2 0 1 0 A N N U A L R E P O R T
BUILDING LIGHT OIL
VALUE AND GROWTH
CORPORATE PROFILE
WHITECAP RESOURCES INC. (“WHITECAP” OR THE “COMPANY”) IS ENGAGED IN THE ACQUISITION,
DEVELOPMENT, OPTIMIZATION AND PRODUCTION OF CRUDE OIL AND NATURAL GAS IN WESTERN
CANADA. WE HAVE AN ENVIABLE SUITE OF OIL-WEIGHTED, LONG RESERVE LIFE ASSETS WITH
SUBSTANTIAL UNBOOKED UPSIDE POTENTIAL, A SIGNIFICANT LEVEL OF DEVELOPMENT WELL
INVENTORY AND A STRONG BALANCE SHEET.
CONTENTS
Financial & Operating Highlights
Message to Shareholders
Review of Operations
Management’s Discussion & Analysis
Management’s Report
Independent Auditors’ Report
Financial Statements
Notes to the Financial Statements
Corporate Information & Abbreviations
1
2
4
9
26
27
28
31
45
CORPORATE HISTORY
MARCH 8 / 2011
JANUARY 14 / 2011
Announced acquisition of Spry Energy Ltd. for $223 million
Significantly expands presence in the Cardium oil resource play
Acquired partner interest in Valhalla North asset for $25 million
Provides for oil production and reserve growth in core asset
OCTOBER 18 / 2010
Graduated to the Toronto Stock Exchange
JULY 12 / 2010
Acquisition of Onyx 2006 Inc. for $52 million
Entrance into Pembina horizontal Cardium play
JUNE 25 / 2010
Going public transaction through reverse takeover of Spitfire Energy Ltd.
Acquired Fosterton pool in southwest Saskatchewan
SEPTEMBER 17 / 2009
Acquired Valhalla North asset for $58 million
Sets stage for Whitecap with light oil focus
FINANCIAL AND
OPERATING HIGHLIGHTS
Whitecap’s 2010 year end results include approximately six months of production from the reverse takeover of Spitfire Energy
Ltd. and five months of production from the acquisition of Onyx 2006 Inc.
FInAncIAL ($000s)
Total revenues
Funds from operations
Basic & diluted ($/share)
net loss
Basic & diluted ($/share)
Development capital expenditures
corporate and property acquisitions (cash-based)
Bank debt and working capital(1)
OpERATIng
production
crude oil (bbls/d)
natural gas (Mcf/d)
ngLs (bbls/d)
Total (boe/d)
Average realized price
crude oil ($/bbl)
natural gas ($/Mcf)
ngLs ($/bbl)
Total ($/boe)
netbacks ($/boe)
Total commodity revenue
Other income
Royalties
Operating expenses
Transportation expenses
Operating netbacks prior to hedging
Realized hedging gain
Operating netbacks
Total wells drilled
Working interest wells
Success rate
Undeveloped land holdings (acres)
gross
net
common shares, end of period (000s)
Weighted average shares (000s)
(1) Excludes risk management contracts.
2010
25,991
11,706
0.51
(9,623)
(0.42)
41,579
52,572
29,545
631
4,141
112
1,433
74.89
4.24
56.95
49.68
49.68
0.64
(7.44)
(12.73)
(1.65)
28.50
1.04
29.54
17.0
10.6
100%
66,973
46,228
41,826
23,162
2009
4,799
997
0.21
(1,224)
(0.26)
429
56,511
10,315
105
855
28
275
73.99
4.55
54.32
47.82
47.82
0.19
(9.29)
(11.95)
(1.81)
24.96
–
24.96
–
–
–
11,280
4,111
15,312
4,721
Annual Report 2010
1
MESSAGE TO
SHAREHOLDERS
YEAR IN REVIEW
2010 was an eventful and exceptional year for us. We began the year with a well-defined strategy to increase our exposure
to light oil value and growth opportunities. Our execution was purposeful and disciplined as we increased our leverage to oil
production as well as assembling an inventory of oil opportunities for future growth.
The successful results of this past year are directly attributable to the strength and vision of our employees.
Their ability to identify and capture valuable light oil based assets and generate a considerable inventory of light oil development
wells has provided us with an enviable oil platform from which to grow. We are geographically concentrated in three regions in
Western canada; being the peace River Arch area of northwestern Alberta, the pembina area of west central Alberta and the
Fosterton area of southwest Saskatchewan.
We started 2010 as a private company producing approximately 900 boe/d (45% oil & ngLs) from our Valhalla north asset.
In June, we completed a reverse takeover of Spitfire Energy Ltd., a publicly traded company which provided us with an additional
360 boe/d (85% oil) of production and resulted in us becoming a publicly traded entity on the TSX Venture Exchange. In July,
we acquired Onyx 2006 Inc., a private company with assets that included 600 boe/d (50% oil and ngLs) focused in the
pembina cardium area and which provided us with a third core area from which to grow. These acquisitions and our strong
internal performance have provided us with a substantial amount of development and exploitation upside in areas that are
accessible year round. Our aggressive but disciplined approach to growth and our graduation to the Toronto Stock Exchange on
October 18, 2010 have allowed us to build a strong institutional shareholder base.
HIGHLIGHTS
/
/
/
/
grew our average production 150 percent from 806 boe/d in the fourth quarter of 2009 to 2,014 boe/d in the
fourth quarter of 2010 through strategic oil-weighted acquisitions and internally generated growth.
Our 2010 exit production rate was 3,200 boe/d (60 percent oil and ngLs) compared to 731 boe/d for 2009
(46 percent oil and ngLs), a 338 percent increase, as a result of an active second half drilling program.
generated cash flow of $11.7 million on an operating netback of $29.54/boe in 2010 compared to cash flow of
$1.0 million and an operating netback of $24.96/boe in the prior year.
Invested $40.3 million in field expenditures consisting of $36.9 million for drilling, completing and the
tie-in of 17 (10.6 net) wells with a 100 percent success rate, $2.1 million for recompleting and optimizing 18 wells
and $1.3 million for land, seismic and our waterflood simulation study.
/
completed two significant oil-weighted corporate acquisitions and eight minor property acquisitions in our three core
areas totaling $92 million.
/
Increased our drilling inventory three-fold from 60 to 180 wells of which 96 percent are oil opportunities.
/
/
Increased proved plus probable gross reserves by 169 percent to 13.7 MMboe (65 percent oil and ngLs) and proved
gross reserves by 192 percent to 8.3 MMboe (64 percent oil and ngLs).
Achieved finding, development and acquisition (“FD&A”) costs of $14.52 per proved plus probable boe, excluding
changes in future development costs, generating a recycle ratio of 2.5 times based on our current operating netback
of $35.50/boe.
2
Whitecap Resources
LOOKING AHEAD
We anticipate that our business plan going forward will not alter dramatically from our 2010 plan. We will remain focused on
large oil resource-in-place assets where application of advancing horizontal frac technology is significantly improving operating
results and increasing reserve recovery factors. We will continue to measure our success by our growth in production, reserves,
net asset value and cash flow on a per share basis. As well, our financing strategy will again be designed to support value creation
through the turbulent commodity price environment that we are currently experiencing and expect to continue for the remainder
of the year.
We are fortunate to have the majority of our production from high netback oil. The challenge for industry is to keep the cost of
finding new production and reserves as low as possible as well as the necessity to gain timely access to services. Whitecap
is prepared and committed to meet the challenges that we contemplate the future will bring and we remain confident that we
will be able to deliver exceptional operational and financial per share results for Whitecap shareholders in 2011 and beyond.
In closing, I would like to express my appreciation to our employees for their focus and determination, to our Board of Directors
for their time and guidance and to our shareholders and stakeholders for their support and belief in us. With continued optimism
and enthusiasm, I remain!
On behalf of the Board,
gRAnT FAgERHEIM
pRESIDEnT AnD cHIEF EXEcUTIVE OFFIcER
March 22, 2011
Annual Report 2010
3
REVIEW OF
OPERATIONS
OVERVIEW
Whitecap employs a strategy of entering scalable and repeatable resource type plays early in their development life cycle.
Our targeted entry point is early enough in the play’s life cycle that we can benefit from economic efficiencies but late enough
that the early stage economic risk has been removed.
Whitecap uses an aggressive but disciplined approach to acquisitions, ensuring they provide a strong foundation for organic
growth through the drill bit. We evaluate many opportunities large and small, but only transact when they will add value to
Whitecap. In 2010 we completed two corporate acquisitions, eight property acquisitions and drilled 17 wells (10.6 net) with
a 100 percent success rate.
The combination of acquisitions and organic growth resulted in 2010 year end proved reserves of 8.3 MMboe and proved
plus probable reserves of 13.7 MMboe. When we include the January 2011 acquisition of a partner interest in Valhalla, proved
reserves increase to 9.2 MMboe and proved plus probable reserves increase to 15.3 MMboe; a 225 percent and 201 percent
from the prior year, respectively.
Our three core operating areas currently consist of the Valhalla north asset in the peace River Arch area of northwestern Alberta,
the pembina area of west central Alberta and the Fosterton area of southwest Saskatchewan.
ALBERTA
SASkATcHEWAn
peace river arch
valhalla
north
west central
pembina
sw saskatchewan
fosterton
4
Whitecap Resources
OIL RESOURCE PLAYS
References to “DPIIP” in this document means Discovered Petroleum Initially In Place and is defined as quantity of hydrocarbons
that are estimated to be in place within a known accumulation, plus those estimated quantities in accumulations yet to be
discovered. There is no certainty that it will be economically viable or technically feasible to produce any portion of this DPIIP
except for those identified as proved or probable reserves.
PEACE RIVER ARCH– ANCHORS WHITECAP’S UNDERLYING VALUE
The Valhalla north property is located in the peace River Arch area of Alberta and is characterized by shallow declines,
a predictable reserve base and a consistent working interest (50%). The property has multiple prospective oil and gas zones
which allows us to focus on the oil potential in the near to medium-term and provides the company with an option on future
gas price increases.
The primary resource plays that Whitecap is currently focused on are the large Montney Sexsmith oil pool and the Middle
Montney oil pools which overlie the Montney Sexsmith zone. Our technical expert analyses have led to the confirmation of
a large DpIIp within our Valhalla area. We will continue to further evaluate the multi-zone potential and the most efficient
methods of extraction.
Montney Sexsmith
key characteristics
/ Light oil 36 ApI
/ Homogenous reservoir
/ no formation water
/ Very successful waterflood in place on a small portion of the pool
gross resource potential
/ DpIIp 83 MMbbls
/ Recovered to date 8 percent or 6.9 MMbbls
/ current booked recovery 16 percent or 13.3 MMbbls
/ Expected ultimate recovery on waterflood of approximately 40 percent or 21.7 MMbbls of incremental reserves
Whitecap has been the first to apply horizontal multi-frac technology in the Montney Sexsmith pool and as a result has been
able to generate superior returns than those generated by vertical wells. The horizontal wells drilled qualify for the five percent
royalty rate on up to 70,000 to 80,000 boe and for a maximum of 30 to 36 months which significantly enhances the economics
of the wells.
Middle Montney
key characteristics
/ Light oil 36 ApI
/ High quality reservoir
/ Waterflood potential
/ Synergies with the Montney Sexsmith pool
gross resource potential
/ DpIIp 38 MMbbls
/ Recovered to date 1.8 percent or 0.7 MMbbls
/ current booked recovery 3.9 percent or 1.5 MMbbls
/ Expected ultimate recovery approximately 40 percent on waterflood or 13.8 MMbbls of incremental reserves
Annual Report 2010
5
WEST CENTRAL ALbERTA – EARLY STAGE GROWTH AREA
Our key cardium oil producing properties are located in East pembina, South pembina and the Willesden green areas of West
central Alberta. This is an early stage resource play being developed with horizontal multi-frac technology where advancements
in this technology will continue to increase productivity and decrease costs. In the medium-term, continued development of
this resource and the associated production history will provide the framework for significant reserve additions as industry’s
confidence in the cardium performance matures and optimal developments are put in place.
Cardium
key characteristics
/ Light oil 40 ApI
/ geology and DpIIp mapping are well defined
/ no formation water with production in the cardium
gross resource potential
/ DpIIp 166 MMbbls
/ Recovered to date 0.1 percent or 0.2 MMbbls
/ current booked recovery 3.2 percent or 5.3 MMbbls
/
/
Expected primary recovery ranges from 10 percent to 15 percent or 11.3 MMbbls to 19.6 MMbbls of
incremental reserves
potential waterflood recovery ranges from 25 percent to 40 percent or 36 to 61 MMbbls incremental over what
is currently booked.
The cardium play with its 40 light oil generates high netbacks and coupled with advances in horizontal frac technology allows
Whitecap to generate superior rates of return. The horizontal wells drilled qualify for the five percent royalty rate on up to 60,000
boe and for a maximum of 24 months which significantly enhances the economics of this development.
SOUTHWEST SASKATCHEWAN – INFILL DRILLING PROJECT
The main Roseray resource play is located at Fosterton in southwest Saskatchewan. This is a low risk infill drilling project
consisting of shallow drilling depths (1,000m) and conventional, non-frac’d completions which leads to low development costs.
Roseray
key characteristics
/ Medium oil 22 ApI
/ Very stable and predictable production profile
/ consistent and repeatable economics
gross resource potential
/ DpIIp 31 MMbbls
/ Recovered to date 9 percent or 2.8 MMbbls
/ current booked recovery 13.8 percent or 4.3 MMbbls
/ Expected ultimate recovery greater than 35 percent or more than 6.5 MMbbls of incremental reserves
In addition to the Roseray infill opportunities there are several new oil opportunities emerging due to the advancement
in horizontal frac technology.
6
Whitecap Resources
LAND HOLDINGS
As at December 31, 2010, Whitecap’s land base was 77,872 net acres with an average working interest of 60 percent. Of this
total, 46,228 net acres were undeveloped. Our land holdings translate to over 180 locations of which 125 are unbooked with
96 percent being oil opportunities.
RESERVES
McDaniel Engineering consultants Ltd. (“McDaniel”), an independent petroleum engineering firm, has evaluated the crude oil,
natural gas and natural gas liquids reserves of the company effective December 31, 2010 and prepared a reserves report in
accordance with national Instrument 51-101 “Standards of Disclosure for Oil and gas Activities” and the canadian Oil and gas
Evaluation Handbook. Full and complete disclosure of information as required by nI 51-101 can be referenced in the company’s
Annual Information Form (“AIF”).
The following is an overview of the McDaniel’s report:
SUMMARy OF cOMpAny gROSS RESERVES
(FOREcAST pRIcIng)(1)(2)
proved producing
proved non-producing
Undeveloped
Total proved
probable
Total proved plus probable
Oil
(Mbbls)
2,914
125
1,801
4,840
3,348
8,188
gas
(MMcf)
11,032
1,388
5,224
17,644
10,783
28,427
SUMMARy OF BEFORE TAX nET pRESEnT VALUES (FOREcAST pRIcIng) ($M)(1)(2)(5)
proved producing
proved non-producing
Undeveloped
Total proved
probable
Total proved plus probable
0%
205,576
10,735
80,078
296,390
234,822
531,211
ngL
(Mbbls)
312
27
138
477
274
751
5%
156,453
8,194
46,855
211,502
133,287
344,790
Total
(Mboe)
5,064
384
2,810
8,257
5,419
13,676
10%
126,647
6,409
27,225
160,281
85,163
245,443
Annual Report 2010
7
RESERVE REcOncILIATIOn (Mboe)(1)(2)
Opening balance December 31, 2009(3)(4)
Development
Revisions
Acquisitions
production
closing balance December 31, 2010
pERFORMAncE RATIOS
FInDIng, DEVELOpMEnT AnD AcqUISITIOn cOSTS ($/boe)(6)
2010 FD&A cost (excludes change in “FDc”)
REcycLE RATIO(7)
Using current field netback of $35.50/boe
RESERVE LIFE InDEX (years)(8)
2010 exit production rate – 3,200 boe/d
proved
2,828
964
363
4,625
523
8,257
probable
2,255
97
(126)
3,193
–
5,419
proved plus
probable
5,083
1,061
237
7,818
523
13,676
Total proved
proved
plus probable
22.23
14.52
1. 6
7.1
2.5
11.7
(1) gross company reserves are the company’s total interest share before the deduction of any royalties and without including any royalty interest of the company.
(2) Based on McDaniel’s January 1, 2011 escalated price forecast.
(3) Based on Whitecap’s internally prepared reserve evaluation using gLJ petroleum consultants’ January 1, 2010 escalated price forecast.
(4) Whitecap is the resulting entity following the completion of the reverse takeover of Spitfire Energy Ltd. (“Spitfire”) by Whitecap and the subsequent amalgamation of Whitecap
and Spitfire on July 1, 2010. In accordance with gAAp, Whitecap was deemed to be the acquirer of Spitfire and therefore, the December 31, 2009 reserves information
reflects Whitecap’s reserves as at December 31, 2009.
(5) The net present values of future net revenue do not represent fair market value.
(6) FD&A (finding, development and acquisition) costs are used as a measure of capital efficiency and are calculated by dividing the capital costs for the period, by the change
in the reserves, incorporating revisions and production, for the same period. The capital expenditures include the announced purchase price of corporate acquisitions rather
than the amounts allocated to property, plant and equipment for accounting purposes. The capital expenditures also exclude capitalized administration costs and acquisition
costs. FD&A costs including FDc is $32.67/Mboe for proved reserves and $25.91/Mboe for proved plus probable.
(7) The Recycle Ratio is calculated by dividing the field netback per boe by the FD&A costs for the period. The recycle ratio is comparing the netback from existing reserves to
the cost of finding new reserves and may not accurately indicate investment success unless the replacement reserves are of equivalent quality as the produced reserves.
(8) The reserve life index is calculated by dividing the reserves (in Mboe) in each category by the annualized exit production rate in boe/year.
8
Whitecap Resources
MANAGEMENT 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 March 22, 2011 and should be read in conjunction with the company’s
audited financial statements and related notes for the period ended December 31, 2010.
The accompanying financial statements of Whitecap have been prepared by management and approved by the company’s
Board of Directors. These financial statements have been prepared in accordance with canadian generally accepted accounting
principles (“gAAp”) in canadian dollars, except where indicated otherwise.
The MD&A contains non-gAAp measures and forward-looking information; readers are cautioned that the MD&A should be
read in conjunction with Whitecap’s disclosure under “non-gAAp Measures” and “Forward-Looking Statements” included at
the end of this MD&A.
DESCRIPTION OF bUSINESS
Whitecap is an oil-weighted exploration, development and production company based in calgary, Alberta, canada.
The company’s operations are in Alberta and Saskatchewan.
On June 25, 2010, the company completed the reverse takeover of Spitfire Energy Ltd. (“Spitfire”) which provided for
(i) a recapitalization of the corporation through a private placement; (ii) the appointment of a new management team and a new
board of directors; and (iii) the acquisition of an oil-weighted asset base in southwest Saskatchewan.
On July 1, 2010, Spitfire amalgamated with its wholly-owned subsidiary Whitecap Resources Inc. and changed its name to
Whitecap Resources Inc. The comparative financial statements of the company for the year ended December 31, 2010 include
the operating results of Whitecap prior to the reverse takeover and the results of the combined entities after June 25, 2010.
2010 YEAR-END FINANCIAL AND OPERATIONAL RESULTS
Production
Whitecap’s 2010 average production volumes and commodity splits were as follows:
crude Oil (bbls/d)
natural gas (Mcf/d)
ngLs (bbls/d)
Total (boe/d)
production Split (%)
crude Oil and ngL
natural gas
Total
2010
631
4,141
112
1,433
52
48
100
2009
105
855
28
275
48
52
100
Whitecap commenced operations in September 2009 which resulted in average production volumes of 275 boe/d in 2009
compared to 1,433 boe/d in 2010. The fourth quarter 2010 production volumes increased 150 percent from 2,014 boe/d
compared to 806 boe/d in the prior period. The significant increase in production is a result of strategic corporate and asset
acquisitions throughout the year and the company’s effective re-investment in those assets.
Annual Report 2010
9
Revenue
A breakdown of 2010 revenue as follows:
($000s)
crude Oil
natural gas
ngLs
Total commodity revenue
Other revenue
Total
2010
17,254
6,412
2,325
25,991
336
26,327
2009
2,828
1,421
550
4,799
19
4,818
Total revenue increased 5 times to $26.3 million in 2010 from $4.8 million in 2009. Fourth quarter 2010 total revenue was
$9.7 million compared to $3.7 million for the same period in the prior year. Higher revenues in 2010 were a result of several
factors including the company producing for a full year in 2010 versus a partial year in 2009, the addition of strategic corporate
and property acquisitions, growth from a successful drilling program and stronger oil prices in 2010.
Average benchmark and realized prices for 2010 are as follows:
BEncHMARk pRIcES
WTI (US$/bbl) (1)
US$ / c$ foreign exchange rate
WTI (c$/bbl)
AEcO natural gas ($/Mcf)(2)
AVERAgE REALIzED pRIcES(3)
crude Oil ($/bbl)
natural gas ($/Mcf)
ngLs ($/bbl)
combined ($/boe)
(1) WTI represents posting prices of West Texas Intermediate oil.
(2) Represents the AEcO daily posting.
(3) prior to hedging gains and losses.
2010
79.45
0.98
81.22
4.00
74.89
4.24
56.95
49.68
2009
61.80
0.88
70.54
3.95
73.99
4.55
54.32
47.82
Oil prices continued to recover in 2010 with US$WTI averaging $79.45/bbl compared to $61.80/bbl in the prior year, partially
offset by a stronger canadian dollar. natural gas prices however, have remained low due to the oversupply of natural gas in
the market.
Oil and natural gas products are sold on the spot market and realized prices fluctuate with changes in the benchmark pricing
of the underlying commodities. Average realized prices in the comparative period are higher than the comparative benchmark
averages due to the company starting production in the latter part of 2009 where commodity prices were higher than the
yearly average.
The company’s crude oil and liquids are at a discount to Edmonton par due to the differential embedded in the quality of the
product produced from each of its three core areas. The crude oil quality is 36° ApI at Valhalla north in the peace River Arch
area of northwest Alberta, 40° ApI at pembina in west central Alberta and 22° ApI at Fosterton in southwest Saskatchewan.
The company’s natural gas commands a modest premium to the Alberta natural gas spot benchmark price due to its higher
heat content.
10
Whitecap Resources
Risk Management and Hedging Activities
Whitecap maintains an ongoing risk management program to reduce the volatility of revenues in order to fund capital
expenditures and protect acquisition economics as necessary. The company has not designated any of its risk management
activities as accounting hedges under the canadian Institute of chartered Accountants section 3855.
The company realized a gain of $0.5 million on its risk management contracts. The unrealized loss is a result of the non-cash
change in the mark-to-market values period over period.
RISk MAnAgEMEnT cOnTRAcTS ($000s)
Realized gain on risk management contracts
Unrealized loss on risk management contracts
Total loss on risk management contracts
543
(2,001)
(1,458)
At December 31, 2010 the following risk management contracts were outstanding:
TypE
Swap
Swap
collar
VOLUME
500 bbls/d
500 bbls/d
300 bbls/d
pRIcE
c$86.85/bbl
c$87.60/bbl
c$75.00/bbl floor/
c$100.00/bbl ceiling
InDEX
c$WTI
c$WTI
c$WTI
TERM
Jan to Jun 2011
Jan to Dec 2011
Jul to Dec 2011
Subsequent to December 31, 2010, the company entered into the following risk management contract:
TypE
Swap
VOLUME
1,000 gJ/d
pRIcE
$3.85/gJ
InDEX
AEcO
TERM
Feb to Dec 2011
At December 31, 2010, the following financial power contracts were outstanding:
TypE
Swap
Swap
VOLUME
3,506 MWh
1,139 MWh
pRIcE
$49.60/MWh
$46.06/MWh
TERM
Jan 2011 to Dec 2011
Jan 2011 to Dec 2011
In aggregate, the company has hedged approximately 26 percent of its forecasted 2011 production. This leaves ample room for
upside price participation as well as the ability to layer on incremental risk management contracts over time.
Whitecap’s risk management strategy is to transact with creditworthy counterparties to provide downside protection and
minimize the price cap on its product.
Annual Report 2010
11
Operating Netbacks
The components of 2010 operating netback are shown below:
nETBAck ($/boe)
Total commodity revenue
Other income
Royalties
Operating expenses
Transportation expenses
Operating netback prior to hedging
Realized hedging gain
Operating netback
2010
49.68
0.64
(7.44)
(12.73)
(1.65)
28.50
1.04
29.54
2009
47.82
0.19
(9.29)
(11.95)
(1.81)
24.96
–
24.96
For the twelve months ended December 31, 2010, royalties as a percentage of revenue were 15 percent compared
to 19 percent in the prior period and 12 percent in the fourth quarter of 2010 compared to 25 percent in the fourth quarter
of 2009. The decrease in royalty rates was a result of new production from the company’s horizontal wells which qualify for the
five percent royalty holiday.
For the twelve months ended December 31, 2010, operating costs have increased to $12.73 per boe compared
to $11.95 per boe in the prior period. The increase was mainly due to asset acquisitions in 2010 that had higher operating costs
per boe compared to our existing Valhalla north property. In the fourth quarter of 2010, operating costs were $17.64 per boe
compared to $11.89 per boe in the prior period. The higher than expected operating costs in the fourth quarter of 2010 were
due to 13th month adjustments on gas processing and gathering fees in our Valhalla non-operated facility.
12
Whitecap Resources
General and Administrative (“G&A”)
($000s)
general and administrative – gross
Overhead recoveries
capitalized
general and administrative – cash
Stock-based compensation
capitalized stock-based compensation
Total general and administrative
2010
4,392
(1,343)
(1,116)
1,933
7,930
(2,166)
7,697
2009
1,182
(117)
(93)
972
341
–
1,313
gross g&A costs in 2010 were $4.4 million offset by $2.5 million of overhead recoveries and capitalized g&A. Increase
in g&A costs are due to the company moving from a startup phase in the prior period to fully operating in 2010. Included
in g&A expenses for 2010 were fees associated with listing on the Toronto Stock Exchange and one-time charges relating to
the corporate acquisitions.
Stock-based Compensation
Stock-based compensation expense is the amortization over the vesting period of the fair value of stock options granted
to employees, consultants and directors of the company. Stock options granted under the stock option plan have a term
of four years to expiry and warrants granted have a term of five years to expiry. The fair value of all options granted is estimated
at the grant date using the Black-Scholes option pricing model.
As at December 31, 2010, the company had 2.0 million stock options and 1.6 million performance warrants outstanding.
The options and warrants were issued at an average exercise price of $2.82 per option and $2.50 per warrant.
Stock-based compensation expense of $1.4 million related to options has been recognized with the offsetting amount recorded
in contributed surplus.
The performance warrants become exercisable as to one-third upon the 20 day weighted average trading price of the common
shares’ market price equaling or exceeding $4.00, an additional one-third upon the market price equaling or exceeding $5.00
and final one-third upon the market price equaling or exceeding $6.00. All performance warrants met their vesting requirements
in 2010 and $6.5 million in compensation expense was recorded in the period.
Annual Report 2010
13
Interest and Financing Expenses
($000s)
Interest and fees on bank debt and loans
Interest on debentures
non-cash interest expense
Total interest and financing charges
2010
1,068
747
169
1,984
2009
225
313
61
599
Interest expense has increased compared to the prior period as a result of a full year of capital spending in addition
to corporate and property acquisitions in 2010, which increased bank debt. cash interest and financing charges decreased
65 percent from $5.36 per boe in 2009 compared to $3.47 per boe in 2010 primarily due to higher production volumes.
Total interest and financing charges include non-cash interest expense related to the debenture offering. This is discussed
further in the liquidity and capital resources section of the MD&A.
Depletion, Depreciation, and Accretion
($000s)
Depletion and Depreciation expense
Accretion expense
per BOE
2010
15,240
181
15,421
29.48
2009
2,233
30
2,263
22.55
The DD&A rate will fluctuate from one period to the next depending on the amount and type of capital spending and the amount
of reserves added. The depletion rate is calculated on proven reserves, however proven plus probable reserves are added from
acquisitions and development expenditures.
14
Whitecap Resources
Ceiling Test
The company performed a ceiling test calculation at December 31, 2010 in accordance with cIcA full-cost accounting guidelines.
no impairment was recorded as a result of the calculation. The forecasted future oil and gas prices used in the ceiling test
evaluation of the company’s proved reserves at December 31, 2010 is included in the notes to the financial statements.
Taxes
The company has a future income tax recovery of $2.0 million for the year ended December 31, 2010. The future income tax
recoveries in the reporting period reflect reduction to future tax rates, excesses of tax pools over accounting values and tax
pool adjustments from the prior year.
The following deductions are available for future income tax purposes:
($000s)
Undepreciated capital cost
canadian development expense
canadian exploration expense
canadian oil and gas property expense
non-capital loss carry forward
Share issue costs
Total
Cash Flow and Net Loss
2010
26,288
30,824
6,062
49,510
25,687
5,056
143,427
2009
13,788
111
90
36,766
5,570
754
57,079
cash flow from operating activities for the year ended December 31, 2010 was $6.1 million compared to prior period
of $0.6 million as a result of the company advancing from a startup phase to a producing phase with the related revenue
generation from its properties.
net loss for the year ended December 31, 2010 was $9.6 million ($0.42 per share, basic and diluted) compared to a net loss
of $1.2 million ($0.26 per share, basic and diluted) for the prior period. Increase in the net loss is primarily related to higher
non-cash DD&A and stock-based compensation expense.
Related Party Transactions
In the prior year the company received loans from certain officers of Whitecap for general working capital purposes.
These amounts bear interest at 6 percent per annum and were repayable on demand. At December 31, 2009 the loans were
fully repaid and no balances were outstanding.
The company has retained the law firm of Burnet, Duckworth and palmer LLp (“BDp”) to provide Whitecap with legal services.
grant zawalsky, a director of Whitecap, is a partner of this firm. During the year ended December 31, 2010, the company
incurred $0.4 million to BDp for legal fees and disbursements. These amounts have been recorded at the exchange amount.
The company expects to retain the services of BDp on occasion.
Annual Report 2010
15
Capital Expenditures
($000s)
Land and lease
geological and geophysical
Drilling and completions
Investment in facilities
capitalized administration
Drilling credits
Development capital
Office and other
Expenditures on corporate and property acquisitions (cash-based)
Total capital expenditures
2010
916
448
34,139
6,650
1,116
(1,816)
41,453
126
52,572
94,151
2009
3
90
158
–
93
–
344
85
56,511
56,940
For the year ended December 31, 2010, capital expenditures, excluding acquisitions and after deducting Alberta Drilling
Royalty credits (“Drilling credits”), totaled $41.5 million, with approximately 98 percent spent on drilling, completions
and facilities.
Peace River Arch Alberta
Activity in 2010 focused on the Valhalla Montney Sexsmith light oil pool with 8 (3.9 net) of the total 17 (10.6 net) wells drilled
in 2010 being within the Montney Sexsmith pool. Five of the wells drilled were horizontal multi-fracture wells and were the first
horizontal wells drilled in the pool. Initial rates for these wells averaged more than 250 boe/d and stabilized within 3 months at
an average of approximately 150 boe/d. These results combined with the cost savings being realized from program experience
have resulted in a project rate of return (“ROI”) of approximately 57 percent. performance has exceeded expectations with
production growing 76 percent from 850 to 1,500 boe/d in 2010.
Subsequent to December 31, 2010, the company was successful in consolidating its interest across the pool by acquiring one
of its partner’s interest. The consistent and equal ownership across the entire pool paves the way for full development of the
pool including the waterflood.
16
Whitecap Resources
West Central Alberta
Whitecap entered the early stage cardium resource play early in the third quarter through the acquisition of Onyx 2006 Inc.
(“Onyx”). Since then, the company has drilled and placed on production, 4 (3.6 net) horizontal multi-fracture cardium light oil
wells; two in the pembina area and two in the Willesden green area. Initial rates for these four wells averaged approximately
200 boe/d per well. Operating netbacks in the area have been greater than $65/bbl due in part to the five percent royalty holiday
period. In addition to our initial entry into the cardium area, the company has added five smaller property acquisitions around
our core area.
Southwest Saskatchewan
The primary asset in southwest Saskatchewan is in the Fosterton Roseray formation. The two infill Fosterton Roseray oil wells
that were drilled in the second quarter, were completed and placed on production with production averaging 30 boe/d per
well with all-in costs of approximately $0.7 million per well, which makes for excellent economics. Wells in the Fosterton
Roseray oil pool are very predictable and provide the opportunity for low risk, low decline production additions at very attractive
economic returns.
Asset Retirement Obligation
At December 31, 2010, the company recorded an Asset Retirement Obligation (“ARO”) of $4.2 million for future
abandonment and reclamation of the company’s properties. Included in the ARO balance are $0.2 million related to liabilities
incurred, $1.7 million related to liabilities acquired from corporate and property acquisitions, accretion of $0.2 million and
revisions to estimates of $0.8 million. Estimates are based on both operational knowledge of the properties and industry
guidance provided by the ERcB. The estimates are reviewed quarterly and adjusted as new information regarding the liability
is determined.
Capital Resources and Liquidity
Credit Facility
At December 31, 2010, the company had a $65 million operating credit facility with a canadian financial institution. Borrowings
under the facility bear interest at the lender’s prime rate plus 1.25 percent or, at the company’s option, guaranteed notes at
the lender’s base rate plus 2.75 percent. The loan is payable on demand and is secured by a $200 million debenture over the
company’s real properties, a floating charge over all present and after acquired real property interests, and a security interest
over all present and after acquired personal property.
Subsequent to the year end, the company syndicated its credit facility, which increased Whitecap’s credit limit to $85 million
from the previous limit of $65 million. The new facility consists of a $10 million operating line and a $75 million syndicated
facility. The facility is a borrowing base facility subject to semi-annual review by the bank, with the next review scheduled for
the fall of 2011.
At December 31, 2010, Whitecap is in compliance with all covenants under its credit facility.
Annual Report 2010
17
Convertible Debentures
The debentures were classified as long-term debt, net of the fair value of the conversion feature at the date of issue, which
was classified as part of shareholders’ equity. The value of the debt was calculated as the present value of the principal
and interest payments with the remainder of the value attributed to the conversion feature and recorded as equity. The debt
portion of the debenture was accreted up to its full face value by the end of the debenture term. The accretion was recorded
as non-cash interest and financing charges on the statement of operations and deficit. The financing charges related to the
debenture offering were offset against the convertible debenture balance and were amortized as interest and financing charges
over the life of the debentures.
The company had a $10 million principal amount of 8 percent secured convertible debentures. Interest was paid quarterly
in arrears. On December 7, 2010, the holders of the convertible debenture elected to convert the entire principal amount
outstanding into approximately 3.5 million common shares. The outstanding debt and equity portion of the convertible
debentures were transferred to share capital on conversion, while the remaining financing costs were expensed.
Equity
On June 25, 2010, the company completed the reverse takeover of Spitfire whereby each shareholder of Whitecap received
8.33 common shares of Spitfire in exchange for each Whitecap share totaling 15.4 million shares. As part of the reverse
takeover, Spitfire also completed a $7.75 million non-brokered private placement (the “private placement”) of 1.6 million
units of Spitfire at a price of $2.50 per unit, with each unit comprised of one common share and one common share
purchase warrant entitling the holder to purchase one common share at a price of $2.50 for a period of five years and
1.5 million common shares at a price of $2.50 per common share. The private placement units and common shares are
subject to an 18 month escrow, pursuant to which 25 percent of such security was released from escrow on July 12, 2010
and 25 percent released every six months thereafter. On July 1, 2010, Spitfire amalgamated with its wholly-owned subsidiary
Whitecap Resources Inc. and changed its name to Whitecap Resources Inc.
On July 30, 2010, the company completed a bought deal finance offering of 8.9 million subscription receipts of Whitecap
common shares at a price of $4.50 per subscription receipt for total gross proceeds of $40.1 million. concurrent with the
closing of the Onyx acquisition, the outstanding subscription receipts of Whitecap were exchanged for common shares of
Whitecap effective July 30, 2010.
On December 7, 2010, the holders of the convertible debenture elected to convert the entire principal amount outstanding into
approximately 3.5 million common shares.
On December 22, 2010, the company completed a bought deal finance offering of 6.9 million subscription receipts of Whitecap
common shares at a price of $5.85 per subscription receipt for total gross proceeds of $40.4 million.
The company is authorized to issue an unlimited number of common shares. As at December 31, 2010 there were
41.8 million common shares outstanding.
Liquidity
The company generally relies on operating cash flows, equity issuances and the bank loan to fund capital requirements
and provide liquidity. From time to time, the company accesses capital markets to meet its additional financing needs and
to maintain flexibility in funding its capital programs. Future liquidity depends primarily on cash flow generated from operations,
existing credit facilities and the ability to access debt and equity markets. Bank debt is classified as a current liability as it is
a demand loan, however the company does not believe that the loan will be required to be repaid in the near-term. The company
is currently in a net loss position, however it generates positive operating cash flow and the net loss position is primarily due
to non-cash items. Additionally, the company has $47.5 million of unutilized bank debt to cover any working capital deficiencies.
The company believes that it is well positioned to take advantage of its internally developed opportunities funded through
available credit facilities combined with anticipated cash flow from operations. present sources of capital are currently sufficient
to satisfy the capital program for the upcoming 2011 fiscal year.
18
Whitecap Resources
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 and
employee agreements. 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:
($000s)
Operating lease - office buildings
2011
1,008
2012
947
2013
913
2014+
3, 187
Total
6,055
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.
Subsequent Events
In December, the company announced that it had entered into an agreement to purchase a partner’s working interest in the
Valhalla north property. The transaction closed on January 14, 2011 for a total consideration of $25.0 million.
On March 8, 2011 the company announced that it had entered into an agreement with respect to a business combination with
Spry Energy Ltd. (“Spry”). The arrangement provides for a total consideration of $223.0 million payable by Whitecap including
the assumption of Spry’s net debt of approximately $36.0 million. The transaction will be funded in part through a $136 million
bought deal financing of subscription receipts in the capital of the company at $6.80 per subscription receipt (the “Offering”).
Spry shareholders will receive, for each Spry share held: i) 1.17647 Whitecap common shares; or $8.00 in cash, subject to an
aggregate cash maximum of $130.9 million and a maximum distribution of 8.2 million Whitecap common shares. The acquisition
is expected to close on or before May 11, 2011. Whitecap has also granted to the underwriters an option to purchase up to an
additional 2,000,000 subscription receipts, or common shares, at a price of $6.80 per subscription receipt or common share,
as applicable, in whole or in part, on or within 30 days following closing of the Offering.
The company syndicated its credit facility, which increased Whitecap’s credit limit to $85 million from the previous limit
of $65 million. The new facility consists of a $10 million operating line and a $75 million syndicated facility. The facility
is a borrowing base facility subject to semi-annual review by the bank, with the next review scheduled for the fall of 2011.
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 capital expenditures on projects that are in progress;
/
/
/
/
estimated depletion, depreciation 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 asset retirement obligations that are dependent upon estimates of future costs and timing
of expenditures;
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.
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. Further, 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.
Annual Report 2010
19
International Financial Reporting Standards (IFRS)
In January 2006, the cIcA’s Accounting Standards Board (“AcSB”) formally adopted the strategy of replacing canadian
generally accepted accounting principles (gAAp) with IFRS for canadian enterprises with public accountability.
On February 13, 2008, the AcSB confirmed that the use of IFRS will be required for accounting periods commencing on or
after January 1, 2011, for publicly accountable profit-orientated enterprises.
First-time adoption of IFRS
The financial statements for the year ended December 31, 2011, will be prepared according to IFRS with comparative amounts
for the year ended December 31, 2010. IFRS 1, First-time Adoption of International Financial Reporting Standards, generally
requires that the company apply IFRS on a retrospective basis in its opening balance sheet as at January 1, 2010. IFRS 1 also
provides certain mandatory exceptions and elective exemptions to retrospective application. The company has completed its
analysis and is in the process of finalizing its IFRS adjustments and exemptions as of December 31, 2010.
Significant accounting differences between the company’s current accounting policies under canadian gAAp and expected
accounting policies under IFRS include the following areas:
Property, Plant and Equipment (“PP&E”)
The company, like many other canadian oil and gas reporting issuers, applies the “full-cost” accounting methodology to its
oil and gas assets. Under full-cost, capital expenditures are maintained in a single cost center for each country, and the cost
center is subject to a single depletion calculation and impairment test. However, IFRS requires a more extensive evaluation
of the company’s oil and gas assets.
capital expenditures have to be segregated between exploration and evaluation (“E&E”) and development and production
(“D&p”) assets. In addition, assets have to be aggregated at a component level. On transition, this requires establishing the book
value of the unproved lands and then allocating the remaining carrying value to the D&p assets, based on reserve allocations
for each component.
The company’s unproved land balance as at December 31, 2009 will be the opening balance of E&E at January 1, 2010.
This and any other exploratory assets will be separately disclosed on the balance sheet and in the notes to the financial
statements. E&E assets will be assessed for impairment on January 1, 2010, and thereafter, when amounts are transferred
to property, plant and equipment assets and when indicators exist. For impairment testing, E&E assets are expected to be
combined with pp&E; the excess of carrying amount over recoverable amount is expensed in the period of impairment.
The company’s net book value of pp&E excluding E&E as at December 31, 2009 will be the opening cost of pp&E
at January 1, 2010. This amount was allocated, based on reserve value, to depletable units which consolidate into cash
generating Units (“cgUs”).
The company has determined an appropriate depletion method by depleting at the depletable unit level. In addition, there is
the option to deplete using a reserve base of proved reserves or both proved plus probable reserves. Whitecap is currently
assessing the most appropriate depletion methodology it will use.
Impairment tests will occur if there is any indication that an asset may be impaired and the recoverable amount shall be
estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the company
will determine the recoverable amount of the cgU to which the asset belongs. The company has finalized its cgUs for this
purpose. An impairment test will be performed individually for all cgUs when indicators suggest there may be impairment.
There will be more cgUs than the single full-cost pool. The recognition of impairment in a prior year can be reversed should the
conditions that caused the impairment improve.
20
Whitecap Resources
Decommissioning costs
provisions, contingent liabilities and assets, including asset retirement obligations (“ARO”) are identified and calculated
differently under IFRS. ARO calculations are expected to be impacted due to differences in the election of the discount rates
to be used to present value the liability. In addition, under IFRS, ARO is required to be revalued each reporting period at the then
prevailing interest rate. This may increase or decrease the ARO recorded on the balance sheet depending on the movement
of interest rates. In addition, onerous contracts will require identification and, to the extent they exist, must be recorded
as a liability on the balance sheet.
Share-based compensation
Share-based payments are expensed, based on a graded vesting schedule. Also, the company will be required to incorporate
a forfeiture multiplier rather than account for forfeitures as they occur under canadian gAAp. The company’s current
accounting policy is aligned with the IFRS standard and does not expect any differences.
Provisions
Under IFRS, a provision is recorded if there is a present (legal or constructive) obligation as a result of a past event.
A constructive obligation arises when an entity creates a valid expectation to other parties that it will discharge certain
responsibilities based on an established pattern of past practice or published policies. IFRS provides a more precise definition
and specific examples of a constructive obligation; a provision may be recognized at a different point in time depending
on past practice of determining when an equitable or contractual obligation exists under canadian gAAp.
Under canadian gAAp, a contingent liability is recognized when it is likely that a future event will confirm a liability has been
incurred and the amount of the loss can be reasonably estimated. Under IFRS, a provision is recognized when there is a present
obligation, it is more likely than not an outflow of resources will be required to settle the obligation and reliable estimates can be
made of the amount of the obligation. This could potentially lead to situations where a provision may be recognized under IFRS,
but was not previously recognized under canadian gAAp. When measuring provisions, canadian gAAp allows issuers to accrue
provisions at the low end of the range of estimates when no outcome is more likely than other others. Under IFRS, the mid-point
of the range is used to measure the provision when each outcome in a range is as likely as any other. This could potentially lead
to provisions being accrued at higher amounts.
IFRS 1 Exemptions
First-Time Adoption of IFRS (IFRS 1) provides entities adopting IFRS for the first time with a number of optional exemptions and
mandatory exceptions, in certain areas, to the general requirement for full retrospective application of IFRS. The company plans
to take advantage of optional exemptions in two main areas:
/
/
Value the opening cost of E&E and pp&E assets at the net book value determined under canadian gAAp on
January 1, 2010, rather than applying IFRS rules retrospectively. pp&E assets accumulated in the cost centers
shall be allocated to depletable units using reserve volumes or reserve values.
Value past business combinations at the amounts determined under canadian gAAp, rather than applying IFRS rules
retrospectively. note that on January 1, 2010, the company continued to use the canadian Handbook Section 1581,
which is not aligned with IFRS 3, therefore differences in this area will arise in the 2010 comparatives.
The above is not intended to be a complete and comprehensive disclosure of all the possible significant accounting differences
between the company’s current canadian gAAp accounting policies and those expected under IFRS. The company has
analyzed the accounting policy choices available under IFRS and selected the ones best suited for its operations. At this time
the company is in the final stages of internal approval and discussing the choices with its external auditors. The company
will disclose additional information as the impacts, effects and policy choices are finalized. Any amendments to existing IFRS
standards or implementation of new IFRS standards could lead to additional changes.
Annual Report 2010
21
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, financial and liquidity risks and environmental
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 an independent engineering consulting firm that assists 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 may vary from
actual results.
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 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 may periodically use futures and options contracts to hedge its exposure to the potential adverse impact of commodity
price volatility.
Exploration and production for oil and gas is very capital intensive. As a result, the company relies on 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 from operations also provide Whitecap with capital required to grow in its
business. Equity and debt capital are subject to market conditions and availability may increase or decrease from time to time.
Funds from operations also fluctuate with changing commodity prices.
Environmental 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 and destruction of natural habitat, as well as safety risks such as personal injury.
The company works hard to understand the sensitivities of the environments in which it operates and its responsibilities from
the beginning to the end. It also strives to identify the potential environmental impacts of its new projects, in the planning stage
and during operations. The company conducts its operations with high standards in order to protect the environment and
the general public. 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.
22
Whitecap Resources
Climate Change
World leaders gathered in copenhagen in December 2009 to discuss climate policy. Even though consensus was not achieved,
the message from the copenhagen Accord was clear: greenhouse gases (“gHg”) and other air pollutants must be regulated
in order to deal effectively with climate change. gHg emissions can be measured as carbon dioxide equivalents (“cO2E”)
and would consist of carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.
The Federal government of canada has announced its intention to regulate gHg and other air pollutants. As these regulations
are under development, the company is unable to predict the total impact of the potential regulations upon its business.
The Alberta government has set targets for gHg emission reductions. Alberta Environment required all facilities that exceeded
100,000 tonnes of cO2E to reduce their gHg emissions intensity by 12% versus an established baseline emissions intensity.
In order to comply with the Alberta regulations, companies can make operating improvements to their facilities, purchase carbon
offsets or make a monetary contribution to the Alberta climate change and Emissions Management Fund.
Selected Annual Information
($000s except per share amounts)
FInAncIAL
Total commodity revenue
Funds from (used in) operations
Basic & diluted ($/share)
net (loss)
Basic & diluted ($/share)
Development capital expenditures
corporate and property acquisitions (cash-based)
Total assets
Bank debt and working capital(1)
common shares outstanding (000s)(3)
OpERATIOnAL
Average daily production
crude oil (bbls/d)
natural gas (Mcf/d)
ngLs (bbls/d)
Total (boe/d)
Summary of quarterly results (“unaudited”)
($000s, except as noted)
FInAncIAL
Total commodity revenue
Funds from (used in) operations
Basic & diluted ($/share)
net income (loss)
Basic & diluted ($/share)
Development capital expenditures
corporate and property acquisitions (cash-based)
Total assets
Bank debt and working capital(1)
common shares outstanding (000s)(3)
OpERATIOnAL
Average daily production
crude oil (bbls/d)
natural gas (Mcf/d)
ngLs (bbls/d)
Total (boe/d)
(1) Excludes risk management contracts.
(2) 83 common shares were issued on incorporation.
(3) Reflects 8.33 share exchange and 10 to 1 share consolidation.
2010
2009
2008
25,991
11,706
0.51
(9,623)
(0.42)
41,579
52,572
207,424
29,545
41,826
631
4,141
112
1,433
4,799
997
0.21
(1,224)
(0.26)
429
56,511
59,060
10,315
15,312
105
855
28
275
–
(126)
–
(129)
68
–
192
(194)
(2)
–
–
–
–
2010
2009
Q4
Q3
Q2
Q1
q4
q3
q2
q1
–
3,999
1,938
0.12
(712)
(0.04)
7,252
303
9,746
3,681
0.11
(4,361)
(0.13)
15,870
8,728
7,778
3,998
0.14
(4,916)
(0.16)
14,639
41,962
4,468
2,089
0.14
23
0.00
3,818
1,579
207,424 184,345 108,905 64,166 59,060 60,307 222 172
21,014 13,574 10,315 11,965 475 313
29,545
(2)
22,259 15,333 15,312 14,994
41,826
–
1,068
3,731
(154) (111)
4
1,258
0.00
–
0.08
(430) (163) (119)
(512)
–
(0.10)
(0.03)
411
13
2
(39) 56,550
46,674
31,448
–
3
(2)
–
973
5,379
145
2,014
861
4,828
121
1,787
343
3,192
89
964
337
3,131
94
953
308
2,470
86
806
108
922
24
285
–
–
–
–
–
–
–
–
Annual Report 2010
23
For the period from incorporation to August 31, 2009, Whitecap did not have any petroleum and natural gas properties.
In September 2009, the company closed the acquisition of the Valhalla north assets located in Alberta. The assets were
acquired under the terms of an agreement whereby Whitecap and a private company jointly acquired the assets. Whitecap
acquired a 50 percent operated interest in the assets for cash consideration of approximately $58 million prior to purchase
price adjustments.
In the second quarter of 2010, the company completed the reverse takeover of Spitfire whereby each shareholder of Whitecap
received 8.33 common shares of Spitfire in exchange for each Whitecap share. On July 1, 2010, Spitfire amalgamated with its
wholly-owned subsidiary Whitecap Resources Inc. and changed its name to Whitecap Resources Inc.
In the third quarter of 2010, the company completed the acquisition of Onyx 2006 Inc. (“Onyx”) for consideration of approximately
$52.0 million. In connection with the acquisition of Onyx, Whitecap completed a bought deal finance offering of 8.9 million
subscription receipts at $4.50 per subscription receipt for total gross proceeds of $40.1 million. The outstanding receipts were
exchanged for common shares effective July 30, 2010.
In the fourth quarter of 2010, the company completed a bought deal finance offering of 6.9 million common shares at
$5.85 per common share for total gross proceeds of $40.4 million. proceeds for the offering were used to initially reduce bank
debt and subsequently used to purchase a partner’s working interest in the peace River Arch area. Additionally during the fourth
quarter, holders of the $10.0 million convertible debenture elected to convert the instrument into approximately 3.5 million
common shares.
NON-GAAP MEASURES
This document contains the terms “funds from operations” and “operating netbacks”, which do not have a standardized
meaning prescribed by canadian gAAp and therefore may not be comparable with the calculation of similar measures by other
companies. Whitecap uses funds from operations and operating netbacks to analyze financial and operating performance.
Whitecap feels these benchmarks are key measures of profitability and overall sustainability for the company. Both of these
terms are commonly used in the oil and gas industry. Funds from operations and operating netbacks are not intended
to represent operating profits nor should they be viewed as an alternative to cash flow provided by operating activities,
net earnings or other measures of financial performance calculated in accordance with gAAp. Funds from operations are
calculated as cash flows from operating activities less changes in non-cash working capital. Operating netbacks are determined
by deducting royalties, production expenses and transportation and selling expenses from oil and gas revenue. The company
calculates funds from operations per share using the same method and shares outstanding that are used in the determination
of earnings per share.
($000s)
cash flow from operating activities
changes in non-cash working capital
Funds from operations
2010
6,083
5,623
11,706
2009
602
395
997
24
Whitecap Resources
FORWARD-LOOKING INFORMATION AND STATEMENTS
This document may contain certain forward-looking information and statements within the meaning of applicable securities
laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”,
“should”, “believe”, “plans”, “intends”, “strategy” and similar expressions are intended to identify forward-looking information
or statements. In particular, but without limiting the foregoing, this document may contain forward-looking information and
statements pertaining to the following: projected average and exit production rates; the volumes and estimated value of Whitecap’s
oil and gas reserves; the life of Whitecap’s reserves; the volume and product mix of Whitecap’s oil and gas production; future oil
and natural gas prices and Whitecap’s commodity risk management programs; the amount of future asset retirement obligations;
future liquidity and financial capacity; future results from operations and operating metrics; future costs, expenses and royalty
rates; future interest costs; future development, exploration, acquisition and development activities (including drilling plans) and
related capital expenditures and future taxes payable by Whitecap; and Whitecap’s tax pools.
The forward-looking information and statements contained in this document reflect several material factors and expectations
and assumptions of Whitecap including, without limitation: that Whitecap will continue to conduct its operations in
a manner consistent with past operations; the general continuance of current industry conditions; the continuance of existing
(and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the accuracy of the
estimates of Whitecap’s reserve and resource volumes; certain commodity price and other cost assumptions; and the
continued availability of adequate debt and equity financing and cash flow to fund its planned expenditures; 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 document 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: changes in commodity prices; changes in the demand for or supply of Whitecap’s
products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates
or other regulatory matters; changes in development plans of Whitecap or by third party operators of Whitecap’s properties,
increased debt levels or debt service requirements; inaccurate estimation of Whitecap’s oil and gas reserve and resource
volumes; limited, unfavorable or a lack of access to capital markets; increased costs; 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 document).
The forward-looking information and statements contained in this document speak only as of the date of this document,
and none of Whitecap or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or
circumstances, except as may be required pursuant to applicable laws.
Annual Report 2010
25
MANAGEMENT’S
REPORT
Management is responsible for the integrity and objectivity of the information contained in this annual report and for the
consistency between the financial statements and other financial operating data contained elsewhere in the report.
The accompanying financial statements have been prepared by management in accordance with accounting principles
generally accepted in canada using estimates and careful judgment, particularly in those circumstances where transactions
affecting a current period are dependent upon future events. The accompanying financial statements have been prepared
using policies and procedures established by management and reflect fairly the company’s financial position, results
of operations and cash flow, within reasonable limits of materiality and within the framework of the accounting policies
as outlined in the notes to the financial statements.
Management has established and maintained a system of internal control which is designed to provide reasonable assurance
that assets are safeguarded from loss or unauthorized use and the financial information is reliable and accurate. The Audit
committee of the Board of Directors has reviewed in detail the financial statements with management and the external auditors.
The financial statements have been approved by the Board of Directors on the recommendation of the Audit committee.
gRAnT B. FAgERHEIM
pRESIDEnT AnD cEO
March 22, 2011
THAnH kAng
VIcE pRESIDEnT FInAncE AnD cFO
26
Whitecap Resources
INDEPENDENT
AUDITORS’
REPORT
To the Shareholders of Whitecap Resources Inc.
We have audited the accompanying financial statements of Whitecap Resources Inc., which comprise the balance sheets
as at December 31, 2010 and December 31, 2009 and the statements of operations, comprehensive loss and deficit and cash
flows for the periods then ended, and the related notes including a summary of significant accounting policies.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with canadian
generally accepted accounting principles, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in
accordance with canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Whitecap Resources Inc.
as at December 31, 2010 and December 31, 2009 and the results of its operations and its cash flows for the periods then
ended in accordance with canadian generally accepted accounting principles.
cHARTERED AccOUnTAnTS
cALgARy, ALBERTA
March 22, 2011
Annual Report 2010
27
bALANCE
SHEET
AS AT DEcEMBER 31
($000s)
ASSETS
current Assets
cash
Accounts receivable
Deposits and prepaid expenses
Risk management contracts
properties and equipment [note 5]
Future income tax asset [note 14]
LIABILITIES
current Liabilities
Accounts payable and accrued liabilities
Bank debt [note 7]
Risk management contracts [note 13]
convertible debentures [note 8]
Asset retirement obligation [note 9]
Future income tax liability [note 14]
SHAREHOLDERS’ EqUITy
Share capital [note 10]
Equity component of debentures [note 8]
contributed surplus [note 10]
Deficit
See accompanying notes to financial statements
Approved on behalf of the Board:
2010
2009
10
10,212
727
–
10,949
196,475
–
207,424
22,941
17,553
1,977
42,471
–
4,180
11,719
58,370
151,994
–
8,036
(10,976)
149,054
207,424
5
1,886
434
24
2,349
56,049
662
59,060
2,060
10,580
–
12,640
9,594
1,309
–
23,543
36,104
425
341
(1,353)
35,517
59,060
STEpHEn c. nIkIFORUk
DIREcTOR
gRAnT B. FAgERHEIM
DIREcTOR
28
Whitecap Resources
STATEMENT OF OPERATIONS,
COMPREHENSIVE LOSS
AND DEFICIT
FOR THE yEAR EnDED DEcEMBER 31
($000s, except per share amounts)
REVEnUE
petroleum and natural gas revenue
Royalties
Other income
Realized gain on risk management contracts
Unrealized gain (loss) on risk management contracts [note 13]
EXpEnSES
Operating
Transportation
general and administrative [note 10]
Interest and financing
Depletion, depreciation and accretion
net loss before income taxes
TAXES
Future income tax recovery [note 14]
net loss and other comprehensive loss
DEFIcIT, BEgInnIng OF pERIOD
DEFIcIT, EnD OF pERIOD
nET LOSS pER SHARE [note 11]
Basic and diluted ($/share)
See accompanying notes to financial statements
2010
2009
25,991
(3,891)
336
22,436
543
(2,001)
20,978
6,659
866
7,697
1,984
15,421
32,627
(11,649)
2,026
(9,623)
(1,353)
(10,976)
4,799
(932)
19
3,886
–
24
3,910
1,199
181
1,313
599
2,263
5,555
(1,645)
421
(1,224)
(129)
(1,353)
(0.42)
(0.26)
Annual Report 2010
29
2010
2009
(9,623)
(1,224)
15,421
(2,026)
5,764
169
2,001
11,706
(5,623)
6,083
6,973
–
84,207
–
(16,975)
74,205
(41,579)
(52,572)
13,868
(80,283)
5
5
10
1,815
–
2,263
(421)
341
61
(24)
997
(394)
602
10,580
(300)
35,863
9,958
–
56,101
(429)
(56,511)
200
(56,740)
(37)
42
5
538
–
STATEMENT
OF CASH FLOWS
FOR THE yEAR EnDED DEcEMBER 31
($000s)
OpERATIng AcTIVITIES
net loss for the period
Items not affecting cash:
Depletion, depreciation and accretion
Future income taxes
Stock-based compensation
non-cash interest expense [note 8]
Unrealized (gain) loss on risk management contracts [note 13]
net change in non-cash working capital items
FInAncIng AcTIVITIES
Increase in bank debt
Related party repayment [note 15]
Issuance of share capital, net of share issue costs
Issuance of convertible debentures, net of financing costs
Repayment of acquisition debt
InVESTIng AcTIVITIES
Expenditures on property, plant and equipment
Expenditures on corporate and property acquisitions
net change in non-cash working capital items
Increase (decrease) in cash, during the period
cash, beginning of period
cash, end of period
cash interest paid
cash taxes paid
See accompanying notes to financial statements
30
Whitecap Resources
NOTES TO FINANCIAL
STATEMENTS
1. NATURE OF bUSINESS
Whitecap Resources Inc. (also referred to herein as “Whitecap” or “the company”) is an oil and natural gas exploration,
development and production company based in calgary, Alberta, canada. The company’s operations are in Alberta
and Saskatchewan.
On June 25, 2010, the company completed the reverse takeover of Spitfire Energy Ltd. (“Spitfire”) which provided for
(i) a recapitalization of the company through a private placement; (ii) the appointment of a new management team and
a new board of directors; (iii) the acquisition of an oil-weighted asset base in southwest Saskatchewan.
On July 1, 2010, Spitfire amalgamated with its wholly-owned subsidiary Whitecap Resources Inc. and changed its name
to Whitecap Resources Inc. The comparative financial statements of the company for the year ended December 31, 2010
include the operating results of Whitecap prior to the reverse takeover and the results of the combined entities after
June 25, 2010.
2. SUMMARY OF ACCOUNTING POLICIES
bASIS OF PRESENTATION
The financial statements are stated in canadian dollars and have been prepared by management in accordance with canadian
generally accepted accounting principles (“gAAp”). The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies
at the date of the financial statements, and revenues and expenses during the reporting year. Actual results could differ from
those estimated.
MEASUREMENT UNCERTAINTY
The amounts recorded for the fair value of financial instruments, stock-based compensation, depreciation, depletion and
accretion, the provision for asset retirement obligations and the provision for future income taxes are based on estimates.
In addition, the ceiling test calculation is based on estimates of proved reserves, production rates, oil and gas prices,
future costs and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the
impact on the financial statements of future periods could be material.
REVENUE RECOGNITION
Revenue associated with the sale of crude oil, natural gas and natural gas liquids (“ngLs”) owned by Whitecap are recognized
when title passes from Whitecap to its customers and collectability is reasonably assured.
TRANSPORTATION
costs paid by Whitecap for the transportation of natural gas, crude oil and ngLs from the wellhead to the point of title transfer
are recognized when the transportation is provided.
JOINT INTERESTS
Whitecap conducts a significant portion of its oil and gas production activities through jointly controlled operations and the
financial statements reflect only Whitecap’s proportionate interest in such activities.
Annual Report 2010
31
DEPLETION AND DEPRECIATION
Depletion of petroleum and natural gas properties and depreciation of production equipment are calculated on the
unit-of-production basis based on:
(a) total estimated proved reserves calculated in accordance with national Instrument 51-101, Standards of Disclosure
for Oil and gas Activities;
(b) total capitalized costs, excluding unproved lands, plus estimated future development costs of proved undeveloped
reserves, including future estimated asset retirement costs; and
(c) relative volumes of petroleum and natural gas reserves and production, before royalties, converted at the energy
equivalent conversion ratio of six thousand cubic feet of natural gas to one barrel of oil.
PROPERTY, PLANT AND EqUIPMENT (“PP&E”)
Whitecap follows the full cost method of accounting. All costs of exploring, developing, enhancing and acquiring petroleum and
natural gas properties, including asset retirement costs, are capitalized and accumulated in one cost centre as all operations are
in canada. Maintenance and repairs are charged against operations and renewals and enhancements that extend the economic
life of the pp&E are capitalized. gains and losses are not recognized upon disposition of petroleum and natural gas properties
unless such a disposition would alter the rate of depletion by 20 percent or more.
IMPAIRMENT
Impairment is recognized if the carrying amount of the pp&E exceeds the sum of the undiscounted cash flows expected
to result from Whitecap’s proved reserves. cash flows are calculated based on third party quoted forward prices, adjusted for
Whitecap’s contract prices and quality differentials.
Upon recognition of impairment, Whitecap would then measure the amount of impairment by comparing the carrying amounts
of the pp&E to an amount equal to the estimated net present value of future cash flows from proved plus risked probable
reserves. Whitecap’s risk-free interest rate is used to arrive at the net present value of the future cash flows. Any excess carrying
value above the net present value of Whitecap’s future cash flows would be recorded as a permanent impairment and charged
against operations.
The cost of unproved properties is excluded from the impairment test described above and subject to a separate impairment
test. In the case of impairment, the book value of the impaired properties is moved to the petroleum and natural gas
depletable base.
ASSET RETIREMENT ObLIGATIONS
Whitecap recognizes an Asset Retirement Obligation (“ARO”) in the period in which it is incurred when a reasonable estimate
of the fair value can be made. On a periodic basis, management will review these estimates and changes, if any, will be
applied prospectively. The fair value of the estimated ARO is recorded as a long-term liability, with a corresponding increase
in the carrying amount of the related asset. The capitalized amount is depleted on a unit-of-production basis over the life
of the reserves. The liability amount is increased each reporting period due to the passage of time and the amount
of accretion is charged to operations in the period. Revisions to the estimated timing of cash flows or to the original estimated
undiscounted cost would also result in an increase or decrease to the ARO. Actual costs incurred upon settlement of the
obligation are charged against the ARO to the extent of the liability recorded.
32
Whitecap Resources
STOCK-bASED COMPENSATION
Whitecap has a stock-based compensation plan and uses the fair-value method to record compensation expense with respect
to stock options granted. The fair value of each option granted is estimated on the date of grant and a provision for the costs
is provided for as contributed surplus over the vesting period outlined in the option agreement. The consideration received by
the company on the exercise of share options is recorded as an increase to share capital together with corresponding amounts
previously recognized in contributed surplus. Forfeitures are accounted for as they occur which could result in recoveries of the
compensation expense.
INCOME TAxES
Whitecap follows the liability method of accounting for income taxes. Under this method, income tax liabilities and assets
are recognized for the estimated tax consequences attributable to differences between the amounts reported in the financial
statements of Whitecap and their respective tax base, using substantively enacted future income tax rates. The effect of
a change in income tax rates on future tax liabilities and assets is recognized in income in the period in which the change
occurs, provided that the income tax rates are substantively enacted. Temporary differences arising on acquisitions result in
future income tax assets and liabilities.
FINANCIAL INSTRUMENTS
Financial assets, financial liabilities and non-financial derivatives are measured at fair value on initial recognition.
Measurement in subsequent periods depends on whether the financial instrument has been classified as held-for-trading,
available-for-sale, held-to-maturity loans and receivables, or other financial liabilities.
(a) Held-for-trading
Financial assets and liabilities designated as held-for-trading are subsequently measured at fair value with changes in those
fair values charged immediately to operations. Whitecap classifies all risk management contracts as held-for-trading. cash
and cash equivalents are also classified as held-for-trading.
(b) Available-for-sale assets
Available-for-sale financial assets are subsequently measured at fair value with changes in fair value recognized in
Other comprehensive Income (“OcI”), net of tax. Amounts recognized in OcI for available-for-sale financial assets are
charged to operations when the asset is derecognized or when there is an other than temporary asset impairment.
(c) Held-to-maturity investments, loans and receivables and other financial liabilities
Held-to-maturity investments, loans and receivables and other financial liabilities are subsequently measured at amortized
cost using the effective interest method. Whitecap classifies accounts receivable as loans and receivables, and accounts
payable, bank debt and convertible debentures as other financial liabilities.
Financing costs are shown as a reduction in the carrying value of long-term debt and are being expensed over the term of the
debt using the effective interest method.
Annual Report 2010
33
3. NEW ACCOUNTING POLICIES
current Accounting changes
/
/
The cIcA issued sections 1601 “consolidated Financial Statements” and 1602 “non-controlling Interests”, which
replaces existing guidance under Section 1600 “consolidated Financial Statements”. Section 1601 establishes
standards for the preparation of consolidated financial statements, and section 1602 provides guidance on accounting
for a non-controlling interest in a subsidiary. These standards will be effective on January 1, 2011. The adoption of these
sections does not impact the company’s financial statements at this time.
“Business combinations”, Section 1582, which replaces the previous business combinations standard. The standard
requires assets and liabilities acquired in a business combination, contingent consideration and certain acquired
contingencies to be measured at their fair values as of the date of acquisition. In addition, acquisition-related and
restructuring costs are recognized separately from the business combination and are included in the statement of
operations. The adoption of this standard impacts the accounting treatment of business combinations entered into
after January 1, 2011. The standard allows for companies to use “Business combinations”, Section 1581 until the end
of 2010. The company has opted to use Section 1581.
The above cIcA Handbook sections are converged with International Financial Reporting Standards (“IFRS”). Whitecap
will be required to report its results in compliance with IFRS beginning in 2011 and is in the process of implementation
of IFRS accordingly.
4. FINANCIAL ASSETS AND CREDIT RISK
credit risk is the risk of financial loss to Whitecap if a partner or counterparty to a product sales contract or financial instrument
fails to meet its contractual obligations. Whitecap is exposed to credit risk with respect to its accounts receivable and risk
management contracts. Most of Whitecap’s accounts receivable relate to oil and natural gas sales and are subject to typical
industry credit risks. Whitecap manages this credit risk as follows:
/
By entering into sales contracts with only established credit worthy counterparties as verified by a third party rating agency,
through internal evaluation or by requiring security such as letters of credit;
/ By limiting exposure to any one counterparty; and
/
By restricting cash equivalent investments and risk management transactions to counterparties that, at the time of
transaction, are not less than investment grade.
The majority of the credit exposure on accounts receivable at December 31, 2010 pertains to accrued revenue for December
2010 production volumes. Whitecap transacts with a number of oil and natural gas marketing companies and commodity end
users (“commodity purchasers”). commodity purchasers and marketing companies typically remit amounts to Whitecap by
the 25th day of the month following production. Joint interest receivables are typically collected within one to three months
following production. At December 31, 2010, no one counterparty accounted for more than 25 percent of the total accounts
receivable balance.
During the twelve months of 2010, Whitecap has not experienced any material credit loss in the collection of receivables.
When determining whether amounts that are past due are collectable, management assesses the credit worthiness and past
payment history of the counterparty, as well as the nature of the past due amount. Whitecap considers all amounts greater than
90 days to be past due. As at December 31, 2010, there was $0.6 million of receivables aged over 90 days. Subsequent to
December 31, 2010, approximately $0.5 million has been collected and the remaining balance is not considered to be a credit
risk. Maximum credit risk is calculated as the total recorded value of accounts receivable and risk management contracts at
the balance sheet date.
34
Whitecap Resources
5. ACqUISITIONS
(a) Spitfire Energy Ltd. (Reverse takeover)
On June 25, 2010, Whitecap shareholders received approximately 15.3 million shares of Spitfire. The total consideration
has been valued based on a share price of $3.33 per Spitfire share outstanding plus net debt of approximately $8.6 million.
For accounting purposes the transaction was accounted for as a reverse takeover with Whitecap deemed to be the acquirer and
Spitfire deemed to be the acquiree. The acquisition will be recorded by the elimination of the share capital, contributed surplus
and deficit of Spitfire.
nET ASSETS AcqUIRED ($000s):
non-cash working capital deficiency
petroleum and natural gas properties
Asset retirement obligations
Future income tax liability
cOnSIDERATIOn
Issuance of shares
Transaction costs
(b) Onyx 2006 Inc. (“Onyx”)
2010
(8,571)
34,355
(636)
(4,063)
21,085
20,002
1,083
21,085
On July 30, 2010, Whitecap acquired all the issued and outstanding shares of Onyx for an aggregate purchase price
of approximately $52 million which included $40.5 million payable in cash to the shareholders of Onyx and the assumption
of approximately $11.0 million of total net liabilities.
nET ASSETS AcqUIRED ($000s):
non-cash working capital deficiency
petroleum and natural gas properties
Asset retirement obligations
Future income tax liability
cOnSIDERATIOn
cash consideration paid
Transaction costs
PROPERTY AND EqUIPMENT
($000s)
petroleum and natural gas properties
Other assets
Less: accumulated depletion and depreciation
Total net book value
2010
(10,958)
63,440
(692)
(10,876)
40,914
40,534
380
40,914
2009
58,134
152
(2,237)
56,049
2010
213,673
279
(17,477)
196,475
Annual Report 2010
35
At December 31, 2010, approximately $13.5 million (2009 – $0.8 million) of unproved property and salvage value
of $2.5 million (2009 – $1.0 million) was excluded from the depletion calculation. Future development costs of $69.8 million
(2009 – $7.7 million) were included in the depletion calculation.
During the twelve months ended December 31, 2010, the company capitalized $3.3 million (2009 - $0.1 million)
of administrative costs directly relating to exploration and development activities which includes $2.2 million (2009 - $nil)
of stock-based compensation.
The company performed a ceiling test calculation at December 31, 2010. no impairment was recorded as a result of
the calculation.
The forecasted future prices used in the ceiling test evaluation of the company’s reserves as at December 31, 2010 were
as follows:
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Remainder(1)
WTI Oil
(US$/bbl)
85.00
87.70
90.50
93.40
96.30
99.40
101.40
103.40
105.40
107.60
109.70
111.90
114.10
116.40
118.80
2.0%
AEcO-c
cdn$/US$
(cdn$/MMbtu) Exchange rates
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
0.975
4.25
4.90
5.40
5.90
6.35
6.75
7.10
7.40
7.60
7.75
7.85
8.05
8.20
8.40
8.50
2.0%
(1) The prices increase at an average inflation rate of 2 percent every year thereafter.
6. FINANCIAL LIAbILITIES AND LIqUIDITY RISK
Liquidity risk is the risk that Whitecap will not be able to meet its financial obligations as they become due. Whitecap actively
manages its liquidity through cash, debt and equity management strategies. Such strategies include continuously monitoring
forecasted and actual cash flows from operating, financing and investing activities, available credit under existing banking
arrangements and opportunities to issue additional common shares. Management believes that future cash flows generated
from these sources will be adequate to settle Whitecap’s financial liabilities.
The following table details Whitecap’s financial liabilities as at December 31, 2010:
($000s)
Accounts payable and accrued liabilities
Bank debt
Risk management contracts
Total financial liabilities
<1 year
22,941
17,553
1,977
42,471
2 to 3 years
–
–
–
–
Total
22,941
17,553
1,977
42,471
Whitecap actively maintains credit and working capital facilities to ensure that it has sufficient available funds to meet its
financial requirements at a reasonable cost. Refer to note 7 for further details on available amounts under existing banking
arrangements, note 12 for further details on capital management.
36
Whitecap Resources
7. CREDIT FACILITIES
At December 31, 2010, the company had a $65.0 million operating loan facility with a canadian Financial Institution. Borrowings
under the facility bear interest at the lender’s prime rate plus 1.25 percent or, at the company’s option, guaranteed notes at
the lender’s base rate plus 2.75 percent. The loan is payable on demand and is secured by a $200 million debenture over the
company’s real properties, a floating charge over all present and after acquired real property interests, and a security interest
over all present and after acquired personal property. The company must maintain a working capital ratio of not less than 1:1.
The financial ratio is calculated as current assets plus undrawn amounts under the facility divided by current liabilities less
amounts drawn under the facility. At December 31, 2010, Whitecap is in compliance with all covenants under the credit facility.
8. CONVERTIbLE DEbENTURES
On August 10, 2009, the company issued $10 million principal amount of 8 percent secured convertible debentures. Interest
is paid quarterly in arrears and the conversion price for the debentures is $2.88 per share. On December 7, 2010, the holders
of the convertible debenture elected to convert the entire principal amount outstanding into approximately 3.5 million common
shares. The outstanding debt and equity portion of the convertible debentures were transferred to share capital on conversion,
while the remaining financing costs were expensed.
($000s)
Balance, December 31, 2008
non-cash interest expense
Balance, December 31, 2009
non-cash interest expense
conversion into common shares
Balance, December 31, 2010
Debt
portion
9,575
56
9,631
132
(9,763)
–
Financing
cost
(42)
5
(37)
37
–
Total
Debt
9,533
61
9,594
169
(9,763)
–
Equity
portion
425
–
425
–
(425)
–
principal
Outstanding
10,000
–
10,000
–
(10,000)
–
9. ASSET RETIREMENT ObLIGATION
($000s)
Asset retirement obligation, December 31, 2009
Liabilities incurred
Liabilities acquired
Revision in estimates
Accretion expense
Asset retirement obligation, December 31, 2010
2010
1,309
217
1,720
753
181
4,180
2009
–
–
1,279
–
30
1,309
The key assumptions, on which the carrying amount of the asset retirement obligation is based, include a credit adjusted
risk-free rate of 8 percent and inflation rate of 2 percent. The total undiscounted amount of the estimated cash flows required
to settle the obligations was $11.6 million (2009 – $6.1 million). The expected timing of payment of the cash flows required for
settling the obligations ranges from 2 to 48 years.
Annual Report 2010
37
10. SHARE CAPITAL
On June 25, 2010, as a result of the reverse takeover of Spitfire, one Whitecap share was exchanged for 8.33 Spitfire shares.
On July 1, 2010, Spitfire amalgamated with its wholly-owned subsidiary Whitecap and changed its name to Whitecap Resources
Inc. On October 18, 2010, Whitecap consolidated its common shares on a 10 to 1 basis. All figures have been presented as
if the 8.33 exchange ratio and 10 to 1 share consolidation occurred on January 1, 2009.
a) Authorized
Unlimited number of common shares without nominal or par value.
b) Issued and outstanding
2010
2009
(000s)
Balance, beginning of period
Issued for cash through private offering
Reverse takeover bid of Spitfire(1)
Issued for cash through private offering(1)
Stock option exercises
contributed surplus adjustment on exercise of stock options
Issued for cash through public prospectus offering(2)
convertible debenture(3)
Share issue costs, net of future income tax
Balance, end of period
shares
15,312
21
3,792
3,100
329
–
15,800
3,472
–
41,826
$
36,104
50
20,002
7,750
881
235
80,415
10,188
(3,631)
151,994
Shares
–
15,312
–
–
–
–
–
–
–
15,312
$
–
36,764
–
–
–
–
–
–
(660)
36,104
(1) Reverse takeover bid
On June 25, 2010, the company completed the reverse takeover of Spitfire whereby each shareholder of Whitecap received
8.33 common shares of Spitfire in exchange for each Whitecap share totaling 15.3 million shares. As part of the reverse
takeover, Spitfire also completed a $7.75 million non-brokered private placement (the “private placement”) of 1.6 million units
of Spitfire at a price of $2.50 per unit, with each unit comprised of one common share and one common share purchase warrant
entitling the holder to purchase one common share at a price of $2.50 for a period of five years and 1.5 million common shares
at a price of $2.50 per common share. The private placement units and common shares are subject to an 18 month escrow,
pursuant to which 25 percent of such security was released from escrow on July 12, 2010 and 25 percent released every
six months thereafter. On July 1, 2010, Spitfire amalgamated with its wholly-owned subsidiary Whitecap Resources Inc. and
changed its name to Whitecap Resources Inc.
(2) Share subscription
On July 30, 2010, the company completed a bought deal finance offering of 8.9 million subscription receipts of Whitecap
common shares at a price of $4.50 per subscription receipt for total gross proceeds of $40.1 million. concurrent with the closing
of the Onyx acquisition, the outstanding subscription receipts of Whitecap were exchanged for common shares of Whitecap
effective July 30, 2010.
On December 22, 2010, the company completed a bought deal finance offering of 6.9 million subscription receipts of Whitecap
common shares at a price of $5.85 per subscription receipt for total gross proceeds of $40.4 million.
(3) Conversion of convertible debenture
On December 7, 2010, the holders of the convertible debenture elected to convert the entire principal amount outstanding into
approximately 3.5 million common shares. Refer to note 8 for further details.
38
Whitecap Resources
c) Stock options
Under the Stock Option plan, the Board of Directors may grant to any director, officer, employee or consultant, options
to acquire common shares of the company. Stock options granted under the stock option plan have a term of four years to expiry.
Vesting is determined by the company’s board of directors. currently, all of the options granted vest equally over a three year
period commencing on the first anniversary date of the grant. Each stock option granted permits the holder to purchase one
common share of the company at the stated exercise price.
(000s except per share amounts)
Balance, December 31, 2008
granted
Balance, December 31, 2009
granted
Acquired(1)
Exercised
Expired
Forfeited
Balance, December 31, 2010
number of Options
–
1,393
1,393
760
276
(329)
(3)
(83)
2,014
Weighted Average
Exercise price ($)
–
2.40
2.40
3.55
2.75
2.68
5.58
2.40
2.82
(1) pursuant to the reverse takeover transaction, all outstanding Spitfire options vested upon the close of the transaction and all unexercised options in the period expired on
September 24, 2010 in accordance with the Spitfire option agreement.
Exercise
price ($)
2.40 - 2.99
3.00 - 4.49
4.50 - 6.50
2.40 - 6.50
number
Outstanding
1,325
417
272
2,014
Weighted
Average
Remaining
contractual
Life (years)
2.7
3.4
3.6
3.0
Weighted
Average
Exercise
price
($/share)
2.40
3.00
4.61
2.82
number
Exercisable
423
–
–
423
Weighted
Average
Exercise
price
($/share)
2.40
–
–
2.40
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with
weighted average assumptions for grants in the period is as follows:
Risk-free interest rate
Expected life (year)
Expected volatility
Expected dividend yield
Weighted average fair value ($/option)
2010
2.15%
4
65%
–
$1.79
2009
2.31%
4
65%
–
$1.22
Included in general and administrative expenses is non-cash stock-based compensation expense of $5.8 million
(2009 – $0.3 million).
Annual Report 2010
39
d) Warrants
On June 25, 2010, performance warrants were granted to certain employees in conjunction with the recapitalization
transaction. A total of 1.6 million performance warrants were issued, entitling the holders thereof to purchase one
common share at a price of $2.50 for a period of 5 years following the date of issuance. The performance warrants will
vest and become exercisable as to one-third upon the 20 day weighted average trading price of the common shares
(the “Trading price”) equaling or exceeding $4.00, an additional one-third upon the Trading price equaling or exceeding
$5.00 and a final one-third upon the Trading price equaling or exceeding $6.00. The performance warrants are measured at
their fair value on the date of grant and recognized as an expense over a two year vesting period. As at December 31, 2010,
all performance warrants met the vesting requirements and the remaining unamortized non-cash compensation expense
was recognized in the period.
pursuant to the recapitalization of Spitfire, Whitecap assumed 130,000 warrants outstanding for Spitfire shares which
entitled each holder to purchase one Spitfire common share at a price of $11.50 per Spitfire share. These warrants expired
August 1, 2010 in accordance with the warrant agreement.
(000s except per share amounts)
Balance, December 31, 2009
granted
Acquired
Expired
Balance, December 31, 2010
Exercise
price ($)
2.50
Weighted
Outstanding
1,600
number of Warrants
–
1,600
130
(130)
1,600
Weighted Average
Exercise price ($)
–
2.50
11.50
(11.50)
2.50
Weighted
Average
Remaining
contractual
Life (years)
4.5
Weighted
Average
Exercise
price
($/share)
2.50
number
Exercisable
1,600
Weighted
Average
Exercise
price
($/share)
2.50
The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option pricing model with
weighted average assumptions for grants as follows:
2010
2.20%
5
65%
$4.08
2009
–
341
–
–
341
2010
341
1,407
6,523
(235)
8,036
Risk-free interest rate
Expected life (years)
Expected volatility
Weighted average fair value ($/warrant)
e) Contributed Surplus
($000s)
Balance, beginning of period
Stock-based compensation – Options
Stock-based compensation – Warrants
Option exercises
Balance, end of period
40
Whitecap Resources
11. PER SHARE RESULTS
(000s except per share amounts)
per share income (loss), basic and diluted
Weighted average shares outstanding
Basic
Diluted
2010
(0.42)
23,162
23,389
(1)
2009
(0.26)
4,721
4,721
(1) prior period comparatives have been restated to reflect the 8.33 exchange ratio and 10 to 1 share consolidation.
12. CAPITAL MANAGEMENT
The company’s policy is to maintain a strong capital base for the objectives of maintaining financial flexibility, creditor and
market confidence and to sustain the future development of the business. The company manages its capital structure and
makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying petroleum and
natural gas assets. The company considers its capital structure to include shareholders’ equity, bank debt and working capital.
In order to maintain or adjust the capital structure, the company may from time to time issue new shares, seek debt financing
and adjust its capital spending to manage current and projected debt levels.
The following is a breakdown of the company’s capital structure:
($000s)
current assets
current liabilities, excluding bank debt
Working capital surplus (deficit)
Bank debt
convertible Debentures – liability portion
Shareholders’ equity
2010
10,949
24,918
(13,969)
17,553
–
149,054
2009
2,349
2,060
289
10,580
9,594
35,517
13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair Value of Financial Assets and Liabilities
Financial instruments of the company consist mainly of cash, receivables, risk management contracts, payables and bank debt,
all of which are included in these financial statements. At December 31, 2010, the classification of financial instruments and
the carrying amounts reported on the balance sheet and their estimated fair values are as follows:
($000s)
Receivables
Held for trading instruments (cash and risk management contracts)(1)
Other financial liabilities (accounts payable and bank debt)
(1) The fair value measurement of the risk management contracts has a fair value hierarchy of Level 2.
carrying Amount
10,212
(1,967)
(40,494)
Fair Value
10,212
(1,967)
(40,494)
The company’s financial instruments recorded at fair value require disclosure about how the fair value was determined based
on significant levels of inputs described in the following hierarchy:
Level 1 - quoted prices are available in active markets for identical assets or liabilities as of the reporting date.
Active markets are those in which transactions occur in sufficient frequency and value to provide pricing information on an
ongoing basis.
Level 2 - pricing inputs are other than quoted prices in active markets included in Level 1. prices in Level 2 are either directly
or indirectly observable as of the reporting date. Level 2 valuations are based on inputs including quoted forward
prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the
market place.
Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.
Annual Report 2010
41
Market Risk Management
Commodity Price Risk
The company’s operational results and financial condition are largely dependent on the commodity price received for its oil and
natural gas production. commodity prices have fluctuated widely in recent years due to global and regional factors including
supply and demand fundamentals, inventory levels, weather, economic and geopolitical factors.
Whitecap manages the risks associated with changes in commodity prices by entering into a variety of risk management
contracts (see risk management contracts below). The following table illustrates the effects of movement in commodity prices
on net income before tax due to changes in the fair value of risk management contracts in place at December 31, 2010, with all
other variables held constant. When assessing the potential impact of these commodity price changes, the company believes
10 percent volatility is a reasonable measure.
($000s impact on net income before tax)
crude oil price
10% increase
(285)
10% decrease
285
At December 31, 2010 the following risk management contracts were outstanding with a mark-to-market liability value of
$2.0 million:
TypE
Swap
Swap
collar
VOLUME
500 bbls/d
500 bbls/d
300 bbls/d
pRIcE
c$86.85/bbl
c$87.60/bbl
c$75.00/bbl floor/
c$100.00/bbl ceiling
InDEX
c$WTI
c$WTI
c$WTI
TERM
Jan to Jun 2011
Jan to Dec 2011
Jul to Dec 2011
Subsequent to December 31, 2010, the company entered into the following risk management contracts:
TypE
Swap
VOLUME
1,000 gJ/d
pRIcE
$3.85/gJ
InDEX
AEcO
TERM
Feb to Dec 2011
At December 31, 2010, the following financial power contracts were outstanding:
TypE
Swap
Swap
Interest Rate Risk
VOLUME
3,506 MWh
1,139 MWh
pRIcE
$49.60/MWh
$46.06/MWh
TERM
Jan 2011 to Dec 2011
Jan 2011 to Dec 2011
The company is exposed to fluctuations in interest rates on its bank debt. Interest rate risk is mitigated through short-term fixed
rate borrowings using guaranteed notes.
If interest rates applicable to floating rate debt at December 31, 2010 were to have increased by 25 basis points (0.25 percent)
it is estimated that the company’s annual cash flows would decrease less than $0.1 million (2009 – nil). The company does
not expect interest rates to decrease.
Foreign Exchange Risk
The company is exposed to the risk of changes in the canadian/U.S. dollar exchange rate on sales of commodities that are
denominated in U.S. dollars or directly influenced by U.S. dollar benchmark prices.
42
Whitecap Resources
14. INCOME TAxES
The company’s provision for income taxes differs from the result that would be obtained by applying the combined canadian
Federal and provincial statutory income tax rate of 28 percent (2009 - 29 percent) to income before taxes. This difference
results from the following:
($000s)
computed expected provision for income taxes
Increase (decrease) resulting from
change in statutory rate and other
Valuation allowance (reversal)
non-deductible stock-based compensation
Income tax recovery
The significant components of the future income tax liability and assets are as follows:
($000s)
capital assets in excess of tax value
Risk management asset
Asset retirement obligation
non-capital loss carry forward
Share issue costs
Future income tax liability (asset)
The following gross deductions are available for future income tax purposes:
($000s)
Undepreciated capital cost
canadian development expense
canadian exploration expense
canadian oil and gas property expense
non-capital loss carry forward
Share issue costs
Total
2010
(3,276)
(376)
5
1,621
(2,026)
2010
21,051
(526)
(1,050)
(6,460)
(1,296)
11,719
2010
26,288
30,824
6,062
49,510
25,687
5,056
143,427
2009
(477)
(11)
(32)
99
(421)
2009
1,339
6
(327)
(1,492)
(188)
(662)
2009
13,788
111
90
36,766
5,570
754
57,079
At December 31, 2010, the company has recognized the benefit of unused tax loss carry forwards of $25.7 million. Unused tax
loss carry forwards of $0.1 million expire in 2028, $5.4 million expire in 2029 and $20.2 million expire in 2030.
COMMITMENTS
The company is committed to future payments under the following agreements:
($000s)
Operating lease -office buildings
2011
1,008
2012
947
2013
913
2014+
3,187
Total
6,055
Annual Report 2010
43
15. RELATED PARTY TRANSACTIONS
In the prior period, the company received loans from certain officers of Whitecap for general working capital purposes.
These amounts bear interest at 6 percent per annum and were repayable on demand. At December 31, 2009 the loans were
fully repaid and no balances were outstanding. All amounts were recorded at the exchange amount.
The company has retained the law firm of Burnet, Duckworth and palmer LLp (“BDp”) to provide Whitecap with legal services.
grant zawalsky, a director of Whitecap, is a partner of this firm. During the year ended December 31, 2010, the company
incurred $0.4 million to BDp for legal fees and disbursements. These amounts have been recorded at the exchange amount.
The company expects to retain the services of BDp from time to time. As of December 31, 2010 a payable balance of
$0.1 million was outstanding.
16. SUPPLEMENTAL CASH FLOW INFORMATION
changes in non-cash working capital, excluding bank debt:
Accounts receivable
prepaid and deposits
Accounts payable and accrued liabilities
change in non-cash working capital
Relating to:
Operating activities
Investing activities
2010
(5,798)
(22)
14,065
8,245
(5,623)
13,868
2009
(1,909)
(326)
2,041
(194)
(394)
200
17. SUbSEqUENT EVENTS
In December, the company announced that it had entered into an agreement to purchase a partner’s working interest in the
peace River Arch. The transaction closed on January 14, 2011 for a total consideration of $25.0 million.
On March 8, 2011 the company announced that it had entered into an agreement with respect to a business combination
with Spry Energy Ltd. (“Spry”). The arrangement provides for a total consideration of $223.0 million payable by Whitecap
including the assumption of Spry’s net debt of approximately $36.0 million. The transaction will be funded in part through
a $136 million bought deal financing of subscription receipts in the capital of the company at $6.80 per subscription receipt
(the “Offering”). Spry shareholders will receive, for each Spry share held: i) 1.17647 Whitecap common shares; or $8.00 in
cash, subject to an aggregate cash maximum of $130.9 million and a maximum distribution of 8.2 million Whitecap common
shares. The acquisition is expected to close on or before May 11, 2011. Whitecap has also granted to the underwriters
an option to purchase up to an additional 2,000,000 subscription receipts, or common shares, at a price of $6.80 per
subscription receipt or common share, as applicable, in whole or in part, on or within 30 days following closing of the Offering.
The company syndicated its credit facility, which increased Whitecap’s credit limit to $85 million from the previous limit
of $65 million. The new facility consists of a $10 million operating line and a $75 million syndicated facility. The facility is
a borrowing base facility subject to semi-annual review by the bank, with the next review scheduled for the fall of 2011.
44
Whitecap Resources
OFFICERS
Grant B. Fagerheim
President & CEO
Joel Armstrong
Vice President Production & Operations
Dan Christensen
Vice President Exploration
Darin Dunlop
Vice President Engineering
Thanh Kang
Vice President Finance & CFO
Gary Lebsack
Vice President Land
David Mombourquette
Vice President Business Development
DIRECTORS
Grant B. Fagerheim
Gregory S. Fletcher
Glenn A. McNamara
Stephen C. Nikiforuk
Robert G. Welty
Grant A. Zawalsky
AUDITORS
PricewaterhouseCoopers LLP
Chartered Accountants
Calgary, Alberta
BANKERS
National Bank Financial
Alberta Treasury Branch
Canadian Imperial Bank of Commerce
The Bank of Nova Scotia
Calgary, Alberta
ENGINEERING CONSULTANTS
McDaniels Engineering Consultants Ltd.
Calgary, Alberta
LEGAL COUNSEL
Burnet, Duckworth & Palmer LLP
Calgary, Alberta
REGISTRAR & TRANSFER AGENT
Olympia Trust Company
Calgary, Alberta
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Trading Symbol “WCP”
HEAD OFFICE
500, 222 – 3rd Avenue SW
Calgary, AB T2P 0B4
Telephone:
Facsimile:
Email:
Website:
(403) 266-0767
(403) 266-6975
info@wcap.ca
www.wcap.ca
FOR FURTHER INFORmATION CONTACT:
Grant B. Fagerheim or
Thanh Kang at (403) 266-0767
Calgary, Alberta
ANNUAL GENERAL mEETING
The Annual and General Meeting of Shareholders will
be held at 10:30 a.m. on Tuesday, May 17, 2011, in the
Strand/Tivoli Room of the Metropolitan Conference Centre,
333 – 4th Avenue SW, Calgary, Alberta. All shareholders are
cordially invited and encouraged to attend.
ABBREVIATIONS
AECO
bbls
bbls/d
boe
boe/d
bp/d
bop/d
DPIIP
FD&A
*Natural gas is equated to oil on the basis of 6 Mcf of natural gas =1 barrel of oil equivalent (boe)
Alberta Energy Company
barrels
barrels per day
barrels of oil equivalent
barrels of oil equivalent per day
barrels per day
barrels of oil per day
Discovered petroleum initially in place
Finding, development & acquisition
FDC
GJ
Mbbl
Mcf
Mcf/d
MMcf
Mstb
NGLs
WTI
Future development costs
gigajoule
thousand barrels
thousand cubic feet
thousand cubic feet per day
million cubic feet
1000 stock tank barrels
natural gas liquids
West Texas Intermediate
CORPORATE HISTORY
Announced acquisition of Spry Energy Ltd. for $223 million
Significantly expands presence in the Cardium oil resource play
Acquired partner interest in Valhalla North asset for $25 million
Provides for oil production and reserve growth in core asset
Graduated to the Toronto Stock Exchange
Acquisition of Onyx 2006 Inc. for $52 million
Entrance into Pembina horizontal Cardium play
Going public transaction through reverse takeover of Spitfire Energy Ltd.
Acquired Fosterton pool in southwest Saskatchewan
Acquired Valhalla North asset for $58 million
Sets stage for Whitecap with light oil focus
Whitecap Resources Inc
500, 222 – 3rd Avenue SW
Calgary, Alberta
T2P 0B4
www.wcap.ca