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Whitecap Resources: Making Waves


  • Earnings in the latest quarter were C$.16 per share and funds flow was C$.33 per share diluted.  Not bad for a C$9 stock and much better than the competition.
  • Oil production grew 43% in the first quarter when compared to the previous year and is running about 14% ahead of the fourth quarter.
  • Funds flow is usually more than half of revenue, even in the wretched first quarter of 2016, when the company managed a small profit.
  • Projects with a rate of return of 200% assure growth in surprisingly hostile conditions.
  • Management usually keeps the long term debt-to-funds flow under 2:1.

Whitecap Resources (OTCPK:SPGYF) is one of very few energy companies that managed to post a profit and decent cash flow in the first quarter of 2016. Now management is increasing production at a fairly rapid rate. A company with that kind of track record may be a little safer investment than the average oil and gas company. This company still pays a dividend which provides another source of return.

(Canadian Dollars Unless Otherwise Stated)

Source: Whitecap Resources Management Discussion and Analysis First Quarter Fiscal Year 2017

Like most companies, management endured the ceiling cost analysis effects in fiscal year 2015. Unlike most companies, this company made money in the first quarter of 2016 when commodity prices were rock bottom and much of the industry suffered. In the fourth quarter of 2016, profits were aided by a reversal of some of the impairment charges. This company is a Canadian company so reversal of the cost ceiling charges is allowed if the calculations permit it.

Interestingly, management has held long term debt relatively steady since 2015. This management operates with a working capital deficit. All cash goes against the bank loan at all times, so no cash is shown on the balance sheet. For those not used to this practice, some balance sheet ratios are distorted when there is no cash balance.

However, a quick review of the quarterly cash flow shows a relatively conservative long term debt to cash flow ratio. Management has a goal to keep that ratio under 2:1. This establishes a cushion. Should the low prices of the first quarter of 2016 persist, the company still could have paid its debts and done some operational activities. So this company is financially strong despite the weird (Working capital? Quick?) ratios due to no cash balance.

As it was, in the

This article was written by

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Get analysis on under followed Oil & Gas companies with an edge.
I am a high school teacher for a decade. I am now retired.  Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. with an emphasis in Accounting and an MBA (for which I studied Finance, Economics, and Management) I passed the CPA exam on the first try and am a retired CPA in the state of Maryland. I have a high school teaching credential and an MA in Math Education

Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research

Occassionally write articles on Tag Oil for the Panick High Yield Report


Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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