CALGARY, ALBERTA–(Marketwired – Jan. 18, 2017) – Tamarack Valley Energy Ltd. (“Tamarack” or the “Company“) (TSX:TVE) is pleased to provide an operational update, including confirmation of its record fourth quarter 2016 production volumes, and the appointment of Mr. John Leach to its Board of Directors.
During the quarter, Tamarack achieved record production that averaged approximately 11,453 boe/d (55% liquids) based on December field estimates, exceeding previous exit guidance of 11,000 boe/d. The assets acquired in the Spur Resources Ltd. (“Spur“) transaction (the “Spur Assets“) that closed on January 11, 2017, have outperformed initial expectations producing over 6,600 boe/d (57% liquids) based on field estimates in December, 2016, contributing to a pro-forma exit production rate of over 18,000 boe/d. Pro-forma debt estimated at closing on January 11, 2017 was approximately $138 million.
Tamarack’s fourth quarter volumes are 6% higher than the previous quarter and 16% higher than the 2015 fourth quarter rate. Strong fourth quarter production is a result of continued successful drilling in the Wilson Creek / Alder Flats area of Alberta as well as positive performance from the Penny and Redwater assets that were acquired in June, 2016. These assets have continued to outperform expectations, with the assets in Penny averaging 1,194 boe/d (74% liquids) during the last week of December, 2016, an increase of 14% over the 1,050 boe/d reported when the acquisition was announced.
During the fourth quarter of 2016, the Company drilled six net horizontal oil wells, five of which were in the Wilson Creek / Alder Flats area and one in Penny. Three of the Wilson Creek wells were originally planned for 2017 but were accelerated into 2016 to capitalize on lower service costs and idle equipment. All three wells were completed during the first week of January, 2017 with equip and tie-in of the wells expected in the last half of January. Throughout 2016, the Company drilled a total of 22 (20.9 net) wells of which 14 (13.6 net) were in the Wilson Creek/ Alder Flats area.
2017 Capital Program Highlights
Tamarack has budgeted to drill 140 to 150 net wells in 2017, of which 122 to 130 will be Viking oil wells on the newly acquired Spur Assets. Approximately 80% of the budgeted Viking oil wells are anticipated to be drilled within the Consort, Veteran and Hoosier areas where operated infrastructure contributes to greater cost control and enhanced returns. The Company has also budgeted 12 to 14 net Cardium wells and two net Notikewin liquids-rich gas wells in the Wilson Creek / Alder Flats area as well as four net horizontal oil wells in the Penny area.
During the first quarter of 2017, the Company anticipates drilling 30-35 net Viking oil wells, including at least 20 extended reach horizontal (“ERH“) wells in the Viking, five to six net Cardium oil wells plus one net Notikewin well at Alder Flats. Tamarack currently has four drilling rigs in operation and has successfully drilled one Notikewin liquids-rich gas well and one Cardium oil well in Alder Flats, two Viking oil wells in North Hoosier and one Viking oil well in Veteran in 2017.
Leading up to the closing of the acquisition, Tamarack was able to secure licenses for the first quarter Viking drilling program on the Spur Assets. Results from the first quarter Viking program will be used to plan the balance of the Company’s Viking program expected to commence in mid-2017. Drilling and completions design optimization is expected to capture efficiencies and improve results across a larger Viking drilling program than previously executed on the Spur Asset base. Tamarack is also working on initiatives to increase longer-term drilling inventory and incremental reserves, including evaluating tighter well densities in certain areas and allocating a material percentage of the capital program to lower-risk step-out wells.
Reaffirmed 2017 Guidance
The Company’s previously announced 2017 guidance is reaffirmed below:
- Annual average production between 19,000-20,000 boe/d (approximately 55-60% liquids), with 2017 exit production estimated between 20,000-21,000 boe/d (approximately 57-62% liquids);
- Capital expenditure range of $165 to $175 million, with first half 2017 expenditures $65 to $75 million;
- Estimated year end 2017 fourth quarter annualized debt to cash flow (including hedges) ratio below 0.9 times with an estimated $70-75 million of liquidity on the Company’s existing credit facilities; and
- Assumed 2017 commodity prices: WTI averaging $55/bbl USD, Edmonton Par price averaging $64.45/bbl, AECO averaging $2.65/GJ and a Canadian/US dollar exchange rate of $0.76.
The Company currently has 3,000 bbls/d of its first half oil production hedged at $63.50/bbl Cdn WTI and 1,900 bbls/d of its second half average oil production hedged at $69.00/bbl Cdn WTI. Natural gas hedges of 23,000 GJ/d are in place through the end of the third quarter of 2017 at an average fixed AECO price of $2.70/GJ, and 11,000 GJ/d is hedged in the fourth quarter of 2017 at an average fixed AECO price of $2.85/GJ. With an increased credit facility of $220 million, a robust hedging program and continued low operating and capital cost structure, Tamarack has the financial flexibility to adjust expenditures to ensure strong returns across a fluctuating commodity price environment.
Tamarack has a proven track record of effectively and seamlessly integrating acquired assets and operations into its existing portfolio, and is continuing to do so with all of the assets accumulated in 2016. Through 2017, Tamarack will remain focused on driving organic growth within its quick payback, high-quality asset base, while maintaining a strong balance sheet, low cost structure and efficient operations.
New Board Member Appointment
Tamarack is pleased to announce the appointment of Mr. John Leach to its Board of Directors. Mr. Leach is a Chartered Professional Accountant with over 23 years of oil and gas experience. He is currently the Senior Vice President & Chief Financial Officer of Crew Energy Inc., a position he has held since Crew’s spin-out from Baytex Energy Ltd. in 2003. Previously, Mr. Leach was a founding member of Baytex Energy Ltd. since 1993, serving in the finance department in increasing roles of responsibility culminating as its Vice President, Finance from 1998 to 2003. Mr. Leach will serve as a member of the Audit Committee of Tamarack’s Board.
New Tamarack Website
Tamarack also confirms that it has launched an updated website which provides visitors with a streamlined and user-friendly source for Tamarack’s news releases, financial information, corporate presentations, videos and other details, while reflecting the Company’s strong track record and continued evolution. Shareholders and other interested parties are encouraged to visit www.tamarackvalley.ca.
About Tamarack Valley Energy Ltd.
Tamarack is an oil and gas exploration and production company committed to long-term growth and the identification, evaluation and operation of resource plays in the Western Canadian Sedimentary Basin. Tamarack’s strategic direction is focused on two key principles – targeting repeatable and relatively predictable plays that provide long-life reserves, and using a rigorous, proven modeling process to carefully manage risk and identify opportunities. The Company has an extensive inventory of low-risk, oil development drilling locations focused in the Cardium and Viking fairways primarily in Alberta that are economic at a variety of oil and natural gas prices. With this type of portfolio and an experienced and committed management team, Tamarack intends to continue delivering on its strategy to maximize shareholder return while managing its balance sheet.