of the Company’s Cash CGUs exceeded their carrying amounts:

($000s)	FVLCD	Carrying Value	Reversal
Northern Alberta & British Columbia(1)	1,728,951	1,265,814	(463,137)
Eastern Saskatchewan(1)	2,288,406	2,067,188	(221,218)
Central Alberta(1)	1,326,508	903,160	(423,348)
Western Saskatchewan(1)	1,380,253	636,740	(743,513)
Total	6,724,118	4,872,902	(1,851,216)

Note:

(1) CGU composition changed in 2021 as a result of 2021 Acquisitions.

The full amount of the impairment reversal was attributed to PP&E and, as a result, a total impairment reversal of $1.9 billion was recorded in the Consolidated Statement of Comprehensive Income (Loss). The impairment reversal was primarily a result of higher forecast benchmark commodity prices and increases to proved plus probable oil and natural gas reserves within certain CGUs. The fair value measurement of the Company’s PP&E is designated Level 3 on the fair value hierarchy. Refer to Note 4 – “Determination of Fair Values” for a description of the methodology used in the determination of fair values.

Changes in any of the key judgments, such as an increase in the after-tax discount rate, a downward revision in reserves, a decrease in forecast benchmark commodity prices, changes in foreign exchange rates, an increase in royalties or an increase in operating costs would decrease the estimated recoverable amounts of assets and any impairment charges or reversals would affect net income (loss).

As at September 30, 2021, a one percent increase in the assumed discount rate and/or a five percent decrease in the forecast operating cash flows would result in the following total pre-tax impairment expense (reversal) being recognized:

recognized:
			1% increase in
			discount rate and
	1% increase in	5% decrease in	5% decrease in
Impairment expense (reversal) ($000s)	discount rate	cash flows	cash flows
Northern Alberta & British Columbia(1)	(463,137)	(463,137)	(463,137)
Eastern Saskatchewan(1)	(221,218)	(221,218)	(221,218)
Central Alberta(1)	(330,326)	(335,148)	(246,777)
Western Saskatchewan(1)	(656,951)	(651,632)	(569,398)
Total	(1,671,632)	(1,671,135)	(1,500,530)

Note:

(1) CGU composition changed in 2021 as a result of 2021 Acquisitions.

At December 31, 2020, as a result of an increase in forward benchmark commodity prices compared to March 31, 2020 as well as increases to proved plus probable oil and natural gas reserves within certain CGUs, an impairment test on the Company’s PP&E assets was performed.

Whitecap Resources Inc. | 2021

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

The impairment test of PP&E at December 31, 2020 concluded that the FVLCD of each of the Company’s CGUs exceeded their carrying amounts:

($000s)	FVLCD	Carrying Value	Reversal
Northwest Alberta & British Columbia(1)	598,537	450,523	(148,014)
Southeast Saskatchewan(1)	653,971	553,255	(100,716)
Southwest Saskatchewan(1)	440,316	317,008	(123,308)
West Central Alberta(1)	539,659	490,537	(49,122)
West Central Saskatchewan(1)	323,806	312,797	(11,009)
Total	2,556,289	2,124,120	(432,169)

Note:

(1) CGU composition changed in 2021 as a result of 2021 Acquisitions.

The full amount of the impairment reversal was attributed to PP&E and, as a result, a total impairment reversal of $432.2 million was recorded in impairment expense. The impairment reversal was primarily a result of higher forecast benchmark commodity prices and increases to proved plus probable oil and natural gas reserves within certain CGUs. The Company used an after-tax discount rate ranging from 14.5-15 percent.

At March 31, 2020, as a result of the significant decrease in forward benchmark commodity prices compared to December 31, 2019, an impairment test on the Company’s PP&E assets was performed. The estimated recoverable amount of PP&E is determined as the FVLCD using a discounted cash flow method and is assessed at the CGU level.

The impairment test of PP&E at March 31, 2020 concluded that the carrying amounts of each of the Company’s CGUs exceeded their FVLCD:

($000s)	FVLCD	Carrying Value	Impairment
Northwest Alberta & British Columbia(1)	521,508	1,164,965	643,457
Southeast Saskatchewan(1)	559,345	900,438	341,093
Southwest Saskatchewan(1)	387,844	895,683	507,839
West Central Alberta(1)	549,188	1,287,248	738,060
West Central Saskatchewan(1)	360,167	931,311	571,144
Total	2,378,052	5,179,645	2,801,593

Note:

(1) CGU composition changed in 2021 as a result of 2021 Acquisitions.

The full amount of the impairment was attributed to PP&E and, as a result, a total impairment loss of $2.8 billion was recorded in impairment expense. The impairment expense at March 31, 2020 was primarily a result of lower forecast benchmark commodity prices and the increase to the after-tax discount rate at March 31, 2020 to 13 percent compared to 10 percent at December 31, 2019.

Impairment losses can be reversed in future periods if the estimated recoverable amount of the CGU exceeds its carrying value. The impairment recovery is limited to a maximum of the estimated depleted historical cost if the impairment had not been recognized.

8. EXPLORATION AND EVALUATION ASSETS

a) Net Carrying Amount

a) Net Carrying Amount
	December 31,		December 31,
($000s)	2021		2020
Exploration and evaluation assets	94,465		50,757
Less: accumulated land expiries and write-offs	(38,392 )		(34,019)
Total net carryingamount	56,073		16,738

Whitecap Resources Inc. | 2021

27

WHITECAP RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

b) Cost

b) Cost
($000s)	Undeveloped Land
Balance at December 31, 2019	40,923
Additions	10,793
Corporate acquisitions	150
Transfer to property, plant and equipment	(1,109)
Balance at December 31, 2020	50,757
Additions	6,408
Corporate acquisitions	38,917
Transfer to property, plant and equipment	(1,559)
Disposals	(58)
Balance at December 31, 2021	94,465

c) Accumulated Land Expiries and Write-Offs
($000s)	Accumulated land expiries and write-offs
Balance at December 31, 2019	31,417
Land expiries and write-offs	2,602
Balance at December 31, 2020	34,019
Land expiries and write-offs	4,373
Balance at December 31, 2021	38,392

E&E assets consist of the Company’s exploration projects which are pending the determination of proved reserves. Additions represent the Company’s share of costs acquired or incurred on E&E assets during the year.

d) Impairment Test of Exploration and Evaluation Assets

At December 31, 2021, there were no indicators of impairment or impairment reversal for E&E assets.

9. RIGHT-OF-USE ASSETS

Whitecap recognizes right-of-use assets and corresponding lease liabilities related to certain office facilities, operating facilities, vehicles and equipment. See Note 11 – “Lease Liabilities” for additional information regarding the Company’s leases.

a) Net Carrying Amount

a) Net Carrying Amount	a) Net Carrying Amount	a) Net Carrying Amount	a) Net Carrying Amount	a) Net Carrying Amount
($000s) Offices Facilities Other Total
Right-of-use assets 35,521 - 6,038 41,559 Less: accumulated depreciation (10,020) - (3,803) (13,823)
Balance at December 31, 2021	25,501	-	2,235	27,736

b) Cost ($000s) Offices Facilities Other Total	b) Cost ($000s) Offices Facilities Other Total	b) Cost ($000s) Offices Facilities Other Total	b) Cost ($000s) Offices Facilities Other Total	b) Cost ($000s) Offices Facilities Other Total
Balance at December 31, 2019 28,440 60,361 3,092 91,893
Additions - - 1,264 1,264 Disposals - - (114) (114)
Balance at December 31, 2020 28,440 60,361 4,242 93,043
Additions 12,514 - 1,796 14,310 Modifications (5,433) - - (5,433) Disposals - (60,361) - (60,361)
Balance at December 31, 2021	35,521	-	6,038	41,559

Whitecap Resources Inc. | 2021

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WHITECAP RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

c) Accumulated Depreciation

c) Accumulated Depreciation	c) Accumulated Depreciation	c) Accumulated Depreciation	c) Accumulated Depreciation	c) Accumulated Depreciation
($000s) Offices Facilities Other Total
Balance at December 31, 2019 3,267 9,658 1,135 14,060
Depreciation 3,267 9,658 1,315 14,240 Disposals - - (76) (76)
Balance at December 31, 2020 6,534 19,316 2,374 28,224
Depreciation 3,486 2,233 1,429 7,148 Disposals - (21,549) - (21,549)
Balance at December 31, 2021	10,020	-	3,803	13,823

10. LONG-TERM DEBT

10. LONG-TERM DEBT
	December 31,	December 31,
($000s)	2021	2020
Bank debt	460,808	506,511
Senior secured notes	594,854	594,751
Long-term debt	1,055,662	1,101,262

a) Bank Debt

At December 31, 2021, the Company had a $1.605 billion credit facility with a syndicate of banks. The credit facility consists of a $1.53 billion revolving syndicated facility and a $75 million revolving operating facility, with a maturity date of May 31, 2026. As at December 31, 2021 the amount drawn on the credit facilities was $460.8 million. Prior to any anniversary date, being May 31 of each year, Whitecap may request an extension of the then current maturity date, subject to approval by the banks. Following the granting of such extension, the term to maturity of the credit facilities shall not exceed four years. The credit facility provides that advances may be made by way of direct advances, banker’s acceptances or letters of credit/guarantees. The credit facility bears interest at the bank's prime lending or bankers' acceptance rates plus applicable margins. The applicable margin charged by the bank is dependent upon the Company’s debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio for the most recent quarter. The bankers’ acceptances bear interest at the applicable banker’s acceptance rate plus an explicit stamping fee based upon the Company’s debt to EBITDA ratio. The credit facilities are secured by a floating charge debenture on the assets of the Company. The following table lists Whitecap’s financial covenants as at December 31, 2021:

at December 31, 2021:
		December 31,
Covenant Description		2021
	Maximum Ratio
Debt to EBITDA(1) (2)	4.00	0.87
	Minimum Ratio
EBITDA to interest expense(1)	3.50	26.10

Notes:

(1) The EBITDA used in the covenant calculation is adjusted for non-cash items, transaction costs and extraordinary and non-recurring items such as material acquisitions or dispositions.

(2) The debt used in the covenant calculation includes bank indebtedness, letters of credit, and dividends declared.

Whitecap Resources Inc. | 2021

29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

At December 31, 2021, the Company was compliant with all covenants provided for in the lending agreement. Copies of the Company’s credit agreements may be accessed through the SEDAR website (www.sedar.com).

b) Senior Secured Notes

At December 31, 2021, the Company had issued $595 million senior secured notes. The notes rank equally with Whitecap’s obligations under its credit facility. The terms, rates, principals and carrying amounts of the Company’s outstanding senior notes are detailed below:

($000s)	($000s)	($000s)	($000s)
Issue Date Maturity Date Coupon Rate Principal Carrying Value Fair Value
January 5, 2017 January 5, 2022 3.46% 200,000 200,000 203,126 May 31, 2017 May 31, 2024 3.54% 200,000 199,934 200,000 December 20, 2017 December 20, 2026 3.90% 195,000 194,920 197,068
Balance at December 31, 2021	595,000	594,854	600,194

The senior secured notes are subject to the same debt to EBITDA ratio and EBITDA to interest expense ratio described under the credit facility. At December 31, 2021, the Company was compliant with all covenants provided for in the lending agreements.

Subsequent to December 31, 2021, the Company repaid its senior secured notes maturing on January 5, 2022 by utilizing its credit facility.

c) Interest and Financing Expense

The following table summarizes the components of interest and financing expense during the period:

Twelve Months Ended December 31, ($000s) 2021 2020	Twelve Months Ended December 31, ($000s) 2021 2020
Interest expense Interest expense, lease liabilities (Note 11) Unrealized (gains) losses on interest rate contracts Realized losses on interest rate contracts	42,174 40,053 1,516 3,473 (10,148 ) 1,397 3,345 10,380
Interest and financingexpense	36,887 55,303

11. LEASE LIABILITIES

The Company incurs lease payments related to office facilities, operating facilities, vehicles and equipment. Leases are entered into and exited in coordination with specific business requirements which include the assessment of the appropriate durations for the related leased assets.

appropriate durations for the related leased assets.
	December 31,	December 31,
($000s)	2021	2020
Current portion	3,498	11,688
Non-current portion	26,170	59,906
Lease liabilities	29,668	71,594

For the twelve months ended December 31, 2021, interest expense of $1.5 million and total cash outflows of $8.4 million were recognized relating to lease liabilities.

For the twelve months ended December 31, 2020, interest expense of $3.5 million and total cash outflows of $14.4 million were recognized relating to lease liabilities.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

12. DECOMMISSIONING LIABILITY

12. DECOMMISSIONING LIABILITY	12. DECOMMISSIONING LIABILITY
($000s)
Balance at December 31, 2019 859,143
Liabilities incurred 3,523 Liabilities acquired 3,282 Liabilities settled (5,696) Revaluation of liabilities acquired(1) 12,680 Change in estimate 161,091 Accretion expense 12,636
Balance at December 31, 2020 1,046,659
Liabilities incurred 7,792 Liabilities acquired 261,877 Liabilities settled (12,233) Liabilities disposed (6,695) Revaluation of liabilities acquired(1) 541,099 Change in estimate (407,020) Accretion expense 24,288
Balance at December 31, 2021	1,455,767

Note:

(1) Revaluation of liabilities acquired is the revaluation of acquired decommissioning liabilities at the end of the period using the risk-free discount rate. At the date of acquisition, acquired decommissioning liabilities are fair valued.

The Company’s decommissioning liability results from its ownership interest in oil and natural gas assets including well sites and gathering systems. The total decommissioning liability is estimated based on the Company’s net ownership interest in all wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred in future years. The key assumptions, on which the carrying amount of the decommissioning liability is based, include a risk-free rate of 1.7 percent (1.2 percent at December 31, 2020) and inflation rate of 2.0 percent (2.0 percent at December 31, 2020). At December 31, 2021, the total undiscounted amount of the estimated cash flows required to settle the obligations was $2.5 billion (December 31, 2020 – $1.6 billion). The expected timing of payment of the cash flows required for settling the obligations extends up to 68 years.

13. DEFERRED GAIN

In 2021, the Company sold a five percent gross overriding royalty interest on Whitecap's working interest in the Weyburn Unit ("Weyburn GORR") for cash proceeds of $186.0 million, net of transaction costs. The Company applied judgment in concluding that the proceeds for the sale of the Weyburn GORR comprised two components: (1) a payment for partial disposal of an interest in property, plant and equipment; and (2) an upfront payment received for future extraction services that will generate future royalties.

The Company used the discounted future cash flows of future development and operating costs multiplied by the five percent royalty rate to derive the upfront payment received for future extraction services of $57.6 million, which was initially recorded as deferred gain and is afterwards being recognized as gain on asset disposition over the reserve life of the Weyburn Unit (as this is estimated to approximate the efforts we will incur towards the implied extraction performance obligation).

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WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

The remaining proceeds were compared to the carrying value attributable to the partial disposal of property, plant and equipment, which resulted in a $17.6 million gain on asset disposition recognized in the fourth quarter of 2021. The Company applied judgment in determining the carrying value of property, plant and equipment to be disposed, which was derived based on the proportion of proved and probable reserve value given up on the Company's working interest in the Weyburn Unit. Changes to deferred gain were as follows:

	December 31,	December 31,	December 31,
($000s)	2021		2020
Deferred gain, beginning of the year	-		-
Sale of Weyburn GORR	57,634		-
Recognition of deferred gain	(576 )		-
Deferred gain, end of year	57,058		-
Less current portion of deferred gain	(2,306 )		-
Non-currentportion of deferred consideration	54,752		-

14. SHARE CAPITAL

a) Authorized

The Company is authorized to issue an unlimited number of common shares without nominal or par value. The Company is also authorized to issue an unlimited number of preferred shares without nominal or par value provided that, if the authorized preferred shares are to be assigned voting or conversion rights, the number of preferred shares to be issued may not exceed twenty percent of the number of issued and outstanding common shares at the time of issuance of any such preferred shares.

b) Issued and outstanding

b) Issued and outstanding	b) Issued and outstanding	b) Issued and outstanding
(000s) Shares $
Balance at December 31, 2019 409,619 3,860,962
Issued on share award vesting 2,249 - Common shares repurchased (2,634) (10,197) Contributed surplus adjustment on vesting of share awards - 16,048 Share award liability adjustment on vesting of share awards - 530
Balance at December 31, 2020 409,234 3,867,343
Issued on the acquisition of NAL(1) 58,271 283,195 Issued on the acquisition of TORC(2) 129,765 731,877 Issued on the acquisition of Kicking Horse(3) 34,463 189,201 Issued on the acquisition of HighRock(4) 3,571 22,286 Issued on acquisition of other assets 2,664 19,525 Share issue costs, net of deferred income tax - (623) Issued on share award vesting 2,184 - Common shares repurchased (24,328) (164,226) Contributed surplus adjustment on vesting of share awards - 12,679
Balance at December 31, 2021	615,824	4,961,257

Notes:

(1) On January 4, 2021, as part of the acquisition of NAL, 58.3 million Whitecap shares were issued to The Manufacturers Life Insurance Company. The common shares issued were valued using the share price of Whitecap on December 31, 2020, of $4.86.

(2) On February 24, 2021, as part of the acquisition of TORC, 129.8 million Whitecap shares were issued to TORC shareholders. The common shares issued were valued using the share price of Whitecap on February 24, 2021, of $5.64.

(3) On May 14, 2021, as part of the acquisition of Kicking Horse, 34.5 million Whitecap shares were issued to Kicking Horse shareholders. The common shares issued were valued using the share price of Whitecap on May 14, 2021, of $5.49.

(4) On July 2, 2021, as part of the acquisition of HighRock, 3.6 million Whitecap shares were issued to HighRock shareholders. The common shares issued were valued using the share price of Whitecap on July 2, 2021, of $6.24.

c) Normal Course Issuer Bid

On May 17, 2021, the Company announced the approval of its renewed NCIB by the TSX (the “2021 NCIB”). The 2021 NCIB allows the Company to purchase up to 29,894,096 common shares over a period of twelve months commencing on May 21, 2021.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

On May 14, 2020, the Company announced the approval of its renewed NCIB by the TSX (the “2020 NCIB”). The 2020 NCIB allowed the Company to purchase up to 20,406,799 common shares over a period of twelve months commencing on May 21, 2020.

On May 16, 2019, the Company announced the approval of its renewed NCIB by the TSX (the “2019 NCIB”). The 2019 NCIB allowed the Company to purchase up to 20,657,914 common shares over a period of twelve months commencing on May 21, 2019.

Purchases are made on the open market through the TSX or alternative platforms at the market price of such common shares. All common shares purchased under the NCIB are cancelled. The total cost paid, including commissions and fees, is first charged to share capital to the extent of the average carrying value of Whitecap’s common shares and the excess is charged to contributed surplus.

The following table summarizes the share repurchase activities during the year:

Twelve Months Ended December 31, (000s except per share amounts) 2021 2020	Twelve Months Ended December 31, (000s except per share amounts) 2021 2020
Shares repurchased Average cost ($/share)	24,328 2,634 6.75 3.87
Amounts charged to:
Share capital	164,226 10,197
Share repurchase cost	164,226 10,197

d) Award Incentive Plan

The Award Incentive Plan has time-based awards and performance awards which may be granted to directors, officers, employees of the Company and other service providers. Effective January 1, 2017, independent outside directors will receive only time-based awards as the primary form of long-term compensation. As at December 31, 2021, the maximum number of common shares issuable under the plan shall not at any time exceed 3.755 percent of the total common shares outstanding. Vesting is determined by the Company’s Board of Directors. Time-based awards and performance awards issued to employees of the Company and independent outside directors have vesting periods ranging from 1 to 3 years.

Each time-based award may, in the Company’s sole discretion, entitle the holder to be issued the number of common shares designated in the time-based award plus dividend equivalents or payment in cash. Decisions regarding settlement method for insider and non-insider awards are mutually exclusive. On October 1, 2018, consistent with the terms of the Award Incentive Plan, awards vesting for insiders were settled in cash. As a result, the remaining insider awards were accounted for as cash-settled, resulting in the recognition of share award liabilities on the consolidated balance sheet. Performance awards are also subject to a performance multiplier. This multiplier, ranging from zero to two, will be applied on vesting and is dependent on the performance of the Company relative to predefined corporate performance measures set by the Board of Directors for the associated period.

Based on the terms of the Award Incentive Plan, the fair value of share awards is equal to the underlying share price on grant date. The fair value of awards that are accounted for as cash-settled transactions are subsequently adjusted to the underlying share price at each period end. Performance awards are also adjusted by an estimated payout multiplier. The amount of compensation expense is reduced by an estimated forfeiture rate on the grant date, which has been estimated at four percent of outstanding share awards. The forfeiture rate is adjusted to reflect the actual number of shares that vest. Fluctuations in compensation expense may occur due to changes in estimating the outcome of the performance conditions as well as changes in fair value for awards that are accounted for as cashsettled. Upon the vesting of the awards that are accounted for as equity-settled, the associated amount in contributed surplus is recorded as an increase to share capital. In the year the awards vest for insiders, the awards vest in two tranches with one half of such awards vesting February 1 and one half vesting October 1.

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WHITECAP RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

			Number of	Number of
	Number of Time-		Performance
(000s)	based Awards		Awards(1)		Total Awards
Balance at December 31, 2019	2,090		5,416		7,506
Granted	734		2,296		3,030
Forfeited	(80)		(102)		(182)
Vested	(682)		(1,732)		(2,414)
Balance at December 31, 2020	2,062		5,878		7,940
Granted	1,032		2,514		3,546
Forfeited	(95)		(75)		(170)
Vested	(878)		(2,394)		(3,272)
Balance at December 31, 2021	2,121		5,923		8,044

Note:

(1) Based on underlying awards before performance multiplier and dividends accrued.

e) Contributed Surplus

($000s)	($000s)
Balance at December 31, 2019 18,413
Stock-based compensation 10,657 Share award vesting (16,048)
Balance at December 31, 2020 13,022
Stock-based compensation 10,679 Share award vesting (12,679)
Balance at December 31, 2021	11,022

f) Dividends

Dividends declared were $0.21 per common share in the year ended December 31, 2021 ($0.21 per common share in the year ended December 31, 2020).

On January 13, 2022, the Board of Directors declared a dividend of $0.0225 per common share designated as an eligible dividend, payable in cash to shareholders of record on January 31, 2022. The dividend payment date is February 15, 2022.

On February 15, 2022, the Board of Directors declared a dividend of $0.0225 per common share designated as an eligible dividend, payable in cash to shareholders of record on February 28, 2022. The dividend payment date is March 15, 2022.

15. REVENUE

Whitecap sells its production pursuant to fixed and variable-price contracts. The transaction price for fixed price contracts represents the stand-alone selling price per the contract terms. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Under its contracts, Whitecap is required to deliver fixed or variable volumes of crude oil, natural gas and natural gas liquids to the contract counterparty. The amount of revenue recognized is based on the agreed transaction price, whereby any variability in revenue relates specifically to the Company’s efforts to transfer production, and therefore the resulting revenue is allocated to the production delivered in the period during which the variability occurs. As a result, none of the variable consideration is considered constrained.

The contracts generally have a term of one year or less, whereby delivery occurs throughout the contract period. Commodity purchasers typically remit amounts to Whitecap by the 25[th ] day of the month following production.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

A breakdown of petroleum and natural gas sales is as follows:

Twelve Months Ended December 31, ($000s) 2021 2020	Twelve Months Ended December 31, ($000s) 2021 2020
Crude oil NGLs Natural gas	2,143,464 813,083 156,532 30,549 226,326 57,924
Petroleum and natural gas revenues Tariffs Processing & other income Marketing revenue	2,526,322 901,556 (17,577 ) (11,979) 30,494 18,721 154,779 23,600
Petroleum and naturalgas sales	2,694,018 931,898

Substantially all of the petroleum and natural gas revenues for the year ended December 31, 2021 are derived from variable price contracts based on index prices.

Included in accounts receivable at December 31, 2021 is $256.6 million (December 31, 2020 – $88.2 million) of accrued petroleum and natural gas revenues related to December 2021 production.

16. KEY MANAGEMENT PERSONNEL COMPENSATION

Compensation relating to key management personnel, including directors of the Company, is as follows:

Twelve months ended December 31, ($000s) 2021 2020	Twelve months ended December 31, ($000s) 2021 2020
Salaries and bonuses Stock-based compensation	8,596 7,084 26,448 8,926
Total keymanagementpersonnel compensation	35,044 16,010

17. EMPLOYEE COMPENSATION EXPENSE

Whitecap’s Consolidated Statement of Comprehensive Income/ (Loss) is prepared primarily by nature of item, with the exception of employee compensation expense which is included in both operating and general and administrative ("G&A”) expense line items.

The following table details the amount of total employee compensation expense included in operating and G&A expense line items in the statements of income (loss):

Twelve months ended December 31, ($000s) 2021 2020	Twelve months ended December 31, ($000s) 2021 2020
Operating G&A	26,168 13,396 36,993 22,310
Total employee compensation expense	63,161 35,706

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

18. PER SHARE RESULTS

18. PER SHARE RESULTS	18. PER SHARE RESULTS
Twelve Months Ended December 31, (000s except per share amounts) 2021 2020
Per share income (loss) ($/share) Basic 2.97 (4.52) Diluted 2.95 (4.52) Weighted average shares outstanding
Basic Diluted(1)	598,601 408,371 603,094 408,371

Note:

(1) For the year ended December 31, 2021, 0.4 million share awards (7.9 million share awards for the year ended December 31, 2020) were excluded from the diluted weighted average shares calculation as they were anti-dilutive.

19. INCOME TAXES

Income taxes for the years ended December 31, 2021 and 2020 are as follows:

($000s) Deferred tax: 2021 2020	($000s) Deferred tax: 2021 2020
Origination and reversal of timing differences	595,539 (573,007)
Income tax expense(recovery)	595,539 (573,007)

The tax provision differs from the amount computed by applying the combined Canadian federal and provincial statutory income tax rates to income before income tax expense as follows:

Twelve months ended December 31, ($000s, except statutory tax rates) 2021 2020	Twelve months ended December 31, ($000s, except statutory tax rates) 2021 2020
Income (loss) before income taxes Statutory income tax rate(1)	2,372,206 (2,417,980) 24.70 % 25.42%
Expected income tax recovery at statutory rates	585,896 (614,533)
Increase (decrease) resulting from
Unrealized gain on acquisition Change corporate tax rates and tax rate variance Return to provision true-up Non-deductible stock-based compensation Non-deductible transaction costs Impairment of goodwill Other	- (7,154) 3,823 11,944 157 103 2,960 2,165 1,494 283 - 31,940 1,209 2,245
Deferred income tax expense(recovery)	595,539 (573,007)

Note:

(1) The tax rate consists of the combined federal and provincial statutory tax rates for the Company and its subsidiaries for the years ended December 31, 2021 and 2020. The general Provincial tax rate in Alberta was decreased on October 20, 2020 from 10 percent to 8 percent for the second half of 2020.

The analysis of deferred tax assets and deferred tax liabilities is as follows:

	December 31,	December 31,	December 31,
($000s)	2021		2020
Deferred tax assets
To be recovered after more than 12 months	63,990		514,298
To be recovered within 12 months	18,140		2,806
Deferred tax liabilities
To be recovered after more than 12 months	(8,313 )		(17,331)
To be recovered within 12 months	-		-
Deferred tax assets(liabilities)	73,817		499,773

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WHITECAP RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

Deferred tax assets (liabilities):

($000s) Capital assets in excess of tax value Risk Management asset / (liability) Decom- missioning liability Non- capital loss carry forward Share issue costs Cash settled share awards Total	($000s) Capital assets in excess of tax value Risk Management asset / (liability) Decom- missioning liability Non- capital loss carry forward Share issue costs Cash settled share awards Total	($000s) Capital assets in excess of tax value Risk Management asset / (liability) Decom- missioning liability Non- capital loss carry forward Share issue costs Cash settled share awards Total	($000s) Capital assets in excess of tax value Risk Management asset / (liability) Decom- missioning liability Non- capital loss carry forward Share issue costs Cash settled share awards Total	($000s) Capital assets in excess of tax value Risk Management asset / (liability) Decom- missioning liability Non- capital loss carry forward Share issue costs Cash settled share awards Total
At December 31, 2019 (493,379) (472) 214,569 171,985 2,680 3,252 (101,365)
Charged / (credited) to the income statement 524,909 3,278 986 44,802 (1,951) 983 573,007 Corporate acquisition 1,934 - 554 25,643 - - 28,131 Change in estimate of decommissioning liabilities (44,391) - 44,391 - - - -
At December 31, 2020 (10,927) 2,806 260,500 242,430 729 4,235 499,773
Charged / (credited) to the income statement (535,514) 7,472 983 (70,851) (765) 3,136 (595,539) Charged / (credited) directly to equity (3) - - - 203 - 200 Corporate acquisition (120,146) 7,862 63,457 218,210 - - 169,383 Change in estimate of decommissioning liabilities (34,609) - 34,609 - - - -
At December 31, 2021	(701,199 ) 18,140 359,549	389,789	167 7,371	73,817

The following gross deductions are available for deferred income tax purposes:

	December 31,	December 31,
($000s)	2021	2020
Undepreciated capital cost	697,741	486,932
Canadian development expense	896,261	569,499
Canadian oil and gas property expense	1,899,294	1,508,070
Non-capital loss carry forward	1,578,201	974,051
Share issue costs	659	2,911
Total	5,072,156	3,541,463

At December 31, 2021, the Company has non-capital losses of $1,578.2 million that expire between 2027 and 2041. The Company recognized deferred tax assets to the extent that it is probable that the future benefit will be realized. At December 31, 2021, the Company had of $9.0 million (2020 - $9.0 million) of tax pools for which no benefit was recognized.

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WHITECAP RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

20. SUPPLEMENTAL CASH FLOW INFORMATION

a) Changes in Non-Cash Working Capital

Changes in non-cash working capital, excluding acquired working capital:

Twelve months ended December 31, ($000s) 2021 2020	Twelve months ended December 31, ($000s) 2021 2020
Accounts receivable Deposits and prepaid expenses Accounts payable and accrued liabilities Share awards liability – current Dividend payable Share awards liability	(66,443 ) 58,544 25,140 (24,200) 131,858 (62,983) 15,397 2,720 8,024 (5,842) (2,566 ) 1,271
Change in non-cash working capital	111,410 (30,490)
Related to:
Operating activities Financing activities Investing activities Items not impactingcash	25,288 16,294 8,024 (5,842) 71,374 (42,760) 6,725 1,818

b) Reconciliation of Financing Liabilities Arising from Financing Activities

The following table provides a detailed breakdown of the cash and non-cash changes in financing liabilities arising from financing activities:

($000s) Long-term debt Lease liabilities Dividend payable	($000s) Long-term debt Lease liabilities Dividend payable
Balance at December 31, 2019 1,176,200 81,262 11,674
Additions - 1,264 - Disposals - (40) - Cash flows (76,039) (10,892) - Amortization of debt issuance costs 1,101 - - Dividends paid - - (11,674) Dividends payable - - 5,832
Balance at December 31, 2020 1,101,262 71,594 5,832
Additions - 14,310 - Modifications - (5,432) - Disposals - (43,885) - Cash flows (48,653) (6,919) - Amortization of debt issuance costs 3,053 - - Dividends paid - - (5,832) Dividends payable - - 13,856
Balance at December 31, 2021	1,055,662 29,668 13,856

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

WHITECAP RESOURCES INC.

21. COMMITMENTS

The Company is committed to future payments under the following agreements:

($000s) 2022 2023 2024 2025+ Total	($000s) 2022 2023 2024 2025+ Total	($000s) 2022 2023 2024 2025+ Total	($000s) 2022 2023 2024 2025+ Total	($000s) 2022 2023 2024 2025+ Total	($000s) 2022 2023 2024 2025+ Total
Lease liabilities(1)(Note 11) 4,213 6,866 6,503 16,073 33,655 Service agreements 3,415 4,399 4,374 10,581 22,769 Transportation agreements 42,031 38,934 28,916 103,267 213,148 CO2purchase commitments 39,791 40,588 23,300 37,453 141,132 Long-term debt(1) 214,761 14,685 10,534 870,643 1,110,623
Total	304,211	105,472	73,627	1,038,017	1,521,327

Note:

(1) These amounts include the notional principal and interest payments.

22. RELATED PARTY TRANSACTIONS

The Company has retained the law firm of Burnet, Duckworth & Palmer LLP (“BD&P”) to provide Whitecap with legal services. A director of Whitecap is a partner of this firm. During the year ended December 31, 2021, the Company incurred $1.7 million for legal fees and disbursements ($0.4 million for the year ended December 31, 2020). These amounts have been recorded at the amounts that have been agreed upon by the two parties. The Company expects to retain the services of BD&P from time to time. At December 31, 2021, a $0.2 million payable balance ($0.1 million – December 31, 2020) was outstanding.

23. SUBSEQUENT EVENTS

a) TimberRock Energy Corp. ("TimberRock") Acquisition

On January 10, 2022, the Company closed the previously announced acquisition of TimberRock. Whitecap acquired all the issued and outstanding common shares of TimberRock for consideration consisting of up to 12.5 million Whitecap common shares and $205.8 million in cash.

The preliminary purchase price allocation of the acquisition is as follows:

Net assets acquired(1) ($000s):	Net assets acquired(1) ($000s):
Working capital Petroleum and natural gas properties Risk management contracts Decommissioning liability Deferred income tax	26,246
	348,169
	75
	(2,105 )
	(66,478 )
Total identifiable net assets acquired	305,907
Consideration:
Cash consideration Share consideration	205,767
	100,140
Total consideration	305,907

Note:

(1) The above amounts are estimates, which were made by management at the time of the preparation of these financial statements based on information then available. Amendments may be made to these amounts as values subject to estimate are finalized.

b) Dividend Increase

In February 2022, Whitecap’s Board of Directors approved an increase to the Company’s monthly dividend from $0.0225 per Common Share to $0.03 per Common Share ($0.36 per Common Share annualized). The dividend increase is expected to be effective with the March 2022 dividend payable in April 2022.

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