Whitecap Resources (TSX:WCP) Q3 2026 Earnings Call

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12:05 Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Whitecap Resources' third quarter 2026 results and 2027 budget conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. And if you would like to withdraw your question, Please press star, then number two. And I would like to turn the conference over to Whitecaps CEO, Mr. Grant Fagerheim. You may begin.

12:42 Thanks very much, Sylvie. Good morning, everyone, and thank you for joining us today. There are five members of our management team here with me today. Our president, Joey Wong, our senior vice president and CFO, Thanh Kang, our senior vice president, asset development and information technology, Dave Mombourquette, Chief Operating Officer, Travis Tweit, and our Vice President, Conventional Division, Reserves and Reservoir Development, Chris Bowen. Before we get started today, I would like to remind everybody that all statements made by the company during this call are subject to the same forward-looking disclaimer and advisory that we set forth in our news release issued yesterday afternoon. We are once again pleased to report very strong operational and financial results for the third quarter of 2026.

13:30 Our technical and operations teams continue to execute efficiently with our asset productivity once again exceeding our expectations. Third quarter production averaged 390,720 BUE per day comprised of 237,252 barrels per day of condensate, light oil, and natural gas liquids and approximately 920 million cubic feet a day per day of natural gas. Production was well above our internal forecast driven by strong Thank you. Thank you. of last year. After capital investments of $533 million, we generated $640 million of free funds flow in the quarter, bringing free funds flow to $1.9 billion, or $1.57 per share, for the first nine months of 2026.

14:51 From an activity perspective, we drove 84 wells in the third quarter, 35 in our unconventional division across our Montney and DuVernay assets, and 49 Thank you. Thank you. These quicker cycle times along with strong performance from our assets is prompting us to raise our 2026 average production guidance for the third time this year to 392,000 BUE per day, which equates to the fourth quarter production of 395,000 to 400,000 BUE per day. This represents a total increase of approximately 19,500 BUE per day, or 5% from original budget guidance.

16:00 The incremental activity is focused on our highest return programs at KBOB, LOTOR, and our Saskatchewan light oil assets, and it carries additional momentum into 2027. Increasing returns to our shareholders is a priority for Whitecap. Reflecting the strength of our business, our board of directors has approved an increase to our monthly dividend of approximately 1.5% to 6.17 cents per share or 74 cents per share annually, affected with the November dividend payable in December. The increase equates to approximately $13 million on an annual basis and follows the substantial improvements to our cost structure and our overall highly economic growth we have delivered to date.

16:47 Beyond our base dividend, we continue to prioritize the balance sheet. For the first nine months of 2026, our free funds flow of approximately $1.9 billion funded $665 million of base dividends, with the remainder directed to debt reduction. Net debt decreased by approximately $1.3 billion since year end 2025, and now being $2.1 billion at the end of the third quarter, 4.4 times net annualized funds flow. Our balance sheet is in excellent condition, and Tom will talk to more details shortly. Moving to our 2027 We are excited to announce our $2.4 to $2.6 billion of capital program includes the drilling of 332 total wells comprised of 127 unconventional montane and duvernay wells and 205 conventional wells delivering average production, as I said before, 400 to 410,000 BW per day.

17:50 On a per share basis, the budget delivers approximately 3% annual growth or approximately 5% including the planned major turnarounds at KBOB in the third quarter of 2027. Our forecast for 2027 will continue the operational momentum achieved to date in 2026 and build on recent results we've achieved, managed to achieve on our asset base. Our 2027 average production forecast includes 140,000 BUE per day from our conventional division, which is more normalized leverage after a strong 2026, designed to generate significant free cash flow in the current commodity price environment. Our unconventional division forecast is to grow by 8% to 265,000 BUE per day, and more importantly, to grow condensate production, our base of 60,000 to over 70,000 BUE per day as we anticipate demand and condensate continuing to be most topical. At strip prices, our forecast will generate $4.6 billion of funds flow and free funds flow of $2.1 billion.

19:01 It is important to note that the free funds flow will increase by approximately $400 million to $2.5 billion in 2027 if the recently announced productivity mega-deduction is enacted as proposed. The under-based dividend of $900 million, this would leave $1.2 billion to $1.6 billion of unallocated free funds flow. We will continue to be prudent and patient with respect to our unallocated funds flow, and we'll look for opportunities to redeploy the excess funds flow through 2027. We will remain diligent on looking to drive further shareholder value for the longer term, and until we feel the time is appropriate, we are comfortable parking the excess free funds flow on our balance sheet in the short to medium term.

19:47 I will now pass A call on to Tom for further discussion on our third quarter financial results. Tom?

19:53 Thanks, Grant. Petroleum and natural gas revenues increased 45% to $2.4 billion compared to the third quarter of 2025. Third quarter WTI averaged U.S. $85.79 per barrel, up 32 cents from last year, as the conflict in the Middle East continued to disrupt global crude oil supply. Edmonton MSW and condensate differentials, which averaged US $0.62 per barrel and US $3.42 per barrel, respectively, in the third quarter, were much tighter than the headline WCS heavy oil differentials, which averaged about US $14 per barrel in the third quarter. As a result, our realized crude oil and condensate price was $113.89 per barrel in the third quarter, an increase of 35% Thank you for joining us.

21:13 AECO prices average $1.57 per MCF in the third quarter, up from 63 cents last year, as export pipeline maintenance restrictions were lower than in the third quarter of 2025. The benefit of our natural gas price diversification was again evident, with our realized natural gas price averaging $2.32 per MCF, which is 77% higher than a year ago, and a 75 cent premium to AECO. Approximately 30% of our third quarter natural gas revenue came from sales into U.S. markets. And beginning in 2028, approximately 5% of our natural gas production will be exposed to European TTF pricing.

21:58 We continue to see the benefits of our lower cost structure. Operating costs were $10.22 per VOE in the quarter. I do want to highlight that the third quarter includes one-time favorable cost adjustments. including excluding those adjustments, operating expenses would be $11.70 per VOE, which is still below both the second quarter and the third quarter of last year, reflecting lower fixed costs and higher production volumes. For 2027, we forecast operating costs in the $12 to $12.50 per VOE range, which is compared to 2026, include higher power and fuel cost expectations and the costs associated with the KBOB turnaround in the third quarter.

22:45 Transportation expenses increased 10% to $3.76 per VOE, reflecting the growing weighting of our unconventional production, which is further from sales points, including the U.S. markets where we receive higher realized prices. Our transportation costs are expected to remain in the range of $3.50 to $3.75 per VOE for 2027. Royalties were 14.5% of revenue, or $9.70 per VOE, compared to 12.2% last year, primarily on higher commodity prices. Funds flow was $1.2 billion, or 96 cents per share, up 32% per share compared to the third quarter of 2025.

23:32 Through the first nine months of the year, funds flow was $3.6 billion, or $2.91 per share, An increase of 73 cents in total and 30% on a per share basis. Net income was 326 million or 27 cents per share compared to 204 million or 17 cents per share in the third quarter of last year. During the quarter, we recorded an unrealized loss on commodity contracts of 333 million. This is a non-cash marked market movement that will fluctuate with changes in forward commodity prices. Capital expenditures were $533 million in the quarter, below our internal forecast as continued cycle time compression and operational execution are improving efficiencies.

24:22 This resulted in free funds flow of $640 million, bringing year-to-date funds flow to $1.9 billion. Year-to-date free funds flow funded $665 million of base dividends with the remainder directed to debt reduction. As a result, net debt at September 30th was $2.1 billion, down approximately $450 million from the end of the second quarter and approximately $1.3 billion since year end 2025. That represents a net debt to annualized funds flow ratio of 0.4 times. We ended the quarter with no draws on our $2.5 billion credit facility. and 1.7 billion of investment grade senior notes at a weighted average interest rate of 4.76%.

25:11 A remaining 195 million of senior notes that mature in December of this year, we will anticipate using cash on hand to fund that payment. We expect to exit 2026 with net debt of less than 2 billion. Turning back to 2027, at our price deck of $80 WTI, Thank you for joining us. The mega deduction would increase our 2027 free funds flow to approximately 2 billion. Our current strip pricing, that would be closer to 2.5 billion of free funds flow in 2027. Free funds flow beyond this level provides flexibility for additional shareholder returns, which we will assess in 2027.

26:25 As Grant mentioned, we take a counter-cyclical approach to capital allocation and have been prudently allocating excess free funds flow to our balance sheet provide maximum flexibility to increase shareholder returns. The opportunities that are in front of us today, whether they be additional growth, share repurchases, further dividend growth, or tuck-in acquisitions, will be thoughtfully considered, and we will not rush into anything. I'll now pass it off to Joey for remarks on our unconventional results.

26:55 Yeah, thanks, Don. Our unconventional division delivered another strong quarter, drilling 35 wells in the quarter, and 90 year-to-date across the Montney and Duronais. Third quarter, our performance was led by strong base and new well performance at Gold Creek, along with new wells at KBOB. At Latorre, we completed construction of our 413 battery during the third quarter and successfully commissioned and introduced production into the facility early in the fourth quarter, which was within our expected timeframe and on budget. We have redirected existing area volumes and brought on our recently drilled five-well Montney pad through the facility with throughput and runtimes meeting expectations. Our 2027 plan on the TOR includes a two-rig program to flood 22 wells and bring on 17 wells. And the ramp up to the 413 facility capacity of 35,000 to 40,000 BUEs per day is expected to take 12 to 18 months as we incorporate learnings from our first development paths and continue to apply our established development workflows to area development.

27:57 At KBOB, our DuVernay assets have been producing at the existing productive capacity of 120,000 BOEs per day since mid-year. During the third quarter, our technical teams identified numerous projects to increase the productive capacity of the asset to approximately 130,000 BOEs per day in the near term, and approximately 135,000 to 140,000 BOEs per day by the end of 2027. These projects are a combination of targeted compression additions and optimization, along with process optimization that allowed for increased utilization of existing infrastructure. The realized and planned capacity improvements involve nominal capital spent as the bottlenecking and targeted optimization projects often do. Our facility and production teams are constantly looking for ways to adjust our infrastructure portfolio to match the characteristics of our production and this is a great showcase of that. We will look across the balance of our portfolio for similar opportunities as well as the next material facility project.

28:55 Our upcoming capital programs at KBOB will utilize this capacity to further take advantage of the increased profitability we are experiencing in our development there. That profitability reflects better well performance driven by improvements in both design and execution. Inventory enhancement initiatives such as wine racking and our ongoing downspacing pilots are further extending inventory life at KBOB. Drilling operations on two downspacing pilot pads are done with completion and early time flow back operations now underway. upon success of the downspacing pilots along with the successful wine racking initiative, the estimated value generated through our development on these lands increases by 20 to 25% and we anticipate adding up to two years of additional inventory in the heart of our KBOB asset.

29:40 These improvements are being further strengthened through operational execution. With improvements to frac design and the application of our real-time frac optimization, we have increased our frac effectiveness by 14% on legacy Varon lands which is contributing to stronger production results and better capital efficiency. Gains in both design and execution are a product of our integrated development workflow which is built to carry concepts from identification through application and to evaluation. How far learning then transfers across our portfolio depends on the demonstrated results and how well each concept fits the asset. Each pad feeds the next and over time that loop has helped us identify the approach that delivers increasing risk-adjusted returns in each area. The improvements we have demonstrated in our operator results are evidence that it is working.

30:29 Turning now to 2027, our unconventional division will invest approximately $1.9 billion, or about 75% of our capital budget, to drill 127 wells consisting of 77 Montney wells and 50 DuVernay wells. Unconventional production is forecast to average approximately 265,000 BOEs per day at 51% liquids, representing a growth of approximately 8% relative to 2026 and about 10% growth on an exit-to-exit basis. That growth is led by the ramp-up of our Latorre 413 facility and by Gold Creek, Carr and KBOB continuing to grow into available infrastructure capacity. One item to flag for 2027 is a planned turnaround at our 15 of 7 gas plant and a third-party processing facility, both at KBOB, in the third quarter.

31:17 We expect it to impact third quarter production by approximately 32,000 BUEs per day and annual average production by approximately 8,000 BOEs per day. Condensate is a key driver of the economics of our liquids rich Montney and DuVernay assets. In 2027, we anticipate condensate growth to 70,000 barrels per day. Condensate often trades at a premium to local light oil prices due to its required use as a diluent to transport heavy oil production and Whitecap is well positioned to capture this incremental growth and pricing opportunity. The successful execution of our 2026 capital program has now been well documented, with demonstrated improvements on our capital efficiencies visible on both acquired and legacy whitecap lands. Cycle time compression has played a key role in these improvements, along with optimization of our cost structure.

32:05 For the compressed cycle times, we are building on the gains we have seen from well-designed features, such as lateral length, landing depth, casing configuration, and completion design. In 2027, we are also implementing new initiatives, including dual rigs and dual frac crews on multiple pad sites. We are also scaling our data-driven execution, building on the real-time frac optimization we discussed earlier to improve the accuracy and efficiency of our frac and drilling programs. With our large proprietary and public well data set, we expect these tools to keep getting stronger as every new well feeds back into them. Lastly, our size and scale are benefiting our cost structure and supply certainty. Our consistent rig lines and strong operating practices make us a preferred operator, and those benefits are showing through.

32:51 With that, I will now turn it over to Chris to discuss our conventional assets.

32:55 Thanks, Joey. Our conventional division continued to deliver in the third quarter with strong base production contributing to corporate production outperformance. Our third quarter program was active, drilling 49 gross, 39.1 net wells in the quarter, up from 36, 25.3 net, in the third quarter of 2025. Base production outperformed expectations, driven mainly by proactive optimization in our central Alberta glauconite assets, including a more aggressive drawdown strategy. Developed from our observation of reservoir response to drawdown, this strategy applies the methodologies and learnings from our extensive analysis of the unconventional asset base. We are pleased with the subsequent reservoir response and have adjusted our development plans accordingly. lowering the near-term capital requirement of the asset.

33:44 This is a good example of the strength of our diversified asset base, where we can scale and transfer learnings quickly and consistently to deliver incremental value. The Conventional Division has outperformed expectations for the first nine months of 2026, averaging approximately 147,000 VOE per day. Looking ahead to 2027, we plan to invest approximately $600 million, or about 25% of our total capital budget, and forecast a more normalized level of production at 140,000 BOE per day. Stronger than expected, 2026 production has been incorporated into our 2027 forecast, which allows us to moderate activity levels and generate higher free cash flow. In the Peace River Arch area of northern Alberta, our recent light oil focused Charlie Lake wells have continued to perform above our expectations and offset wells.

34:34 With nine months of production history now behind them, these wells we completed with our higher intensity design have outperformed wells completed with our previous design. We are carrying forward the learnings from that frac design along with an optimized landing depth into an expanded Charlie Lake program of 10 gross 7.8 net wells in 2027. This program will incorporate updated drilling and completion design impetus that we expect will improve productivity and enhance capital efficiency. In Saskatchewan, our short cycle light oil weighted assets in the Bakken, Robeshire and Viking will represent over 80% of our Saskatchewan drilling activity in 2027, with 141 gross, 132.6 net wells planned.

35:19 These are plays where our technical progress is evident. Over 40% of our 2027 Saskatchewan drilling capital will be focused on open-hole multilaterals across our Frobisher, Bakken, and Weyburn assets. The use of this technology is repeatable, high-confidence design for us. ranging from two to four leg wells in the Frobisher and up to 10 legs in the Bakken. Open-hole multilateral drilling is core to how we develop our Saskatchewan assets and our confidence comes from a deep understanding of the subsurface and technical rigor. When we are drilling up to three miles out and threading each leg through the target zone, success depends on reservoir characterization, geo-steering, and precision in operational execution. We continue to look for more opportunities to deploy open-hole multilateral technology across our portfolio.

36:09 The division is further supported by approximately 50,000 barrels per day of aggregate water flood and EOR volumes that have an average decline of approximately 12%. Water flood and EOR initiatives are ongoing, and we continue to advance projects within our portfolio that strengthen our base. Since the beginning of 2026, we have increased production from existing assets under water flood by approximately 2,000 barrels per day through our rigorous technical workflows providing greater long-term sustainability of our asset base. On an overall basis, our conventional assets are approximately 80% oil weighted and the economics of these assets are extremely strong in the current commodity price environment. Continuous improvement in operational execution and well performance along with inventory enhancements such as drilling design, lateral placement, one to two mile inventory consolidation and additional lateral length extensions are further improving the long-term profitability of these assets. With that, I'll turn it back over to Grant for his closing remarks.

37:11 Thanks very much, Thanh, Joey, and Chris, for your comments. Before we close, I want to summarize our outlook for 2027. Our 2027 budget invests $2.4 to $2.6 billion with approximately 75% allocated to our unconventional division and 25% to our conventional division to deliver average production growth to 400 to 410,000 BWE per day. That translates into approximately 3% production per share growth or approximately 5% excluding the planned turnaround at KBOB in the third quarter. At current strip pricing, WTI pricing, the budget generates approximately $2.1 billion of pre-funds flow and up to $2.5 billion if the productivity mega-deduction is enacted as proposed. Whitecap's ongoing improvements in operational execution, lower cost structure, and production growth are becoming out of time when elevated light oil and condensate prices are further increasing for profitability.

38:13 But beyond the current price environment, Canada is increasingly well-positioned to grow its share of global energy supply. Additional pipeline egress is opening new markets for Western Canadian crude oil, and the federal government's recently announced productivity mega-deduction is expected to materially improve the competitiveness of the investment in the Canadian energy sector. At the same time, oil sands growth, LNG exports, and power demand from data centers are expected to drive demand for each of Whitecap's three core products, light oil, condensate, and natural gas. Whitecap is fortunate to have scale in all three. We are the fifth largest oil and condensate producer in Canada, and over 90% of our oil production and Condensate Production exposed to light oil and condensate pricing, which is strengthened relative to WTI.

39:04 As the fourth largest condensate producer in Canada, we are positioned to supply the diluent needed to transport growing oil sands volumes, and approximately 75% of our 4,700 Montane and DuVernay drilling locations are liquids rich, providing the inventory to support further demand-driven growth into the future. Approximately 30% of our third quarter natural gas revenue came from sales into U.S. markets. And beginning in 2028, we approximately have 5% of our natural gas production will be exposed to European TTF pricing. Longer term, the Rest Haven area provides significant natural gas optionality with over 1,000 undeveloped locations under management. With deep inventory across all three products, available infrastructure capacity, and exceptionally strong balance sheets, has the flexibility to direct the highest return for opportunities as these markets develop.

40:02 We also have the track record to back up our approach. Since we closed the Barron transaction in mid-2025, we have executed on our strategy, delivering annualized production growth of over 5%, reducing our debt by $1.2 billion, and return $1.5 billion of refunds to shareholders to the base dividend and share repurchases. We are extremely excited to finish off the balance of a great 2026 and deliver on our stated goals for 2027. On behalf of our employees, our management team, and our board of directors, I want to thank you, our shareholders, for our continuous support and confidence. With that, I will now turn the call over to the operator, Sylvie, for questions. Thank you.

40:47 Thank you, sir. Ladies and gentlemen, as stated, if you do have a question, please press star followed by one on your touchtone phone. You will then hear a prompt acknowledging your request. And should you wish to withdraw your questions, simply press star followed by two. And we do ask that if you're using a speakerphone to please lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Thank you. First question will be from Travis Wood at National Bank. Please go ahead.

41:18 Yeah, good morning. You mentioned some comments around the Q3 Turnaround. Would you be able to provide any kind of incremental commentary if you could? And do you see some opportunity to redirect some of those volumes during that downtime, given some maybe capacity flex in the area?

41:40 Hey Travis, thanks for the question. Yeah, first and foremost, like we said, there are two facilities in the area, one operated by us, one operated by a third party. And again, both coinciding in the third quarter there, you see the volumes back up in the quarter itself. With respect to some background behind it, I think most will be aware, but worth highlighting that plan maintenance, and that's what a turnaround is, is a core part of our business. We plan around these things. They come in predictable cycles, and we optimize all things around it being the cost it takes to do them, the time associated with it, and therefore the and then to your question there, the back part of your question, Travis, our ability to mitigate those downtime events. What we've included in the 32,000 BOEs per day of downtime in the quarter or 8,000 on the year actually is net of our efforts to do that, our anticipated efforts, I should say.

42:42 With that said, will we seek further opportunities to further either offload or mitigate those impacts through Thank you for joining us. Better perspective to give to the world, kind of the impact of the net barrels, because effectively that's what's going to be impacting, of course, production and therefore cash flow in the quarter. The days themselves will, again, be looking to work not just with our own teams and associated contractors, but of course the third party as well to make sure that we've optimized around that and we've brought it down to as few days as possible, as you might imagine, Travis.

43:43 Okay, no, that's fair. I was trying to figure out if there was, or rather how much upside would be associated with that if it was ahead of schedule. So no, I'll leave that there. And then last question, probably for Thanh. You know, you shared color in the opening remarks around the debt reduction. I think that was probably ahead of forecast as we think back to the start of the year in terms of debt, the pace of debt reduction. You've commented that the return profile for next year might lean more to a return of capital, but could you help us with some guardrails with respect to debt levels, how you're thinking about buybacks in this commodity price environment, given where we're sitting, and just help us understand how we could look at the pace of an NCIB through 2027?

44:45 Thanks for that question there, Travis. As we think about free cash flow allocation in 2027, as you know, we take a counter-cyclical approach, which means in an elevated pricing environment there, we do prioritize delivering on the strength of the balance sheet and then looking for opportunities to redeploy that in 2027. You're right, our leverage is quite low at this particular time. At the end of this year here, We're expecting our debt to be $1.8 billion, which is 0.4 times debt to cash flow there. As we look out into 2027, you know, on strip pricing and including the impact of the productivity mega deduction there, our free cash flow will be about $2.5 billion.

45:34 So there's $900 million that we would be allocating to the dividend, including the increase that we recently announced here. Thank you. Thank you. as well as continuing to put cash on the balance sheet there. So those are all the options that are available to us. I would say specifically around the share buybacks, they remain very compelling for us. And there's a few different reasons for that.

46:24 Number one, as we look at reducing our share count, it is a permanent improvement to our capital structure. Not only does it enhance our per share growth metric, but it also improves the sustainability of the dividend longer term as well there. And you have to keep in mind that when we look at the inventory set that's in front of us, only 30% of our inventory is currently booked. So there's a huge opportunity for us to continue to increase our net asset value as we move through time. But we'll continue to remain very disciplined and patient with deploying that excess cash. So we'll look at those opportunities as we move through 2027.

47:09 Okay, and not to hold you to it, but there is a scenario, you know, given if commodity prices continue to stay at these levels through at least the first half of the year, there is a scenario I'm reading between the lines that that debt repayment will continue to be the priority to lead more flexibility if there's a pullback in the commodity and then lean into the buyback at better parts of the cycle?

47:38 Yeah, I think there's opportunities to, you know, certainly in the short to medium term to, you know, park that excess cash on our balance sheet. But our objective is in 2027 there to redeploy it to enhance returns for our shareholders.

47:55 Okay, that's all for me. I'll turn it back. Thanks. Thanks, Travis. Next question is from Dennis Fung at CIBC. Please go ahead.

48:06 Hi, good morning, and thanks for taking my questions. My first one follows a little bit along the lines of what Travis was discussing here, but a shift of the focus a little bit. So I'm just curious, in terms of the PMD, you've mentioned it a few times, How does the potential implementation of this productivity mega deduction influence, we'll call it investment opportunities, as well as how do you guys think about balancing, we'll call it short-term, quick payback projects like those seen in the unconventional versus kind of the longer-term opportunities like water flood or EOR?

48:42 Yeah, so it's Taun here. With respect to the PMD, the way that it works is It needs to pass second reading because we're in a majority government currently here before we start reporting the benefits on our financial statements.

48:59 So just a bit of a quick refresh.

49:00 You know, what that allows us to do effectively is on our drill complete equipment high-end costs there, specifically on the CDE, instead of being 30% deductible on a declining basis, it's 100% deductible in year one. So really that improves the economics on our capital program quite significantly, especially from an NPV perspective. I think where that becomes, I think, more important as we think about our conventional division is we have a big opportunity set in front of us in terms of enhanced oil recovery, which really helps the long-term sustainability of the business. Low decline generates a ton of free cash flow and low capital investment ratios there. The PMD really accelerates the payout of those type of projects.

49:50 So there will be opportunities for us, and it's an internal process that we're going through right now, looking at those projects that we could potentially accelerate in this pricing environment, but also taking into context the fact that for every dollar that we spend, it's 100% deductible now.

50:07 Just to further on that, Dennis, when we're talking about the productivity mega-deduction, At this particular time, we did not work it into our capital program or our budget for the year. We're growing production 5% from fourth quarter to fourth quarter, 26 to 27, already at the high end. And that is including the average that we have at 3% includes that 32,000 per day of downtime in the third quarter that we'll try, as Joey said, to try and eliminate But when we look at the conventional portion of our assets, our base plan, we'll look to enhance that. If we do get final reading on that, we'll enhance for sure growth as we've done in 2026 with operational performance.

50:55 But stability and long-term sustainability of the conventional assets has put us in a wonderful position at this particular time with the excess free cash flow. So we'll continue to I look forward on that into 27. Certainly, we're not completed and this is a budget outlook that we provided at this particular time.

51:22 Great. Thanks for the commentary from both of you. My second question here is just on the TOR. So, I appreciate the comments in the prepared remarks there, Joey. I was actually hoping you could elaborate a little bit more. on opportunities or how you would observe seeing kind of a 12-month ramp-up versus kind of an 18-month ramp-up. Is there commodity price kind of related decisions that could be made there, or is this more kind of driven by execution of the development program and or productivity from the individual wells as being the more guiding factor?

52:00 Yeah, Dennis, appreciate that. It might sound a cop-out, but it's not. It's kind of all of the above, right? You look at the way that the asset is responding to our development and if things are going better than expected, you might see us allocate incremental capital there or you may see us also leave it how it is and we just experience an accelerated ramp up to that capacity there. When you look at general development, whether that's in Latour or some of the development we've talked about throughout the rest of the corporation, We're always trying to take those most recent results and feed them back in and understand, go forward. What is the optimal way of deploying that capital?

52:46 And like you've suggested there, one of the influences to that could be also an increase to commodity prices. And the nice part about not just the TOR, but the balance of the asset base is we do have the opportunity and the optionality to grow into a number of those assets. I spoke to it in the call there, or in the prepared remarks, I should say, but we do have capacity in Gold Creek and Carr that we can grow into. We're building out a little bit more in KBOB, like we spoke to. And, you know, when you look at the amount of capital or sort of the amount of inventory associated with these assets, as well as the conventional assets, it is an option to us that, again, we can lean into that strength. So rather than trying to focus just on the asset targets in the tour or just on The specific ramp of that asset, what we're actually looking at is what is the overall balance of capital throughout the corporation and ultimately how do we turn out the most amount of free cash flow that we can.

53:45 Great, thanks for that Joey. Last question here, shifting over to the Charlie Lake. You've seen kind of a planned uptick in activity driven from we'll call it better than expected performance and opportunity set there. Can you talk a little bit more about, A, what some of the adjustments happen to be, whether it be completion or development techniques, as well as what the running room you have there in the Charlie Lake and the Peace River Arch area to keep this kind of incremental pace going?

54:15 Thanks. Thanks for that, Dennis. It's Chris here. So the two key adjustments, and we kind of spoke about this in some of the prior quarters, is really just, you know, shared learnings from the unconventional workflow as it relates to improved frac design and efficiencies there. We did make some modifications on frac intensities and tonnage. That's one of the key things to take away from that. Along with most recently, our teams have done such a great job kind of digging apart the technical. And we do have a new design from a drilling perspective, more so from a landing perspective. So we're going to be targeting a different landing zone in the Charlie Lake. So kind of those two key technical initiatives for us are part of the reasons that we're Thank you so much for joining us.

55:25 those organic opportunities to enhance and continue to build on that for the Charlie. Great. Thanks, Chris. I'll turn it back. Next question will be from Aaron Bilkowski at TD Cowan. Please go ahead.

55:43 Thanks, Sylvie. My question is on the conventional division. You guys are talking about better base performance combined with improved drilling and completion designs. But if I look at this on a year-over-year basis, it seems like you're spending 50 to 100 million more, filling roughly 50 more wells year over year, while guidance seems to imply about a 4% production decline within the conventional business. I guess, can you help me reconcile higher activity with the production outlook? And what I'm trying to get to is why doesn't the stronger base and higher activity translate into at least flat conventional productions?

56:17 Aaron, Chris here. Thanks for that question. We did set the bar pretty high with our base out performance and technical improvements throughout the year, which you kind of hinted at there. But I think the way we look at this here is really, at the end of the day, we're building our budgets from the bottoms up. We're selecting projects based on technical merit, economics. We're factoring in risk or risk-adjusted projects, of course, the pace of development, along with strategy and infrastructure. And really, the goal here is how do we generate the strongest free cash flow Thank you. Thank you. Thank you.

57:15 Maybe I'll add on to that, Chris. Just from the overall, you look at the growth that we've delivered, Grant said it at the outset there, that the 5% growth as measured Q4 to Q4, it is on the higher end of our range. And importantly as well, you look at the capital efficiencies of the corporation. At $18,500 per flowing BOE, which is equivalent to what we saw in 2026, in spite of a little bit of inflationary pressure there, some some pretty healthy overall capital efficiency numbers in the corporation. And again, to Chris's point there, maximizing free cash flow at this time, this is an opportunity for us to do exactly that in 2027. Thank you.

58:05 Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next, we will hear from Patrick O'Rourke at ATB Cormark. Please go ahead.

58:18 Hey, guys. Good morning, and thanks for taking my questions. Maybe just to go back to Latour in terms of the ramp-up, I know you talked about sort of applying learnings. You've got the 12 to 18 months. If we think about the guidance that you've put in place corporately for 2020, 27 here. How would that sort of gravitate between the 12 and 18 months and sort of what sort of risking have you done in those numbers that are embedded in the guidance? Yeah, thanks, Patrick.

58:56 Sorry, getting a bit of feedback from you there.

58:58 There you go. Yeah, like I said there, the range that we provide there is going to be and a little bit of output as well as input there. What we've worked into the overall forecast is, like I say, it'll be somewhere in that range. Again, hesitating to provide specific asset level details on that one when we're establishing that it's not the output that we're targeting. We're not targeting an exact date and an exact volume. We're targeting the maximization of the results of the Thank you very much, Patrick.

1:00:07 Okay, thanks. And I mean, you guys have touched on a couple of times a little bit of inflation in the industry. Obviously, we can see inputs like diesel would naturally be up in this pricing environment. But maybe if you could point to sort of what the key pressure points that you're seeing are in terms of inflationary pressures and sort of what mitigations or efficiencies you're thinking about to sort of manage this in 2027.

1:00:37 Thanks for that question. This is Travis Tweit. For the back half of 26, we're really comfortable with our existing guidance, given that we've logged in much of our pricing. As we look ahead to 27, on the OPEC side, we're forecasting about 3% inflation, driven largely by fuel and power costs. and just general service inflation. On the capital side, we expect a very modest increase overall of about 2%. This is really an offset of inflationary pressures on diesel, casing and labor. We're offsetting that with a lot of our improvements to our completions cost structure as well as our overall DNC efficiencies. So as we go forward, the longer the diesel prices remain elevated, definitely the greater the downstream cost pressure will be across the supply chain.

1:01:30 We're just focusing on what we can control, which is displacing our diesel with self-supplied natural gas on the majority of our DNC operations in the unconventional. So going forward, about 2% on the capital.

1:01:46 And to that end, are you seeing any pressure, inflationary pressure, tightness in terms of the rig market or frack spreads?

1:02:00 The market is definitely tightening up, but we have long-term contracts in place with all of our key rigs, and we've just logged in our key suppliers for FRAC as well. So we're feeling really good about that over the next few years here. Okay. Thank you. Thank you. At this time, gentlemen, we have no other questions registered. Please proceed.

1:02:25 Thank you, Sylvie, and thanks to each of you online today who continue to support us. from our entire management team. I want to once again thank our Whitecap staff, our contractors for your relentless and focused efforts on delivering a very strong third quarter and year-to-date performance. We look forward to updating you on our progress through the remainder of the year and into the 2027 year. Wishing everyone all the best for the remainder of this year and 2027. Back to you, Sylvie. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time we do ask that you please disconnect your lines. Enjoy the rest of your day.