Q: Hi, Pat and team, what are your thoughts on Whitecap Resources (TSX:WCP)? They seem to check a lot of boxes for me in the small-cap energy sector. I know you warn of risks of growth by acquisition. What’s your take? Cheers!
A: Whitecap Resources Inc., $9.51, symbol WCP on Toronto (Shares outstanding: 626.3 million; Market cap: $6.1 billion; www.wcap.ca), produces and explores for oil and natural gas in Western Canada. Oil makes up 74% of its daily output; the remaining 26% is gas.
In the three months ended March 31, 2022, acquisitions, plus successful drilling, increased Whitecap’s average daily production by 38.5%. Specifically, output rose to 132,691 barrels of oil equivalent per day from 95,828 a year earlier.
That gain, plus higher realized oil and natural gas prices, pushed Whitecap’s cash flow up to $505.7 million from $187.8 million. That’s a gain of 169.3%. However, cash flow per share rose 125.0%, to $0.81 from $0.36, as Whitecap issued more shares to pay for its acquisitions.
The company made a lot of acquisitions last year and this year.
In January 2021, it closed a deal to buy NAL Resources for $155 million in Whitecap stock. Then, in February 2021, it completed the purchase of TORC Oil…
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