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Whitecap Resources Inc. Interim / Quarterly Report 2025
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Interim / Quarterly Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
First Quarter 2025
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following management's discussion and analysis ("MD&A") of financial condition and results of operations for Whitecap Resources Inc. (the "Company" or "Whitecap") is dated April 22, 2025 and should be read in conjunction with the Company's unaudited interim consolidated financial statements and related notes for the period ended March 31, 2025, as well as the audited annual consolidated financial statements and related notes for the year ended December 31, 2024. The unaudited interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"), specifically International Accounting Standard ("IAS") 34, Interim Financial Reporting, in Canadian dollars, except where indicated otherwise. Accounting policies adopted by the Company are set out in the notes to the audited annual consolidated financial statements for the year ended December 31, 2024 and Note 3 of the unaudited interim consolidated financial statements for the period ended March 31, 2025. The unaudited interim consolidated financial statements of Whitecap have been prepared by management and approved by the Company's Board of Directors. This MD&A should also be read in conjunction with Whitecap's disclosures under "Advisories" below. Additional information respecting Whitecap is available on the SEDAR+ website (www.sedarplus.ca) and on our website (www.wcap.ca).
DESCRIPTION OF BUSINESS
Whitecap 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.
2025 STRATEGIC COMBINATION
Veren Inc. Strategic Combination
On March 10, 2025, the Company announced that it had entered into a definitive business combination agreement with Veren Inc. ("Veren") to combine in an all-share transaction valued at approximately $15 billion, inclusive of net debt. Veren shareholders will receive 1.05 common shares of Whitecap for each Veren common share held. The combined company will be led by Whitecap's existing management team under the Whitecap name. The transaction is expected to close on or about May 12, 2025, subject to the satisfaction of customary closing conditions, including the receipt of necessary regulatory approvals, as well as Whitecap and Veren shareholder approval.
2024 STRATEGIC DISPOSITIONS
Musreau Facility Partial Disposition
On June 24, 2024, the Company closed the disposition of a 50 percent working interest in the Musreau 05-09 facility for cash consideration of $100.0 million. A gain on disposition of $0.7 million was recorded as the proceeds less cost of disposal exceeded the carrying amount. Whitecap retains operatorship and the remaining 50 percent working interest. In addition, Whitecap has entered into a long-term fixed take-or-pay commitment.
Kaybob Facility Partial Disposition
On December 31, 2024, the Company closed the disposition of a 50 percent working interest in the Company's Kaybob 15-07 complex for $420.0 million. A 50 percent working interest in the complex and the associated decommissioning liability was previously classified as held for sale, and upon closing of the transaction, a net gain on asset disposition of $243.1 million was recorded as the proceeds less cost of disposal exceeded its carrying amount. Whitecap retains operatorship and the remaining 50 percent working interest in the complex and has entered into a take-or-pay commitment with Pembina Gas Infrastructure ("PGI") to access their working interest capacity in the Kaybob complex.
In addition, at the closing of the transaction, Whitecap closed its strategic partnership with PGI to fund 100% of phase 1 of the Lator facility, which includes our 04-13 battery, and entered into a long-term fixed take-or-pay commitment with PGI for priority access to the facility upon completion.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
2025 FIRST QUARTER FINANCIAL AND OPERATIONAL RESULTS
Production
Whitecap's average production volumes and commodity splits were as follows:
| Three months ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Crude oil (bbls/d) (1) | 93,765 | 88,807 |
| NGLs (bbls/d) (1) | 22,167 | 19,403 |
| Natural gas (Mcf/d) (1) | 378,715 | 368,701 |
| Total (boe/d) (2) | 179,051 | 169,660 |
(1) "Crude oil" refers to light and medium crude oil, tight oil, and condensate combined. "NGLs" refers to ethane, propane, butane and pentane combined. "Natural gas" refers to conventional natural gas and shale gas combined. For further breakdown of crude oil and natural gas production volumes refer to the "Product Type Information" section of this MD&A.
(2) Disclosure of production on a per boe basis in this MD&A consists of the constituent product types and their respective quantities disclosed in the "Product Type Information" section of this MD&A. Also refer to the "Boe Presentation" section of this MD&A.
Exhibit 1
Average production volumes increased six percent to 179,051 boe/d in the first quarter of 2025 compared to 169,660 boe/d in the first quarter of 2024. The increase in production in the three months ended March 31, 2025 was primarily due to the Company's ongoing successful drilling program, partially offset by natural declines.
Crude oil and NGLs weighting in the first quarter of 2025 remained consistent at 65 percent compared to 64 percent in the first quarter of 2024.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Petroleum and Natural Gas Sales
A breakdown of petroleum and natural gas sales is as follows:
| ($ millions) | 2025 | Three months ended March 31, 2024 |
|---|---|---|
| Crude oil | 784.8 | 719.4 |
| NGLs | 76.0 | 61.4 |
| Natural gas | 81.4 | 87.5 |
| Petroleum and natural gas revenues | 942.2 | 868.3 |
| Tariffs | (4.7) | (6.8) |
| Processing & other income | 13.0 | 12.0 |
| Marketing revenues | 62.6 | 59.8 |
| Petroleum and natural gas sales | 1,013.1 | 933.3 |
Exhibit 2
Petroleum and Natural Gas Revenues
Three Months Ended March 31,
Crude oil
NGLs
Natural gas
Petroleum and natural gas revenues in the first quarter of 2025 increased nine percent to $942.2 million from $868.3 million in the first quarter of 2024. The increase of $73.9 million consists of $50.7 million attributed to higher production volumes and $23.2 million attributed to higher weighted average realized prices.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Benchmark and Realized Prices
Average benchmark and realized prices were as follows:
| Three months ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Average benchmark prices | ||
| WTI (US$/bbl) (1) | 71.42 | 76.96 |
| Exchange rate (US$/C$) | 1.43 | 1.35 |
| WTI (C$/bbl) | 102.47 | 103.81 |
| MSW Par at Edmonton ($/bbl) (2) | 95.30 | 92.21 |
| Fosterton Par at Regina ($/bbl) | 85.39 | 80.94 |
| Midale Par at Cromer ($/bbl) | 98.69 | 93.15 |
| LSB Par at Cromer ($/bbl) (3) | 95.57 | 91.90 |
| AECO natural gas ($/Mcf) (4) | 2.15 | 2.50 |
| Average realized prices (5) | ||
| Crude oil ($/bbl) (6) | 93.00 | 89.02 |
| NGLs ($/bbl) (6) | 38.09 | 34.77 |
| Natural gas ($/Mcf) (6) | 2.39 | 2.61 |
| Petroleum and natural gas revenues ($/boe) (6) | 58.47 | 56.24 |
(1) WTI represents the calendar month average of West Texas Intermediate oil.
(2) Mixed Sweet Blend ("MSW").
(3) Light Sour Blend ("LSB").
(4) AECO represents the AECO 5A Daily Index price.
(5) Prior to the impact of risk management activities and tariffs.
(6) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
Exhibit 3
Crude Oil Sales by Index
Three Months Ended March 31,
MSW Midale Fosterton LSB
Whitecap's weighted average realized price prior to the impact of risk management activities and tariffs increased four percent to $58.47 per boe in the first quarter of 2025 compared to $56.24 per boe in the first quarter of 2024.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Crude Oil
The WTI price decreased seven percent to US$71.42 per barrel in the first quarter of 2025 compared to US$76.96 per barrel in the first quarter of 2024. The decrease was primarily due to the implementation and/or threat of U.S. tariffs weighing on global demand as tariffs are expected to slow global economic growth.
West Division
Northern Alberta & British Columbia
The Company's realized crude oil prices in Northern Alberta and British Columbia are based on the MSW par at Edmonton. The MSW par oil price increased by three percent to average $95.30 per barrel in the first quarter of 2025 compared to $92.21 per barrel in the first quarter of 2024. The increase is primarily due to an improvement in the MSW differential as apportionment significantly declined on the Enbridge Mainline with the Trans Mountain ("TMX") pipeline fully operational, offsetting the decrease in the WTI price.
East Division
Central Alberta
The Company's realized crude oil prices in Central Alberta are based on the MSW par at Edmonton, discussed above.
Western Saskatchewan
The Company's realized crude oil prices in West Central Saskatchewan are based on the MSW par at Edmonton, discussed above.
The Company's realized crude oil prices in Southwest Saskatchewan are based on the Fosterton par price at Regina. The Fosterton par price increased five percent to average $85.39 per barrel in the first quarter of 2025 compared to $80.94 per barrel in the first quarter of 2024. The increase is primarily due to an improvement in the underlying Western Canadian Select ("WCS") differential as apportionment significantly declined on the Enbridge Mainline with the TMX pipeline fully operational, offsetting the decrease in the WTI price.
Eastern Saskatchewan
The Company's realized crude oil prices in Weyburn are based on the Midale par price at Cromer. The Midale par price increased six percent to $98.69 per barrel in the first quarter of 2025 compared to $93.15 per barrel in the first quarter of 2024. The increase is primarily due to an improvement in the Midale differential as apportionment significantly declined on the Enbridge Mainline with the TMX pipeline fully operational, offsetting the decrease in the WTI price.
The Company's realized crude oil prices in South-Central Saskatchewan and Southeast Saskatchewan are based on the LSB par price at Cromer. The LSB oil price increased four percent to average $95.57 per barrel in the first quarter of 2025 compared to $91.90 per barrel in the first quarter of 2024. The increase is primarily due to an improvement in the LSB differential as apportionment significantly declined on the Enbridge Mainline with the TMX pipeline fully operational, offsetting the decrease in the WTI price.
Natural Gas Liquids
The natural gas liquids realized price increased ten percent to average $38.09 per barrel in the first quarter of 2025 compared to $34.77 per barrel in the first quarter of 2024. The increase is primarily due to Conway propane pricing increasing 10% in the first quarter of 2025 compared to the first quarter of 2024, and diversification to alternative NGL export markets.
Natural Gas
The AECO daily spot price decreased 14 percent to average $2.15 per Mcf in the first quarter of 2025 compared to an average of $2.50 per Mcf in the first quarter of 2024. The decrease is primarily due to record levels of natural gas storage as a result of higher production and limited transportation of natural gas volumes out of the Western Canadian Sedimentary Basin.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Risk Management
Whitecap maintains an ongoing risk management program to reduce the volatility of cash flows in order to fund capital expenditures and pay cash dividends to shareholders.
The Company incurred a realized gain of $13.7 million on its commodity risk management contracts for the three months ended March 31, 2025.
The unrealized gains and losses are a result of the non-cash change in the mark-to-market values period over period. The significant assumptions made in determining the fair value of financial instruments are disclosed in Note 4 to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025.
| Three months ended | ||
|---|---|---|
| Risk Management Contracts ($ millions) | 2025 | March 31, 2024 |
| Realized gain on commodity contracts | 13.7 | 5.6 |
| Unrealized loss on commodity contracts | (31.6) | (92.3) |
| Net loss on commodity contracts | (17.9) | (86.7) |
| Realized gain on interest rate contracts (1) | 1.1 | 4.0 |
| Unrealized loss on interest rate contracts (1) | (1.1) | (2.7) |
| Realized gain on equity contracts (2) | 0.6 | - |
| Unrealized gain on equity contracts (2) | 2.7 | - |
| Net loss on risk management contracts | (14.6) | (85.4) |
(1) The gains (losses) on interest rate risk management contracts are included in interest and financing expenses.
(2) The gains on equity contracts are included in stock-based compensation expenses.
Exhibit 4
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
At March 31, 2025, the following risk management contracts were outstanding with an asset fair market value of $41.8 million and a liability fair market value of $19.0 million:
WTI Crude Oil Derivative Contracts
| Type | Remaining Term | Volume (bbls/d) | Swap Price (C$/bbl) (1) |
|---|---|---|---|
| Swap | Apr - Jun 2025 | 8,000 | 104.39 |
| Swap (2) | Apr - Dec 2025 | 19,000 | 101.77 |
| Swap | Jul - Dec 2025 | 1,000 | 100.05 |
| Swap | Jan - Dec 2026 | 22,500 | 91.55 |
(1) Prices reported are the weighted average prices for the period.
(2) 5,000 bbls/d at a weighted average price of $105.41/bbl are extendable through 2026 at the option of the counterparty through the exercise of a one-time option on December 31, 2025.
Natural Gas Derivative Contracts
| Type | Remaining Term | Volume (GJ/d) | Bought Put Price (C$/GJ) (1) | Sold Call Price (C$/GJ) (1) | Swap Price (C$/GJ) (1) |
|---|---|---|---|---|---|
| Swap (2) | Apr - Dec 2025 | 105,000 | 3.34 | ||
| Swap | Jan - Dec 2026 | 30,000 | 3.58 | ||
| Swap | Nov 2026 - Mar 2027 | 5,000 | 3.37 | ||
| Collar | Jan - Dec 2026 | 68,500 | 2.25 | 3.52 |
(1) Prices reported are the weighted average prices for the period.
(2) 17,500 GJs/d at a weighted average price of $3.48/GJ are extendable through 2026 at the option of the counterparty through the exercise of a one-time option on December 31, 2025.
Power Derivative Contracts
| Type | Remaining Term | Volume (MWh) | Fixed Rate ($/MWh) (1) |
|---|---|---|---|
| Swap | Apr - Dec 2025 | 33,000 | 71.75 |
(1) Prices reported are the weighted average prices for the period.
Interest Rate Contracts
| Type | Term | Amount ($ millions) | Fixed Rate (%) (1) | Index (2) | |
|---|---|---|---|---|---|
| Swap | May 5, 2021 | May 5, 2025 | 200.0 | 1.2315 | CORRA |
(1) Rates reported are the weighted average rates for the period.
(2) Canadian Overnight Repo Rate Average ("CORRA").
Equity Derivative Contracts
| Type | Remaining Term | Notional Amount ($ millions) (1) | Share Volume (millions) | |
|---|---|---|---|---|
| Swap | Apr 1, 2025 | May 1, 2025 | 3.2 | 0.4 |
| Swap | Apr 1, 2025 | May 12, 2025 | 130.8 | 14.3 |
| Swap | Apr 1, 2025 | Nov 3, 2025 | 3.5 | 0.4 |
| Swap | Apr 1, 2025 | Apr 1, 2026 | 2.9 | 0.3 |
| Swap | Apr 1, 2025 | May 1, 2026 | 2.9 | 0.3 |
| Swap | Apr 1, 2025 | Nov 2, 2026 | 2.9 | 0.3 |
| Swap | Apr 1, 2025 | Apr 1, 2027 | 2.9 | 0.3 |
| Swap | Apr 1, 2025 | May 3, 2027 | 2.9 | 0.3 |
| Swap | Apr 1, 2025 | Nov 1, 2027 | 3.0 | 0.3 |
(1) Notional amount is calculated as the share volume for the period multiplied by the weighted average prices for the period.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Contracts entered into subsequent to March 31, 2025
WTI Crude Oil Derivative Contracts
| Type | Remaining Term | Volume (bbls/d) | Bought Put Price (C$/bbl) (1) | Sold Call Price (C$/bbl) (1) |
|---|---|---|---|---|
| Collar | Jul - Dec 2025 | 5,000 | 70.00 | 90.42 |
| Collar | Jan - Dec 2026 | 5,000 | 70.00 | 90.04 |
(1) Prices reported are the weighted average prices for the period.
Natural Gas Derivative Contracts
| Type | Remaining Term | Volume (GJs/d) | Swap Price (C$/GJ) (1) |
|---|---|---|---|
| Swap | Jan - Dec 2026 | 20,000 | 3.02 |
(1) Prices reported are the weighted average prices for the period.
Royalties
| Three months ended March 31, | ||
|---|---|---|
| ($ millions, except per boe amounts) | 2025 | 2024 |
| Royalties | 157.9 | 145.6 |
| As a % of petroleum and natural gas revenues (1) | 16.8 | 16.8 |
| $ per boe (1) | 9.80 | 9.43 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
Royalties as a percentage of petroleum and natural gas revenues remained consistent at 16.8 percent for the first quarter of 2025, compared to 16.8 percent for the first quarter of 2024.
Whitecap pays royalties to the provincial governments and mineral owners in Alberta, Saskatchewan, Manitoba and British Columbia. Each province has separate royalty regimes which impact Whitecap's overall corporate royalty rate.
Operating Expenses
| Three months ended March 31, | ||
|---|---|---|
| ($ millions, except per boe amounts) | 2025 | 2024 |
| Operating expenses | 218.7 | 220.3 |
| $ per boe (1) | 13.57 | 14.27 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
Operating expenses per boe in the first quarter of 2025 decreased five percent to $13.57 per boe compared to $14.27 per boe in the first quarter of 2024. The decrease is primarily due to increased production in the first quarter of 2025 compared to the first quarter of 2024.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Transportation Expenses
| ($ millions, except per boe amounts) | 2025 | Three months ended March 31, 2024 |
|---|---|---|
| Transportation expenses | 37.8 | 31.8 |
| $ per boe (1) | 2.35 | 2.06 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
Transportation expenses per boe in the first quarter of 2025 increased 14 percent to $2.35 per boe compared to $2.06 per boe in the first quarter of 2024. The increase is primarily due to an increase in oil production in the West division which have higher transportation costs per boe than the Company average, partially offset by lower tariff costs as the Company has increased sales where it has shipper status.
Transportation expenses per boe will fluctuate quarterly based on pipeline connectivity or downtime, weather, shipper status and pipeline shipping arrangements. When Whitecap has shipper status, pipeline tariffs incurred by the Company are included in transportation expenses. When Whitecap does not have shipper status, pipeline tariffs incurred by commodity purchasers subsequent to the delivery of the Company's product are charged back to Whitecap and are netted against petroleum and natural gas sales.
Marketing Revenues and Expenses
| ($ millions, except per boe amounts) | 2025 | Three months ended March 31, 2024 |
|---|---|---|
| Marketing revenues | 62.6 | 59.8 |
| $ per boe (1) | 3.88 | 3.87 |
| Marketing expenses | 61.0 | 59.3 |
| $ per boe (1) | 3.79 | 3.84 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
Marketing revenues and expenses per boe in the first quarter of 2025 remained consistent compared to the first quarter of 2024. Marketing activities will fluctuate and may occur when there is a sufficiently large variance between crude oil sales stream prices and where there is both sufficient facility and pipeline capacity.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Netbacks
The components of operating netbacks are shown below:
| Three months ended | ||
|---|---|---|
| March 31, | ||
| Operating Netbacks ($ millions) | 2025 | 2024 |
| Petroleum and natural gas revenues | 942.2 | 868.3 |
| Tariffs | (4.7) | (6.8) |
| Processing & other income | 13.0 | 12.0 |
| Marketing revenues | 62.6 | 59.8 |
| Petroleum and natural gas sales | 1,013.1 | 933.3 |
| Realized gain on commodity contracts | 13.7 | 5.6 |
| Royalties | (157.9) | (145.6) |
| Operating expenses | (218.7) | (220.3) |
| Transportation expenses | (37.8) | (31.8) |
| Marketing expenses | (61.0) | (59.3) |
| Operating netbacks (1) | 551.4 | 481.9 |
(1) "Operating netback" is a non-GAAP financial measure determined by adding marketing revenues and processing & other income, deducting realized losses on commodity risk management contracts or adding realized gains on commodity risk management contracts and deducting tariffs, royalties, operating expenses, transportation expenses and marketing expenses from petroleum and natural gas revenues. The most directly comparable financial measure to operating netback disclosed in the primary financial statements is petroleum and natural gas sales. Operating netback is a measure used in operational and capital allocation decisions. Operating netback is not a standardized financial measure under IFRS Accounting Standards and, therefore, may not be comparable with the calculation of similar financial measures disclosed by other entities.
The components of operating netbacks per boe are shown below:
| Three months ended | ||
|---|---|---|
| March 31, | ||
| Operating Netbacks ($ per boe) | 2025 | 2024 |
| Petroleum and natural gas revenues (1) | 58.47 | 56.24 |
| Tariffs (1) | (0.29) | (0.44) |
| Processing & other income (1) | 0.81 | 0.78 |
| Marketing revenues (1) | 3.88 | 3.87 |
| Petroleum and natural gas sales (1) | 62.87 | 60.45 |
| Realized gain on commodity contracts (1) | 0.85 | 0.36 |
| Royalties (1) | (9.80) | (9.43) |
| Operating expenses (1) | (13.57) | (14.27) |
| Transportation expenses (1) | (2.35) | (2.06) |
| Marketing expenses (1) | (3.79) | (3.84) |
| Operating netbacks (2) | 34.21 | 31.21 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
(2) "Operating netback per boe" is a non-GAAP ratio calculated by dividing operating netbacks by the total production for the period. Operating netback is a non-GAAP financial measure component of operating netback per boe. Operating netback per boe is not a standardized financial measure under IFRS Accounting Standards and, therefore, may not be comparable with the calculation of similar financial measures disclosed by other entities. Presenting operating netback on a per boe basis allows management to better analyze performance against prior periods on a comparable basis.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
General and Administrative Expenses
| ($ millions, except per boe amounts) | 2025 | Three months ended March 31, 2024 |
|---|---|---|
| Gross G&A costs | 32.3 | 28.9 |
| Recoveries | (7.5) | (6.6) |
| Capitalized G&A | (8.7) | (6.9) |
| G&A expenses | 16.1 | 15.4 |
| $ per boe (1) | 1.00 | 1.00 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
General and administrative ("G&A") expenses per boe in the three months ended March 31, 2025 remained consistent compared to the same periods in 2024.
The increase in G&A expenses in the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to additional personnel and office related expenses as a result of the Company's growth year over year.
Stock-based Compensation Expense
| ($ millions, except per boe amounts) | 2025 | Three months ended March 31, 2024 |
|---|---|---|
| Stock-based compensation | 22.6 | 19.3 |
| Realized gain on equity contracts | (0.6) | - |
| Unrealized gain on equity contracts | (2.7) | - |
| Capitalized stock-based compensation | (4.8) | (3.6) |
| Stock-based compensation expenses | 14.5 | 15.7 |
| $ per boe (1) | 0.90 | 1.02 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
In the three months ended March 31, 2025, the Company recorded stock-based compensation of $22.6 million compared to $19.3 million in the same period in 2024.
The increase in stock-based compensation and capitalized stock-based compensation for the three months ended March 31, 2025 compared to the same period in 2024 is primarily due to a higher number of awards outstanding with a higher per share fair value than awards vesting as a result of the Company's growth year over year and increases in the prevailing share price at the grant dates.
Stock-based compensation will fluctuate with changes to the expected payout multipliers associated with the performance awards, vesting of existing awards, additional grants of awards under the Award Incentive Plan, as well as changes in fair value for awards that are accounted for as cash-settled.
Unrealized gain on equity contracts was due to an increase in the fair value of equity contracts as a result of an increase in share price relative to contracted prices.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Award Incentive Plan
The Award Incentive Plan has time-based awards and performance awards which may be granted to officers and employees of the Company and other service providers. Prior to January 1, 2025, independent outside directors received time-based awards as long-term compensation. At March 31, 2025, 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 historically issued to independent outside directors) have vesting periods ranging from 1 to 3 years. A copy of the Company's Award Incentive Plan may be accessed through the SEDAR+ website (www.sedarplus.ca). Effective January 1, 2025, independent outside directors no longer participate in the award incentive plan and instead receive an annual grant of deferred share units ("DSUs"). DSUs vest immediately on grant but are not redeemable until the holder ceases to be a director.
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. Awards granted to insiders are currently accounted for as cash-settled, and awards granted to non-insiders are currently accounted for as equity-settled. 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.
A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of awards that vest. 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 resulting stock-based compensation 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. 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. At March 31, 2025, the Company had 7.2 million awards outstanding.
Interest and Financing Expenses
| ($ millions, except per boe amounts) | 2025 | 2024 |
|---|---|---|
| Interest | 12.2 | 23.4 |
| Realized gain on interest rate contracts | (1.1) | (4.0) |
| Unrealized loss on interest rate contracts | 1.1 | 2.7 |
| Interest and financing expenses | 12.2 | 22.1 |
| $ per boe (1) | 0.76 | 1.43 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
The decrease in interest in the first quarter of 2025 compared to the first quarter of 2024 is primarily attributable to lower average debt levels and lower interest rates.
Lower realized gains in the three months ended March 31, 2025 was primarily due to their being fewer contracts outstanding at the time of contract settlement compared to the same period in 2024. Unrealized losses in the three months ended March 31, 2025 are primarily due to the settlement of interest rate contracts.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Depletion, Depreciation and Amortization
| ($ millions, except per boe amounts) | 2025 | 2024 |
|---|---|---|
| Depletion, depreciation and amortization | 245.6 | 237.3 |
| $ per boe (1) | 15.24 | 15.37 |
(1) Supplementary financial measure. Refer to the "Supplementary Financial Measures" section of this MD&A for more information.
Depletion, depreciation, and amortization ("DD&A") per boe in the first quarter of 2025 remained consistent at $15.24 per boe compared to $15.37 per boe in the first quarter of 2024.
DD&A per boe will fluctuate from one period to the next depending on the amount and type of capital spending, changes in decommissioning asset, the recognition or reversal of impairments, the amount of reserve changes, and production volumes. The depletion rates are calculated on proved and probable oil and natural gas reserves, taking into account the future development costs to produce the reserves.
Income Taxes
| ($ millions) | 2025 | 2024 |
|---|---|---|
| Current income tax expense | 56.4 | 38.7 |
| Deferred income tax recovery | (2.2) | (18.9) |
Current Income Tax
For the three months ended March 31, 2025, the Company recognized current income tax expense of $56.4 million compared to current income tax expense of $38.7 million for the same period in 2024. The increase in current income tax expense is primarily due to higher net income before tax and lower allowable tax pool deductions compared to the same period in 2024.
Deferred Income Tax
For the three months ended March 31, 2025, the Company recognized deferred income tax recovery of $2.2 million compared to deferred income tax recovery of $18.9 million for the same period in 2024. The decrease in deferred income tax recovery is primarily due to higher current income tax expense recognized compared to the same period in 2024.
Reassessments
In 2023, Whitecap received reassessments from the Canada Revenue Agency ("CRA") and the Alberta Tax and Revenue Administration ("ATRA") for a former subsidiary that deny non-capital loss deductions relevant to the calculation of income taxes for the years 2018 and 2019. In 2023, Whitecap filed a notice of objection for each CRA and ATRA reassessment and subsequently filed an appeal directly to the Tax Court of Canada. There has been no change in the status of these reassessments since the appeal to the Tax Court of Canada was filed. Whitecap remains confident in the appropriateness of its tax filing position and intends to vigorously defend it.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net Income and Other Comprehensive Income
For the three months ended March 31, 2025, the Company recognized net income of $162.6 million compared to net income of $59.8 million for the same period in 2024. The following changes impacted net income:
Exhibit 5
The factors causing these changes are discussed in the preceding sections.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash Flow from Operating Activities, Funds Flow, and Free Funds Flow
The following table reconciles cash flow from operating activities to funds flow and free funds flow:
| ($ millions, except per share amounts) | 2025 | 2024 |
|---|---|---|
| Cash flow from operating activities | 295.1 | 352.5 |
| Net change in non-cash working capital items | 151.2 | 31.5 |
| Funds flow (1) | 446.3 | 384.0 |
| Expenditures on PP&E | 398.1 | 393.2 |
| Free funds flow (2) | 48.2 | (9.2) |
| Dividends declared | 107.2 | 109.1 |
| Share repurchases | - | - |
| Funds flow per share, basic (1) | 0.76 | 0.64 |
| Funds flow per share, diluted (1) | 0.75 | 0.64 |
| Dividends declared per share | 0.18 | 0.18 |
(1) "Funds flow", "funds flow per share, basic" and "funds flow per share, diluted" are capital management measures and are key measures of operating performance as they demonstrate 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, funds flow per share, basic and funds flow per share, diluted provide useful measures of Whitecap's ability to generate cash that are not subject to short-term movements in non-cash operating working capital. Whitecap reports funds flow in total and on a per share basis (basic and diluted), which is calculated by dividing funds flow by the weighted average number of shares (basic and diluted) outstanding for the relevant period. See Note 5(e)(ii) "Capital Management – Funds Flow" in the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025 for a detailed calculation.
(2) "Free funds flow" is a non-GAAP financial measure calculated as funds flow less expenditures on PP&E. Management believes that free funds flow provides a useful measure of Whitecap's ability to increase returns to shareholders and to grow the Company's business. Free funds flow is not a standardized financial measure under IFRS Accounting Standards and, therefore, may not be comparable with the calculation of similar financial measures disclosed by other entities. The most directly comparable financial measure to free funds flow disclosed in the primary financial statements is cash flow from operating activities.
Dividends are only declared once they are approved by the Company's Board of Directors. The Board of Directors reviews Whitecap's dividend payment on a monthly basis.
Cash flow from operating activities for the three months ended March 31, 2025 was $295.1 million compared to $352.5 million for the same period in 2024. The following changes impacted cash flow from operating activities:
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Exhibit 6
Funds flow for the first quarter of 2025 was $446.3 million compared to $384.0 million in the first quarter of 2024. The increase is primarily due to higher production volumes and higher commodity prices compared to the same period in 2024.
Free funds flow for the first quarter of 2025 was $48.2 million compared to $(9.2) million in the first quarter of 2024. The increase is primarily attributed to higher funds flow compared to the same period in 2024.
Expenditures on Property, Plant and Equipment
| Three months ended | ||
|---|---|---|
| ($ millions) | 2025 | March 31, 2024 |
| Land and geological | 5.6 | 2.6 |
| Drilling and completions | 318.5 | 314.0 |
| Investment in facilities | 63.8 | 68.6 |
| Capitalized administration | 8.7 | 6.9 |
| Corporate and other assets | 1.5 | 1.1 |
| Expenditures on property, plant and equipment | 398.1 | 393.2 |
For the first quarter of 2024, expenditures on property, plant and equipment totaled $398.1 million with 96 percent spent on drilling, completions, and facilities.
For the three months ended March 31, 2025, Whitecap's drilling activity was as follows:
| Wells | Three months ended March 31, 2025 | |
|---|---|---|
| Gross | Net | |
| East Division | 77 | 67.7 |
| West Division | 9 | 8.3 |
| Total | 86 | 76.0 |
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three months ended March 31, 2024, Whitecap's drilling activity was as follows:
| Wells | Gross | Three months ended March 31, 2024
Net |
| --- | --- | --- |
| East Division | 85 | 77.8 |
| West Division | 11 | 10.6 |
| Total | 96 | 88.4 |
Decommissioning Liability
At March 31, 2025, the Company's decommissioning liability balance was $1.2 billion ($1.1 billion at December 31, 2024) for future abandonment and reclamation of the Company's properties. Decommissioning liability at March 31, 2025 increased compared to December 31, 2024 primarily due to a decrease in the risk-free rate from 3.3 percent at December 31, 2024 to 3.2 percent at March 31, 2025. Estimates are based on both operational knowledge of the properties and updated industry guidance provided by the Alberta Energy Regulator, the Saskatchewan Ministry of the Economy and the BC Energy Regulator. The estimates are reviewed quarterly and adjusted as new information regarding the liability is determined.
Exhibit 7
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Capital Resources and Liquidity
At March 31, 2025, the Company had a total credit capacity of $2.6 billion which consisted of a $2.0 billion credit facility, $400.0 million in investment grade senior notes, and $195.0 million in senior notes.
Credit Facility
At March 31, 2025, the Company had a $2.0 billion unsecured covenant-based credit facility with a syndicate of banks. The credit facility consists of a $1.93 billion revolving syndicated facility and a $75.0 million revolving operating facility, with a maturity date of September 19, 2028. At March 31, 2025, the amount drawn on the credit facilities was $231.2 million. Once per calendar 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, CORRA loans, or letters of credit/guarantees. The credit facility bears interest at the bank's prime lending or adjusted CORRA rates plus applicable margins. The applicable margin charged by the bank is dependent upon the Company's credit rating. The CORRA loans bear interest at the applicable adjusted CORRA rate plus an explicit margin based upon the Company's credit rating.
The following table lists Whitecap's financial covenants as at March 31, 2025:
| Covenant Description | March 31, 2025 | |
|---|---|---|
| Debt to EBITDA (1) (2) | Maximum Ratio 4.00 | 0.41 |
| EBITDA to interest expense (1) | Minimum Ratio 3.50 | 30.48 |
| Debt to capitalization (2) | Maximum Ratio 0.60 | 0.13 |
(1) The earnings before interest, taxes, depreciation, and amortization ("EBITDA") used in the covenant calculation is adjusted for non-cash items, transaction costs and extraordinary and non-recurring items.
(2) The debt used in the covenant calculation includes bank indebtedness, senior notes, investment grade senior notes, letters of credit, and dividends declared.
At March 31, 2025, the Company was compliant with all covenants provided for in the credit agreement.
In connection with the Veren business combination, Whitecap has entered into an amended commitment letter with certain lenders to provide for, subject to the terms and conditions set forth in the commitment letter: (i) an increase to Whitecap's syndicated credit facility by $500 million through an exercise of the accordion feature in such syndicated facility; or (ii) refinancing of Whitecap's existing credit facilities with a new credit facility (the "New Credit Facility") providing for aggregate credit facilities of up to $3.0 billion.
Whitecap has also entered into an amended commitment letter with certain lenders to provide for, subject to the terms set forth in the commitment letter, a new term loan of up to $1.0 billion to repay amounts owing under Veren's investment grade senior notes if such notes are subject to a change of control trigger event under the indenture governing such notes as a result of the business combination (the "Bridge Facility"). The commitments under the Bridge Facility will reduce automatically: (i) with proceeds from the issuance of additional debt and hybrid debt securities; and (ii) by an amount equal to commitments under the New Credit Facility in excess of $2.5 billion.
The business combination with Veren is expected to close on or about May 12, 2025, subject to the satisfaction of customary closing conditions, including the receipt of necessary regulatory approvals, as well as Whitecap and Veren shareholder approval.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Senior Notes
At March 31, 2025, the Company had issued $195.0 million of senior notes. The notes rank equally with Whitecap's obligations under its credit facility.
The term, rate, and principal of the Company's outstanding senior notes are detailed below:
($ millions)
| Issue Date | Maturity Date | Coupon Rate | Principal |
|---|---|---|---|
| December 20, 2017 | December 20, 2026 | 3.90% | 195.0 |
| Balance at March 31, 2025 | 195.0 |
The senior notes are subject to the same financial covenants described under the Credit Facility. At March 31, 2025, the Company was compliant with all covenants provided for in the note agreement.
Investment Grade Senior Notes
At March 31, 2025, the Company had issued $400.0 million of investment grade senior notes. The notes rank equally with Whitecap's obligations under its credit facility.
The term, rate, and principal of the Company's outstanding investment grade senior notes are detailed below:
($ millions)
| Issue Date | Maturity Date | Coupon Rate | Principal |
|---|---|---|---|
| November 1, 2024 | November 1, 2029 | 4.382% | 400.0 |
| Balance at March 31, 2025 | 400.0 |
There are no financial covenants on the investment grade senior notes.
Equity
On May 15, 2024, the Company announced the approval of its renewed NCIB by the TSX (the "2024 NCIB"). The 2024 NCIB allows the Company to purchase up to 59,110,613 common shares over a period of twelve months commencing on May 23, 2024.
On May 17, 2023, the Company announced the approval of its renewed NCIB by the TSX (the "2023 NCIB"). The 2023 NCIB allowed the Company to purchase up to 59,724,590 common shares over a period of twelve months commencing on May 23, 2023.
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 retained earnings.
There were no share repurchases for the three months ended March 31, 2025 and 2024.
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. At April 22, 2025, there were 587.5 million common shares and 7.2 million share awards outstanding.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity
The Company generally relies on funds flow and its credit facility to fund its capital requirements, dividend payments and provide liquidity. From time to time, the Company accesses capital markets to meet its additional financing needs for acquisitions. Future liquidity depends primarily on funds flow, existing credit facilities and the ability to access debt and equity markets. All repayments on the revolving production and operating facilities are due at the term maturity date. At March 31, 2025, the Company had $1.8 billion of unutilized credit to cover any working capital deficiencies. The Company believes that available credit facilities, combined with anticipated funds flow, will be sufficient to satisfy Whitecap's 2025 development capital program and dividend payments for the remainder of the 2025 fiscal year.
Contractual Obligations
Whitecap has contractual obligations in the normal course of business which may include purchase of assets and services, operating agreements, transportation commitments, sales commitments, royalty obligations, lease rental obligations, employee agreements and debt. These obligations are of a recurring, consistent nature and impact Whitecap's cash flows in an ongoing manner.
The Company is committed to future payments under the following agreements:
| ($ millions) | 2025 | 2026 | 2027 | 2028+ | Total |
|---|---|---|---|---|---|
| Transportation agreements | 161.9 | 179.1 | 194.6 | 1,712.5 | 2,248.1 |
| Long-term debt (1) | 18.9 | 219.9 | 17.5 | 663.4 | 919.7 |
| CO₂ purchase commitments | 15.3 | 20.7 | 22.2 | 168.7 | 226.9 |
| Lease liabilities (2) | 16.8 | 21.4 | 19.5 | 110.9 | 168.6 |
| Service agreements | 6.3 | 8.5 | 8.0 | 26.1 | 48.9 |
| Total | 219.2 | 449.6 | 261.8 | 2,681.6 | 3,612.2 |
(1) This amount includes the notional principal and interest payments on the revolving credit facility, investment grade senior notes, and senior notes, excluding expected interest payments on the revolving credit facility.
(2) These amounts include the notional principal and interest payments.
Changes in Accounting Policies Including Initial Adoption
There were no changes that had a material effect on the reported income or net assets of the Company.
Standards Issued but not yet Effective
Presentation and Disclosure in Financial Statements
IFRS 18 'Presentation and Disclosure in Financial Statements' was issued in April 2024 by the International Accounting Standards Board and replaces IAS 1 'Presentation of Financial Statements'. The standard introduces defined structure to the Statement of Comprehensive Income with related specific disclosure requirements. IFRS 18 is effective January 1, 2027 and is required to be adopted retrospectively. Early adoption is permitted. The Company is assessing the impact of IFRS 18 on the Company's consolidated financial statements.
Financial Instruments and Financial Instruments: Disclosures
IFRS 9 'Financial Instruments' and IFRS 7 'Financial Instruments: Disclosures' were amended in May 2024 to clarify the date of recognition and derecognition of financial assets and liabilities. These amendments are effective January 1, 2026, and are required to be adopted retrospectively by adjusting opening balances and retained earnings at the date of adoption. Early adoption is permitted. The Company is assessing the impact of the amendments on the Company's consolidated financial statements.
Off Balance Sheet Arrangements
The Company does not have any special purpose entities nor is it party to any arrangements that would be excluded from the balance sheet other than commitments disclosed in Note 18 "Commitments" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Critical Accounting Estimates
Whitecap's financial and operating results may incorporate certain estimates including:
- estimated revenues, royalties and operating expenses on production as at a specific reporting date but for which actual revenues and expenses have not yet been received;
- estimated expenditures on property, plant and equipment on projects that are in progress;
- estimated depletion, depreciation, amortization and accretion that are based on estimates of oil and gas reserves that the Company expects to recover in the future, commodity prices, estimated future salvage values and estimated future capital costs;
- estimated fair values of derivative contracts that are subject to fluctuation depending upon the underlying commodity prices and foreign exchange rates;
- estimated value of decommissioning liabilities that are dependent upon estimates of future costs, timing of expenditures and the risk-free rate;
- estimated income and other tax liabilities requiring interpretation of complex laws and regulations. All tax filings are subject to audit and potential reassessment after the lapse of considerable time;
- estimated stock-based compensation expense using the Black-Scholes option pricing model;
- estimated fair value of business combinations and goodwill requires management to make assumptions and estimates about future events. The assumptions and estimates with respect to determining the fair value of PP&E and exploration and evaluation assets acquired generally require the most judgment and include estimates of reserves acquired, forecast benchmark commodity prices, future costs and discount rates; and
- estimated recoverable amounts are based on estimated proved plus probable oil and natural gas reserves, production rates, benchmark commodity prices, future costs, discount rates and other relevant assumptions, used in impairment (reversal) calculations and the assessment of appropriate accounting treatment of sale of royalty interests.
For more details regarding the Company's use of estimates and judgements, refer to Note 2(d) "Use of Estimates and Judgements" to the Company's audited annual consolidated financial statements for the year ended December 31, 2024.
The Company has hired individuals and consultants who have the skills required to make such estimates and ensures that individuals or departments with the most knowledge of the activity are responsible for the estimates. Furthermore, past estimates are reviewed and compared to actual results, and actual results are compared to budgets in order to make more informed decisions on future estimates.
Business Risks
Whitecap's exploration and production activities are concentrated in the Western Canadian Sedimentary Basin, where activity is highly competitive and includes a variety of different-sized companies. Whitecap is subject to a number of risks that are also common to other organizations involved in the oil and gas industry. Such risks include finding and developing oil and gas reserves at economic costs, estimating amounts of recoverable reserves, production of oil and gas in commercial quantities, marketability of oil and gas produced, fluctuations in commodity prices, stock market volatility, debt service which may limit timing or amount of dividends as well as market price of shares, financial and liquidity risks and environmental and safety risks.
In order to reduce exploration risk, Whitecap employs or contracts highly qualified and motivated professionals who have demonstrated the ability to generate quality proprietary geological and geophysical prospects. Whitecap has retained independent petroleum consultants that assist the Company in evaluating recoverable amounts of oil and gas reserves. Values of recoverable reserves are based on a number of variable factors and assumptions such as commodity prices, projected production, future production costs and government regulations. Such estimates will vary from actual results and such variations may be material.
The Company mitigates its risk related to producing hydrocarbons through the utilization of current technology and information systems. In addition, Whitecap strives to operate the majority of its prospects, thereby maintaining operational control. When the Company does not operate, it relies on its partners in jointly owned properties to maintain operational control.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Whitecap is exposed to market risk to the extent that the demand for oil and gas produced by the Company exists within Canada and the United States. External factors beyond the Company's control may affect the marketability of oil and gas produced. These factors include commodity prices and variations in the Canada–United States currency exchange rate which, in turn, responds to economic and political circumstances throughout the world. Oil prices are affected by worldwide supply and demand fundamentals while natural gas prices are affected by North American supply and demand fundamentals. Whitecap uses futures and options contracts to mitigate its exposure to the potential adverse impact of commodity price volatility. The primary objective of the risk management program is to provide a measure of stability to Whitecap dividends and its capital development program.
Exploration and production for oil and gas is capital intensive. In addition to funds flow, the Company accesses the equity markets as a source of new capital. In addition, Whitecap utilizes bank financing to support ongoing capital investments which exposes the Company to fluctuations in interest rates on its bank debt. Funds flow also fluctuates with changing commodity prices. Equity and debt capital are subject to market conditions, and availability and cost may increase or decrease from time to time.
In February, March and April 2025, the U.S. implemented or threatened to implement, and in some cases suspended, both broad-based and product specific tariff on goods imported into the United States, including from Canada. In response, governments around the world have implemented or threatened to implement retaliatory tariffs on goods imported from the United States (and in some cases Canada). The continuation of existing tariffs, the implementation of threatened tariffs, the reactivation of tariffs that are currently suspended, or the imposition of any new tariffs, taxes or import or export restrictions or prohibitions, could have a material adverse effect on the Canadian economy, the Canadian oil and natural gas industry and the Company. Furthermore, there is a risk that the tariffs imposed or threatened to be imposed by the U.S. on other countries, and retaliatory tariffs imposed or threatened to be imposed by other countries on the U.S., will trigger a broader global trade war which could have a material adverse effect on the Canadian, U.S. and global economies, and by extension the Canadian oil and natural gas industry and the Company, including decreasing demand for (and the price of) oil and natural gas, disrupting supply chains, increasing costs, causing volatility in global financial markets, and limiting access to financing.
Environmental Risks
General Risks
Oil and gas exploration and production can involve environmental risks such as litigation, physical and regulatory risks. Physical risks include the pollution of the environment, climate change and destruction of natural habitat, as well as safety risks such as personal injury. Although the Company endeavours to identify the potential environmental impacts of its new projects in the planning stage and during operations, there can be no assurance that the Company will always be successful in this regard. Although the Company endeavours to conduct its operations in such a manner that mitigates impacts on the environment, its employees and consultants, and the general public, there can be no assurance that the Company will always be successful in this regard. Whitecap maintains current insurance coverage for comprehensive and general liability as well as limited pollution liability. The amount and terms of this insurance are reviewed on an ongoing basis and adjusted as necessary to reflect current corporate requirements, as well as industry standards and government regulations. Without such insurance, and if the Company becomes subject to environmental liabilities, the payment of such liabilities could reduce or eliminate its available funds or could exceed the funds the Company has available and result in financial distress.
Climate Change Risks
Our exploration and production facilities and other operations and activities emit greenhouse gases ("GHG") which may require us to comply with federal and/or provincial GHG emissions legislation. Climate change policy is evolving at regional, national and international levels, and political and economic events may significantly affect the scope and timing of climate change measures that are ultimately put in place to prevent climate change or mitigate its effects. The direct or indirect costs of compliance with GHG-related regulations may have a material adverse effect on our business, financial condition, results of operations and prospects. Some of our significant facilities may ultimately be subject to future regional, provincial and/or federal climate change regulations to manage GHG emissions. In addition, climate change has been linked to long-term shifts in climate patterns and extreme weather conditions both of which pose the risk of causing operational difficulties.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Additional information regarding risk factors including, but not limited to, business risks and environmental risks is available in our Annual Information Form for the year ended December 31, 2024, a copy of which may be accessed through the SEDAR+ website (www.sedarplus.ca).
Summary of Quarterly Results
| 2025 | 2024 | 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| ($ millions, except as noted) | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Financial | ||||||||
| Petroleum and natural gas revenues | 942.2 | 926.1 | 890.9 | 980.4 | 868.3 | 914.1 | 955.9 | 797.9 |
| Funds flow (1) | 446.3 | 412.8 | 409.0 | 426.4 | 384.0 | 462.3 | 466.0 | 415.1 |
| Basic ($/share) (1) | 0.76 | 0.70 | 0.69 | 0.71 | 0.64 | 0.77 | 0.77 | 0.69 |
| Diluted ($/share) (1) | 0.75 | 0.70 | 0.68 | 0.71 | 0.64 | 0.76 | 0.76 | 0.68 |
| Net income | 162.6 | 233.8 | 274.2 | 244.5 | 59.8 | 298.3 | 152.7 | 175.4 |
| Basic ($/share) | 0.28 | 0.40 | 0.46 | 0.41 | 0.10 | 0.49 | 0.25 | 0.29 |
| Diluted ($/share) | 0.27 | 0.40 | 0.46 | 0.41 | 0.10 | 0.49 | 0.25 | 0.29 |
| Expenditures on PP&E | 398.1 | 261.4 | 272.7 | 203.8 | 393.2 | 200.5 | 281.9 | 217.8 |
| Total assets | 9,787.9 | 9,950.1 | 9,828.1 | 9,682.5 | 9,658.2 | 9,602.2 | 9,207.1 | 9,151.7 |
| Long-term debt | 826.2 | 1,023.8 | 1,095.6 | 1,190.1 | 1,392.6 | 1,356.1 | 1,177.1 | 1,259.5 |
| Net debt (2) | 986.9 | 933.1 | 1,361.8 | 1,297.0 | 1,495.4 | 1,385.5 | 1,260.2 | 1,361.2 |
| Common shares outstanding (millions) | 587.5 | 587.5 | 588.0 | 599.4 | 598.0 | 598.0 | 606.2 | 605.8 |
| Dividends declared per share | 0.18 | 0.18 | 0.18 | 0.18 | 0.18 | 0.18 | 0.15 | 0.15 |
| Operational | ||||||||
| Average daily production | ||||||||
| Crude oil (bbls/d) (3) | 93,765 | 94,965 | 92,335 | 93,663 | 88,807 | 88,687 | 85,238 | 82,649 |
| NGLs (bbls/d) (3) | 22,167 | 20,797 | 20,578 | 20,701 | 19,403 | 19,241 | 17,804 | 15,448 |
| Natural gas (Mcf/d) (3) | 378,715 | 365,809 | 362,332 | 377,700 | 368,701 | 351,757 | 323,903 | 294,412 |
| Total (boe/d) (4) | 179,051 | 176,730 | 173,302 | 177,314 | 169,660 | 166,554 | 157,026 | 147,166 |
(1) Refer to Note 5(e)(ii) "Capital Management - Funds Flow" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025, and to the section entitled "Cash Flow from Operating Activities, Funds Flow, and Free Funds Flow" contained within this MD&A for additional information on these capital management measures.
(2) "Net Debt" is a capital management measure and is key to assessing the Company's liquidity. See Note 5(e)(i) "Capital Management – Net Debt and Total Capitalization" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025 for additional information on this capital management measure. The following table reconciles the Company's long-term debt to net debt:
| 2025 | 2024 | 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| ($ millions) | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Long-term debt | 826.2 | 1,023.8 | 1,095.6 | 1,190.1 | 1,392.6 | 1,356.1 | 1,177.1 | 1,259.5 |
| Cash | - | (362.3) | - | - | - | - | - | - |
| Accounts receivable | (442.3) | (422.2) | (355.4) | (421.6) | (435.8) | (400.2) | (452.3) | (357.5) |
| Deposits and prepaid expenses | (19.8) | (22.4) | (32.9) | (34.7) | (30.2) | (32.9) | (44.9) | (28.1) |
| Non-current deposits | (86.6) | (86.6) | (82.9) | (82.9) | (82.9) | (82.9) | (65.3) | - |
| Accounts payable and accrued liabilities | 673.7 | 767.1 | 701.6 | 609.6 | 615.3 | 509.0 | 616.4 | 458.1 |
| Dividends payable | 35.7 | 35.7 | 35.8 | 36.5 | 36.4 | 36.4 | 29.2 | 29.2 |
| Net debt | 986.9 | 933.1 | 1,361.8 | 1,297.0 | 1,495.4 | 1,385.5 | 1,260.2 | 1,361.2 |
(3) "Crude oil" refers to light and medium crude oil, tight oil, and condensate combined. "NGLs" refers to ethane, propane, butane and pentane combined. "Natural gas" refers to conventional natural gas and shale gas combined. For further breakdown of crude oil and natural gas production volumes refer to the "Product Type Information" section of this MD&A.
(4) Disclosure of production on a per boe basis in this MD&A consists of the constituent product types and their respective quantities disclosed in the "Product Type Information" section of this MD&A. Also refer to the "Boe Presentation" section of this MD&A.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Over the past eight quarters, fluctuations in production volumes and realized commodity prices have impacted the Company's petroleum and natural gas revenues and funds flow. Net income has fluctuated due to changes in funds flow and unrealized risk management gains and losses which fluctuate with the changes in forward benchmark commodity prices and exchange rates. Capital expenditures and production volumes have fluctuated over time as a result of the timing of acquisitions and dispositions and the impact of market conditions on the Company's development capital expenditures.
The following outlines the significant events over the past eight quarters:
In the first quarter of 2025, the Company entered into a definitive business combination agreement with Veren to combine in an all-share transaction. Under the agreement, Veren shareholders will receive 1.05 common shares of Whitecap for each Veren common share held. The transaction is expected to close on or about May 12, 2025, subject to the satisfaction of customary closing conditions, including the receipt of necessary regulatory approvals, as well as Whitecap and Veren shareholder approval.
In the fourth quarter of 2024, the Company issued $400.0 million of investment grade senior notes with a maturity date of November 1, 2029. Additionally, the Company closed the previously announced disposition of a 50 percent working interest in the Company's Kaybob 15-07 complex for consideration of $420.0 million. The Company repurchased 1.0 million common shares at an average price of $11.01 per share in the fourth quarter of 2024.
In the third quarter of 2024, the Company entered into a $2 billion unsecured covenant-based credit facility with a syndicate of banks which replaced the Company's secured credit and term loan facilities. The Company repurchased 11.5 million common shares at an average price of $10.17 per share in the third quarter of 2024.
In the second quarter of 2024, the Company closed the disposition of a 50 percent working interest in the Musreau 05-09 facility for cash consideration of $100.0 million. At June 30, 2024, a 50 percent working interest in the Company's Kaybob 15-07 complex was reclassified to assets held for sale and the associated decommissioning liability was reclassified to liabilities held for sale. The Company repurchased 0.2 million common shares at an average price of $10.02 per share during the second quarter of 2024, which were subsequently cancelled in July 2024.
In the fourth quarter of 2023, the Company closed the acquisition of assets in the Western Saskatchewan CGU for cash consideration of $159.7 million. The Company repurchased 8.6 million common shares at an average price of $10.40 per share during the fourth quarter of 2023.
In the third quarter of 2023, the Board of Directors approved an increase to the monthly dividend from $0.0483 per common share to $0.0608 per common share ($0.73 per common share annualized). The dividend increase was effective for the October 2023 dividend paid in November 2023.
In the second quarter of 2023, wildfires in Alberta impacted the Company's operations in northern Alberta and in northeast British Columbia, which at times resulted in significant volumes of production being shut-in.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Whitecap is required to comply with National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109"). NI 52-109 requires that Whitecap disclose in its interim MD&A any material weaknesses relating to design existing at the end of the period in Whitecap's internal control over financial reporting and/or any changes in Whitecap's internal control over financial reporting that occurred during the period that have materially affected, or are reasonably likely to materially affect, Whitecap's internal controls over financial reporting. Whitecap confirms that no material weaknesses or such changes were identified in Whitecap's internal controls over financial reporting at the end of or during the first quarter of 2025.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
ADVISORIES
Boe Presentation
"Boe" means barrel of oil equivalent. All boe conversions in this MD&A are derived by converting gas to oil at the ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of oil. Boe may be misleading, particularly if used in isolation. A boe conversion rate of 1 bbl : 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 bbl : 6 Mcf, utilizing a conversion ratio of 1 bbl : 6 Mcf may be misleading as an indication of value.
Supplementary Financial Measures
Average realized prices for crude oil, NGLs and natural gas are supplementary financial measures calculated by dividing each of these components of petroleum and natural gas revenues, disclosed in Note 15 "Revenue" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025 by their respective production volumes for the period.
Per boe disclosures for petroleum and natural gas revenues, tariffs, processing and other income and marketing revenues are supplementary financial measures calculated by dividing each of these components of petroleum and natural gas sales, disclosed in Note 15 "Revenue" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025, by the Company's total production volumes for the period.
Realized gain (loss) on commodity contracts per boe is a supplementary financial measure calculated by dividing realized gain (loss) on commodity contracts, disclosed in Note 5(d) "Financial Instruments and Risk Management – Market Risk" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025 by the Company's total production volumes for the period.
Per boe disclosures for petroleum and natural gas sales, royalties, operating expenses, transportation expenses, marketing expenses, G&A expenses, stock-based compensation expenses, interest and financing expenses, and depletion, depreciation and amortization are supplementary financial measures that are calculated by dividing each of these respective GAAP measures by the Company's total production volumes for the period.
Royalties as a percentage of petroleum and natural gas revenues is a supplementary financial measure calculated by dividing royalties by petroleum and natural gas revenues, disclosed in Note 15 "Revenue" to the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2025.
Product Type Information
This MD&A includes references to crude oil, NGLs, natural gas and total average daily production.
NI 51-101 includes condensate within the natural gas liquids ("NGLs") product type. The Company has disclosed condensate as combined with crude oil and separately from other natural gas liquids in this MD&A since the price of condensate as compared to other natural gas liquids is currently significantly higher and the Company believes that this combined crude oil and condensate presentation provides a more accurate description of its operations and results therefrom. Crude oil therefore refers to light, medium and tight oil and condensate combined. NGLs refers to ethane, propane, butane and pentane combined. Natural gas refers to conventional natural gas and shale gas combined.
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's aggregate average production for the past eight quarters and the references to "crude oil", "NGLs", and "natural gas" reported in this MD&A consist of the following product types, as defined in NI 51-101 (except as noted above) and using a conversion ratio of 1 bbl : 6 Mcf where applicable:
| 2025 | 2024 | 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | |
| Light and medium oil (bbls/d) (1) | 73,371 | 74,105 | 73,900 | 76,691 | 76,012 | 76,519 | 74,543 | 72,429 |
| Tight oil (bbls/d) | 20,394 | 20,860 | 18,435 | 16,972 | 12,795 | 12,168 | 10,695 | 10,220 |
| Crude oil (bbls/d) | 93,765 | 94,965 | 92,335 | 93,663 | 88,807 | 88,687 | 85,238 | 82,649 |
| NGLs (bbls/d) | 22,167 | 20,797 | 20,578 | 20,701 | 19,403 | 19,241 | 17,804 | 15,448 |
| Shale gas (Mcf/d) | 223,767 | 218,860 | 215,309 | 225,167 | 223,009 | 210,026 | 185,977 | 171,601 |
| Conventional natural gas (Mcf/d) | 154,948 | 146,949 | 147,023 | 152,533 | 145,692 | 141,731 | 137,926 | 122,811 |
| Natural gas (Mcf/d) | 378,715 | 365,809 | 362,332 | 377,700 | 368,701 | 351,757 | 323,903 | 294,412 |
| Total (boe/d) | 179,051 | 176,730 | 173,302 | 177,314 | 169,660 | 166,554 | 157,026 | 147,166 |
(1) Light and medium oil includes condensate.
Forward-Looking Information and Statements
Certain statements contained in this MD&A constitute forward-looking statements and are based on Whitecap's beliefs and assumptions based on information available at the time the assumption was made. By its nature, such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
This MD&A contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "estimate", "objective", "ongoing", "may", "will", "project", "believe", "measure", "stability", "depends", "could", "sustainability" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this MD&A contains forward-looking information and statements pertaining to the following: the expected closing date of the Veren business combination; Whitecap's focus and strategy; that tariffs are expected to slow global economic growth; Whitecap's ongoing risk management program and the benefits to be derived therefrom; the factors that may affect Whitecap's transportation expenses and marketing activities; our intention to vigorously defend our tax filing position relating to CRA and ATRA reassessments; our estimate of the amount of our future decommissioning liabilities for future abandonment and reclamation of our properties; the expected new credit facility to be provided concurrent with the closing of the Veren business combination; the sources and amounts of our future liquidity and financial capacity; the belief that available credit facilities combined with anticipated funds flow will be sufficient to satisfy Whitecap's 2025 development capital program and dividend payments for the 2025 fiscal year; and the actions Whitecap expects to take to mitigate the business, environmental and other risks that it faces.
The forward-looking information and statements contained in this MD&A reflect several material factors and expectations and assumptions of Whitecap including, without limitation: the duration and impact of tariffs that are currently in effect on goods exported from or imported into Canada, and that other than the tariffs that are current in effect, neither the U.S. nor Canada (i) increases the rate or scope of such tariffs, reenacts tariffs that are currently suspended, or imposes new tariffs, on the import of goods from one country to the other, including on oil and natural gas, and/or (ii) imposes any other form of tax, restriction or prohibition on the import or export of products from one country to the other, including on oil and natural gas; the availability and amount of the non-capital losses available to us; expectations and assumptions concerning applicable tax laws and the precedential value of historical Canadian tax case law; the timing of the completion of the Veren business combination and the satisfaction of all conditions precedent including the receipt of applicable regulatory approvals, and that the business combination is completed on the terms contemplated in the business combination agreement; that Whitecap will continue to conduct its operations in a manner consistent with past operations; the general continuance or improvement in current industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty
Whitecap Resources Inc. | First Quarter 2025 Management's Discussion & Analysis
and regulatory regimes; the accuracy of the estimates of Whitecap's reserve volumes; the impact of increasing competition; the general stability of the economic and political environment in which Whitecap operates; the ability of Whitecap to obtain qualified staff, equipment supplies and services in a timely and cost efficient manner; the ability of Whitecap to efficiently integrate assets and employees acquired through acquisitions; drilling results; the ability of the operator of the projects which the Company has an interest in to operate in a safe, efficient and effective manner; field production and decline rates; future operating costs; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion; the ability of the Company to secure adequate product transportation; future petroleum and natural gas prices; currency, exchange, inflation and interest rates; the continued availability of adequate debt and equity financing and funds flow to fund Whitecap's planned expenditures, dividends, and share repurchases; the ability of OPEC+ nations and other major producers of crude oil to adjust production and thereby manage world crude oil prices; the impact (and duration) of the ongoing military actions between Russia and Ukraine and related sanctions, and of the conflicts in the Middle East, on crude oil, NGLs, and natural gas prices; and the ability to maintain dividend payments at current levels. Whitecap believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable, but no assurance can be given that these factors, expectations and assumptions will prove to be correct.
The forward-looking information and statements included in this MD&A are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: the risk that (i) the tariffs that are currently in effect on goods exported from or imported into Canada continue in effect for an extended period of time, the tariffs that have been threatened are implemented, that tariffs that are currently suspended are reactivated, the rate or scope of tariffs are increased, or new tariffs are imposed, including on oil and natural gas, (ii) the U.S. and/or Canada imposes any other form of tax, restriction or prohibition on the import or export of products from one country to the other, including on oil and natural gas, and (iii) the tariffs imposed or threatened to be imposed by the U.S. on other countries and retaliatory tariffs imposed or threatened to be imposed by other countries on the U.S. will trigger a broader global trade war which could have a material adverse effect on the Canadian, U.S. and global economies, and by extension the Canadian oil and natural gas industry and the Company, including decreasing demand for (and the price of) oil and natural gas, disrupting supply chains, increasing costs, causing volatility in the global financial markets, and limiting access to financing; imprecision and uncertainty in estimates of tax pools, tax shelters and tax deductions available to us; the interpretation of tax legislation and regulations applicable to us; the risk that the CRA's and the ATRA's reassessments described herein are successful and that this outcome has a negative effect on the availability or quantum of our non-capital losses; the risk that the tax impact to us, in the event the non-capital losses are not available, is materially different than those currently contemplated; that the reassessment of our tax filings and the continuation or timing of such process is outside of our control; litigation risk associated with the reassessments of our tax filings; changes to tax legislation and administrative policies; changes in commodity prices; changes in the demand for or supply of Whitecap's products; the impact from any resurgence of the COVID-19, or any other pandemic or public health event; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in Whitecap's development plans or by third party operators of Whitecap's properties; competition from other producers; inability to retain drilling rigs and other services; failure to realize the anticipated benefits of acquisitions or dispositions; incorrect assessment of the value of acquisitions; delays resulting from or inability to obtain required regulatory approvals; increased debt levels or debt service requirements; increased interest rates; inaccurate estimation of Whitecap's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs, whether due to high inflation rates, supply chain disruptions or other factors; the risk that weather events such as wildfires, flooding, droughts or extreme hot or cold temperatures forces us to shut-in production or otherwise adversely affects our operations; availability of qualified staff, equipment supply and services; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time to time in Whitecap's public disclosure documents (including, without limitation, those risks identified in this MD&A) which may be accessed through the SEDAR+ website (www.sedarplus.ca).
The forward-looking information and statements contained in this MD&A speak only as of the date of this MD&A, and Whitecap does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.