ATB Cormark Capital Markets, we are very pleased to introduce Whitecap Resources, partially because it is the only thing that is between me and the bar cart at happy hour, and partially because it is also a very exciting story. Whitecap has a CAD 21 billion market cap today, CAD 24 billion EV, about a half turn debt to cash flow, so very strong capital structure that the company has. Also wh en you buy that share, you get about a 4.1% dividend yield today. They have two divisions, conventional and unconventional, and between those two divisions, which we are going to hear about today, over 10,000 future drilling locations. Very pleased to introduce Thanh Kang, CFO of Whitecap Resources.
That is great. Thanks very much for the intro there, Patrick. Thanks everyone for attending this afternoon, and listening to our presentation. Whitecap Resources, we are an upstream oil and gas company with assets in both Saskatchewan and Alberta there. Our enterprise value is CAD 21 billion, producing about 385,000 BOEs per day, about 61% liquids at this particular time here. We would be the fifth largest Canadian oil and condensate producer, and the fifth largest Canadian natural gas producer as well. Balance sheet is in excellent shape. We are 0.5 times debt to cash flow, and we also pay a CAD 0.73 dividend, which is CAD 0.06 on a monthly basis.
We have a very strong track record of per share growth, both in funds flow, production, and 2P reserves. 13% CAGR on funds flow, 11% on production, and 11% on reserves. That would be since inception. When we started the company back in September of 2009, the focus has always been on per share growth versus absolute growth. For 2026, the year has been a great start to the year here, where we have had two production guidance increases, 3% increase from our original guidance that we would have put out in November 2025. Right now we are looking at between 384,000 to 386,000 BOEs per day, 61% liquids. On our price deck, which is $75 oil for the balance of the year and CAD 2 gas AECO per GJ, we would be generating CAD 4.3 billion of cash flow.
Our capital program is CAD 2.1 billion, which leaves us with CAD 2.2 billion of free cash flow. Very significant even at $75 WTI there. Of the CAD 2.1 billion of capital spending, we are allocating about 25% of that towards our conventional assets and 75% of that on the unconventional assets to grow our production per share by 3% in 2026. The most significant transaction that we did was Veren back in 2025. We closed that just over a year, closed that on May 12, 2025 there. What we have seen over this period of time through synergies as well as the efficiencies that we have had, is a structural improvement to the business, both on the capital side as well as the operating side.
Y ou can see on the chart there on the capital efficiency, we started on a standalone basis. We were about CAD 21,500 per flowing. Today we are running our budget at about CAD 18,500, so 12% improvement. Same thing on the operating cost side there. We were running at about CAD 13.50 per BOE, and today our guidance is about CAD 12, so 13% better. When you look at it in aggregate, that improves our free cash flow by about CAD 500 million. Again, it's a structural improvement that we're able to sustain on an annual basis going forward here. From an asset perspective, I think Patrick would've mentioned the way that we've set up our business is there's the conventional division and then there's the unconventional.
Our conventional assets produce about 145,000 BOE per day, primarily in central Alberta and Saskatchewan. Low decline, high net back, 80% liquids, which drive a significant amount of free cash flow. So within our conventional division, we spend about 25% of the corporate budget on the CapEx, and it generates about 50% of the cash flow. It's a very strong stabilizer that allows us to really sustain our dividend and pay for the dividend through commodity price cycles. We balance that with our unconventional assets, which is really the Montney and the Duvernay. That's the growth engine within the company where we're looking to grow that somewhere in that neighborhood of 8%-12% on an annual basis. When you combine those two divisions together, that's what allows us to grow 3%-5% and provide our shareholders with a sustainable dividend longer term.
We've got a long runway of opportunities in front of us, in both divisions. So 10,500 drilling locations that we have in inventory here. Keep in mind for context, we're drilling about 255 wells in 2026, so we have decades and decades of inventory in front of us. Of that 10,500 locations, 55% of that is in the conventional side and 45% of that is on the unconventional side. We think one of the biggest competitive advantages for Whitecap and our shareholders is the diversified portfolio that we have to really maximize returns depending on the commodity that's outperforming. Our inventory set, the 10,500 locations, span all the way from crude oil and condensate to liquids rich to more lean gas opportunities. Depending on the commodity that's outperforming it today, it's certainly light oil and condensate.
We can allocate our capital to the best return projects. If and when gas prices improve there, we can always allocate our capital a little bit more towards the gas portfolio if it competes for capital. As stated, our production growth target is 3%-5% there. It's underpinned by a best-in-class balance sheet where it's 0.5 times debt to cash flow. Longer term, we would target one times debt to cash flow there, and we would enhance the return profiles back to our shareholders by returning back capital in the form of not only share repurchases, but also the dividend that I talked about currently at CAD 0.73 there. What's unique about our approach to free cash flow allocation is we look at it on a long-term basis and really taking a counter-cyclical approach to the business.
I think it's a little bit different than what you'll see out there with other companies where the more cash flow that they have, the more they want to spend, whether it's on acquisitions or share buybacks. The way that we think about the business is in an elevated pricing environment, and we think we are in right now relative to the conflict in the Middle East as well as the Strait of Hormuz being closed here and oil trading in around this $85 range. But what is unique about being in Canada is the weak Canadian dollar. So we are getting a 35%-40% uplift in our revenues because of that. So in this pricing environment here, we prioritize our balance sheet.
So we will take our debt down from CAD 3.4 billion at the end of 2025 to about CAD 2 billion by the end of 2026 here, which is 0.5 times debt to cash flow. And what we are looking to do is really longer term, be able to redeploy that in a lower pricing environment. When we look at a lower pricing environment, let us use $50 oil and $2 gas there. We are looking to pay for our dividend, maintain our production in around that 385,000 BOE per day just within cash flows. And then we would use our balance sheet strength to be able to be more aggressive, whether it is share buybacks or doing acquisitions in a lower pricing environment.
In a balanced environment, more mid-cycle pricing, I would say, we can do a combination of things. We can grow 3%-5% organically, buy a little bit of stock back, and have a little bit left to continue to strengthen the balance sheet as well. But that is the way that we think about the business through commodity price cycles. Return of capital is an important part of the total return that we are providing to our shareholders, organic growth, dividends, as well as share buybacks. So you can see the history there. Cumulatively, we have been able to pay CAD 3.4 billion of dividends back to our shareholders and just under CAD 1 billion of share buybacks, which equates to about CAD 8 per share that we have been able to return back to our shareholders.
On the balance sheet side, we talked a little bit about that. We are investment grade. We are rated BBB flat by DBRS Morningstar. Our cost of borrowing is very low at 4%, so it makes sense that debt is part of the capital stack. That is the way that we are going to maximize returns for our shareholders here, but using it very prudently. So longer term, our debt target is 1 times. Currently very low right now at 0.5 times. We have got a bank line with a syndicate of banks led by TD and National Bank for CAD 2.5 billion. So lots of liquidity that is available to us, CAD 1.7 billion of liquidity.
So very strong from a financial perspective, gives us lots of flexibility as we think about the business on a go-forward basis. Risk management, that is an important tool for us to manage risk given the volatility that we see in the market. So what we would look to do there is hedge somewhere between 25%-35% of our production, both on crude oil as well as natural gas, and we will do that on a two-year rolling basis. What we would look to do is really hedge those cash flows to ensure that in a low commodity price environment, we have enough cash to be able to pay for a dividend as well as maintain our production. It's not meant to be speculative.
We take a very methodical approach to the way that we hedge, and we're looking at very simple, plain vanilla, simple structures like swaps and costless collars. Lock it in, protect our cash flows, and then expose our shareholders to the upside for the balance of the production there. We've got very good positions on the crude oil side for the back half of 2026, 33% hedged at an average price of CAD 94, and then 26% in 2027 at just under CAD 93. Very good hedge positions on natural gas. This is AECO, back half 28% at CAD 4 per GJ and 13% for 2027 at just under CAD 3 per GJ. Again, 25%-35%, we'll just continually do that to lock in our cash flows.
When we look at the asset potential here, it's quite significant given we've got 10,500 locations and decades and decades of growth in front of us. In the near term, we have capacity for an incremental 80,000 BOE per day, which includes Lator Phase 1, which is 35,000-40,000 BOE per day. Beyo nd that, an incremental in excess of 325,000 BOE per day. That allows us to continue to grow our company in that 3%-5% for many years to come. Over the next five-year period of time, depending on commodity prices there, like I said, in a low commodity price environment, we just look to maintain our production. As commodity prices improve in this environment here, it's 3%-5%, so that gets us upwards of 470,000 BOE per day at the end of the five-year period of time.
What's important, though, is you look at the run rate free cash flow. On an annual basis, we're generating CAD 2.2 billion of free funds flow, and that's at $70 WTI. Very, very significant, way more than enough to fund our dividend obligation, which is only CAD 900 million. We would have CAD 1.3 billion of excess free cash flow over and above our dividend obligation. To conclude here, operationally, things are running very, very strong, and we're looking to continue the outperformance for 2026. More importantly here, it's going to set us up very, very well for 2027. We continue to focus on total shareholder returns, combination of organic per share growth enhanced through the share buyback program that we have in place through our NCIB, continue to play the dividend at that CAD 0.73.
Longer term, as we continue to grow our business 3%-5%, we would look to grow our dividend as well in that 1%-2% range. This is underpinned by a best-in-class balance sheet, as I've talked about, longer-term target at one times, but right now it's 0.5 times debt to cash flow. With that, I want to conclude the presentation. Thanks everyone for attending, and we'll take any Q&A at the breakout session. Thanks very much.