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Whitecap Resources rises on 2014 plans, outlook

Last updated: 09:46 07 Jan 2014 EST, First published: 10:46 07 Jan 2014 EST

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Shares of Whitecap Resources  (TSE:WCP) climbed in early deals Tuesday after the company, coming off a year filled with acquisitions, said it expects first quarter exit production of about 28,000 to 29,000 barrels of oil equivalent per day (boe/d). This compares with its outlook of 27,700 to 28,100 boe/d for the entire year, as per its increased forecast in November. 

The Calgary, Alberta-based oil and natural gas producer bumped up its full year outlook late last year after announcing the acquisition of a private company with operations primarily in the Kindersley area of west central Saskatchewan, which immediately offsets Whitecap's lands and Viking production in Kindersley. 

The company said the transaction has now completed, increasing its exposure in the western Saskatchewan Viking light oil resource play, where it has seen strong operational results for the past two years. 

The Alberta and Saskatchewan-focused company had humble beginnings with 850 net barrels per day of production, acquired from a major in Calgary in a $116 million transaction that brought in Barrick Energy as a 50% partner. Since then, this figure has grown substantially through organic drilling growth and through various "tuck-in" acquisitions. 

Its acquisition spree, including last year's purchase of west-central Saskatchewan-focused Invicta Energy for $60 million, has certainly paid off. Whitecap, which went public in June 2010 through a reverse takeover with Spitfire Energy, began a dividend-paying strategy at the start of 2013 and recently boosted its monthly payout by 8%, to $0.0567 per share, or 68 cents annualized.

Whitecap is anticipating generating cash flow of $394 to $400 million in 2014, or $1.95 per share, and is projecting a 2014 debt to cash flow ratio of approximately 1.0 times.

Current pro forma production for the Canadian company is in excess of 25,500 boe/d, which it says provides a base of strong cash flow to start the year.  It has already kicked off its 2014 capital program, with plans to drill 80 wells in its four key operating areas in the first quarter. 

The majority of these wells will use Whitecap's multi-frac completion technology, with roughly 9 wells expected to be extended reach horizontal wells (ERH). Three ERH wells in 2013 achieved average IP rates that were 2.1 times higher than its standard length horizontal wells at 675 boe/d, the company said. 

Whitecap's stock gained more than 1% in early trades in Toronto on Tuesday, sitting at $12.70 on the TSX. In the past 12 months, the company's shares have climbed more than 38%.

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