2020 has been a very challenging year on many fronts, but our financial discipline and operational strength has allowed us to capture significant opportunities including the NAL Combination and the recently announced strategic combination with TORC Oil & Gas Ltd. (“TORC”) (the “TORC Combination”). Our fourth quarter average production is now expected to be approximately 63,000 boe/d which is 5% higher than our budget expectation of 59,000 – 61,000 boe/d. Capital spending for the quarter was approximately $20 million which is in line with our expectations. We have ended 2020 on a very strong operational note and will look to build on this momentum as we move into 2021.
Over the last five years, Whitecap has significantly enhanced our dividend and growth model through our commitment to reducing costs and improving efficiencies in our business. This commitment, in combination with our strategic acquisitions, has transformed Whitecap into one of the most sustainable pure play conventional light oil producers in Canada with over 100,000 boe/d (78% oil and NGLs) of corporate production upon completion of the TORC Combination in late February. Our business today has proven to be resilient in a low commodity price environment and also has the ability to significantly enhance free funds flow as crude oil prices improve.
We are off to a very strong start to 2021 with a robust capital program including six drilling rigs in operation. In the first quarter of 2021, we expect capital expenditures of approximately $115 – $120 million and average production of 89,000 – 91,000 boe/d. Our capital program details for the balance of the year will be released upon closing of the TORC Combination which is expected to be on February 24, 2021.
The first quarter capital program consists of drilling 56 (45.9 net) horizontal wells including 39 (33.6 net) extended reach horizontal (“ERH”) wells and 2 (1.4 net) horizontal injection wells. In addition to our drill, complete, equip and tie-in costs, we will be investing approximately $14 million on enhanced oil recovery (“EOR”) operations and optimizations as well as health, safety, and environmental initiatives in the first quarter. This continued focus on enhancing our base assets through EOR capital will allow us to maintain, and potentially improve upon, our low base production decline rate anticipated to be approximately 17% for 2021.
Northwest Alberta and British Columbia
In the first quarter, we anticipate drilling a total of 10 (7.0 net) oil wells in this business unit including 6 (3.5 net) Cardium oil development wells in the Wapiti area, 3 (2.5 net) Charlie Lake horizontal oil wells in our Peace River Arch region and 1 (1.0 net) Dunvegan horizontal oil well. In addition, we will be participating in a non-operated (50% working interest) Montney completion at Karr and tying in our operated (65% working interest) 13-1 well which was successfully completed with an optimized stimulation design in the fourth quarter of 2020.
The Sturgeon Lake NAL assets continue to perform well above expectations with production 50% (1,200 boe/d) higher than forecasted at the time the NAL Combination was announced. We see significant additional optimization opportunities as well as follow-up drilling on the Ante Creek expansion lands and within the primary waterflooded pool.
West Central Alberta
We will be drilling 6.0 (4.8 net) wells in west central Alberta including 4 (3.8 net) ERH Cardium oil wells and 1 (0.9 net) ERH Cardium injection well in the continued re-development of our operated Pembina Cardium waterfloods and 1 (0.2 net) Glauconite liquids rich gas well on NAL lands.
The West Central Alberta NAL assets continue to perform above expectations with production 4% (600 boe/d) higher than forecasted at the time the NAL Combination was announced.
West Central Saskatchewan
We anticipate drilling 28 (23.5 net) ERH Viking oil wells in the first quarter, of which 4 (3.3 net) wells will be on NAL lands. Our drilling and completion designs continue to advance with 3 (2.7 net) ERH wells having an expected horizontal length of 1.5 miles.
We are excited about the drilling and optimization opportunities that continue to develop with our ongoing technical review of the NAL West Central Saskatchewan assets.
Southwest Saskatchewan
We will have one rig active in this business unit drilling 12 (10.6 net) horizontal wells including 6 (5.6 net) oil wells in the Atlas Formation, 4 (4.0 net) Lower Shaunavon oil wells and 2 (1.0 net) Roseray wells (one producer and one injector). In addition to the drilling capital in the first quarter, we anticipate allocating $7 million towards optimizing our EOR operations in this area.
Southeast Saskatchewan
We anticipate the Southeast Saskatchewan drilling and CO2 expansion programs to commence in the second half of 2021. The first half program will be limited to CO2 purchases, field level optimization and maintenance.
TORC Combination Update
Our technical review of the TORC assets is ongoing and both teams are fully immersed in the integration of our two companies. Prior to closing on February 24, 2021, the TORC team will have executed on a capital program of approximately $40 million which includes the drilling of 22 gross (20.7 net) wells in its core Southeast Saskatchewan area. Capital spending plans for the remainder of the year on the TORC assets will be provided upon closing of the TORC Combination.
Outlook
We are excited about our prospects for adding value from our expanded asset base from the two strategic transactions entered into in 2020. Our preliminary guidance for 2021 pro forma the NAL Combination and TORC Combination remains unchanged with average production of 99,000 – 101,000 boe/d on capital investments of $280 to $300 million. We anticipate generating funds flow of approximately $624 million with free funds flow of approximately $334 million and a total payout ratio of 63% based on commodity prices of US$47 WTI and C$2.50/GJ AECO.
We will continue to focus on responsibly developing our assets including further expansion of our carbon capture utilization and storage (“CCUS”) project at Weyburn, Saskatchewan where we currently sequester 2 million tonnes of CO2 annually. This provides Whitecap with its net negative emitter status and making us a leader in sustainability with best-in-class environment, social and governance practices.
A detailed full year 2021 budget will be provided upon closing of the TORC Combination which is expected to be on February 24, 2021.
On behalf of our employees, management team and board of directors, we would like to thank our shareholders for their support as we execute on our 2021 plans and continue to pursue opportunities to enhance returns to shareholders.
