CALGARY, AB – Tamarack Valley Energy Ltd. (“Tamarack” or the “Company”) is pleased to announce its financial and operating results for the three months ended March 31, 2021. Selected financial and operational information is outlined below and should be read in conjunction with Tamarack’s unaudited condensed consolidated interim financial statements for the three months ended March 31, 2021 and related management’s discussion and analysis (“MD&A”) which are available on SEDAR at www.sedar.com and on Tamarack’s website at www.tamarackvalley.ca.
Brian Schmidt, President and CEO of Tamarack commented: “We are proud to report another very strong quarter driven by the effective execution of our drilling program and integration of the Clearwater acquisitions. The Company exceeded our Clearwater winter drilling program exit production expectations with volumes greater than 4,000 bbl/d(1). Furthermore, we continued to deliver on our strategy of enhancing the sustainability and resilience of our free adjusted funds flow(2) with the closing of the Greater Nipisi and Provost acquisitions on March 25th, which added ~2,800 boe/d(3) of low decline oil production under waterflood and grew our highly economic Clearwater oil inventory. These transactions, combined with our recently announced Anegada Oil Corp. acquisition continue to drive down our sustaining free adjusted funds flow breakeven price(2) to the mid US$30/bbl, while offering significant upside to shareholders through a sector leading total return profile. In addition, we remain focused on advancing the 2021 initiatives and targets set within our robust environmental, social and governance (“ESG”) reporting.”
Q1 2021 Financial and Operating Highlights
- Closed two separate agreements in March 2021 to acquire assets in the Greater Nipisi and Provost areas of Alberta, including approximately 2,800 boe/d(3) of low decline (~16%) oil weighted assets under waterflood and approximately 38,400 net acres in the Clearwater oil play of Alberta for a net cash purchase price of approximately $121 million. These acquisitions were financed through a combination of debt, a $68.2 million bought deal financing (30.3 million common shares at $2.25 per share) and a gross overriding royalty (“GORR”) disposition on the newly acquired Greater Nipisi Clearwater and Slave Point lands for proceeds of approximately $13.5 million.
- Achieved quarterly production of 23,938 boe/d in Q1/21, a 2% increase over the same period in 2020.
- Generated adjusted funds flow(2) of $41.2 million in Q1/21 ($0.16 per share basic and diluted).
- Invested $48.7 million in exploration and development (“E&D”) capital expenditures, excluding acquisitions, during Q1/21, which contributed to the drilling of 44 (42.3 net) wells, comprised of 22 (22.0 net) Viking oil wells, 16 (15.5 net) Clearwater oil wells, two (0.8 net) Falher gas wells and four (4.0 net) water source and injector wells. The Company continued to direct significant capital to our Viking waterflood program which represented approximately 34% of the total E&D capital expenditures.
- Successfully executed on our Viking waterflood program, with first quarter production exit volumes of approximately 2,540 bbls/d of light oil, delivering 91% growth on Q1/21 average volumes versus Q1/20.
Clearwater Update
Tamarack executed a successful winter capital program with the drilling of 16 (15.5 net) wells, with the faster execution of drilling operations enabling three wells from our planned second quarter to be accelerated to the first quarter. The winter drilling program exit production volumes in excess of 4,000 bbl/d(1) exceeded previous expectations. The outperformance was driven by better than forecast well results, with the winter program exhibiting stabilized average IP30 rates (6 leg horizontal wells) of approximately 170 bbl/d, exceeding Tamarack’s Nipisi internal type 1 curve of 147 bbl/d (see the Company’s investor presentation for additional details). Drilling results on the Company’s newly acquired Nipisi have exhibited some of the strongest results seen to date with IP30 rates of 235, 300 and 253 bbl/d respectively. Well costs continue to track below internal estimates, averaging approximately $1.06 million (drill, complete, equip and tie-in) versus our planned costs of $1.1 million per well.
The Company plans to keep one rig active through Q2/21 with a seven well program, ramping back up to two rigs in Q3/21, with plans to convert 27 six-leg wells to 23 seven to eight leg wells. The seven to eight leg wells are expected to enhance the economics of the play, with internal estimates of an incremental $950,000 of net present value (discounted at 10%) per section. In total, Tamarack plans to drill 38 horizontal Clearwater wells on a total capital program investment of $54 million, driving Q4/21 production from the play to over 5,000 bbl/d(4). In addition, the Company has commenced construction of a gas gathering system to further gas conservation efforts and plans to pilot our first waterflood in the Nipisi area in Q4/21.
Anegada Transaction & Updated Guidance
Subsequent to the end of the quarter, Tamarack entered into a definitive agreement to acquire Anegada Oil Corp. (“Anegada”) – a privately held, pure play, Charlie Lake light oil producer – for total net consideration of $494 million (the “Acquisition”), after deducting the proceeds from a newly created 2% GORR on the acquired assets. As announced on April 28th, 2021, the Company has received written consent from shareholders holding a majority of the issued and outstanding shares to approve the Acquisition and as such will not be holding a special meeting on the Acquisition. Furthermore, on May 4, 2021, Tamarack and Anegada received the required approval from Competition Bureau under the Competition Act (Canada) with respect to the Acquisition. With receipt of the Competition Act approval, the parties intend to work expeditiously towards closing the Acquisition and anticipate closing will occur on or about May 31, 2021.
Concurrent with the Acquisition, Tamarack provided updated 2021 pro-forma guidance effective June 1, 2021.
Preliminary 2021 Guidance |
Tamarack March |
Tamarack |
||
Capital Budget ($MM) |
125 – 130 |
165 – 175 |
||
Average Production(5) (boe/d) |
26,000 |
33,000 |
||
% Oil and NGL |
66 – 68 |
67 – 69 |
||
Adjusted Funds Flow(2) ($MM) |
215 – 220 |
290 – 295 |
||
Free Adjusted Funds Flow(2) ($MM) |
85 – 90 |
120 – 125 |
||
Year End Net Debt to Q4 Annualized Adj. Funds Flow(2) |
<1.0x |
<1.2x |
||
Free Adjusted Funds Flow Breakeven(2) (US$/bbl WTI) |
~$40 |
<$36 |
Pro-Forma acquisition guidance numbers are based on pricing assumptions of: a WTI price of US$58.65/bbl; an MSW/WTI differential of US$4.00/bbl; an AECO price of $2.45/GJ; and a USD/CAD exchange rate of $1.2545.
Executive Change
Tamarack congratulates Mr. Ken Cruikshank, Vice President Land, on his retirement effective June 30, 2021. Tamarack would like to thank Mr. Cruikshank for his contributions to the Company since its inception, which span more than eleven years. The Company has planned for succession and has senior experience that will ensure efficient execution moving forward.
“On behalf of the board of directors, executive management team and all of our staff, I would like to extend sincere appreciation to Ken for his many contributions which are imprinted in our success. He has been instrumental in building the Company to what it is today” said Brian Schmidt, President and Chief Executive Officer. “We wish him well in his retirement.”
Financial & Operating Results
Three months ended |
|||
March 31, |
|||
2021 |
2020 |
% change |
|
($ thousands, except per share) |
|||
Total oil, natural gas and processing revenue |
93,434 |
66,283 |
41 |
Cash flow from operating activities |
38,436 |
46,359 |
(17) |
Per share – basic |
$ 0.14 |
$ 0.21 |
(33) |
Per share – diluted |
$ 0.14 |
$ 0.21 |
(33) |
Adjusted funds flow(2) |
41,236 |
42,045 |
(2) |
Per share – basic(2) |
$ 0.16 |
$ 0.19 |
(16) |
Per share – diluted(2) |
$ 0.16 |
$ 0.19 |
(16) |
Net loss |
(166) |
(251,321) |
100 |
Per share – basic |
(0.00) |
$ (1.13) |
100 |
Per share – diluted |
(0.00) |
$ (1.13) |
100 |
Net debt(2) |
(286,175) |
(227,151) |
26 |
Capital expenditures(7) |
48,704 |
73,873 |
(34) |
Weighted average shares outstanding (thousands) |
|||
Basic |
265,415 |
222,048 |
20 |
Diluted |
265,415 |
222,048 |
20 |
Share Trading (thousands, except share price) |
|||
High |
$ 2.46 |
$ 2.27 |
9 |
Low |
$ 1.25 |
$ 0.39 |
221 |
Trading volume (thousands) |
181,132 |
58,945 |
207 |
Average daily production |
|||
Light oil (bbls/d) |
10,120 |
12,867 |
(21) |
Heavy oil (bbls/d) |
2,654 |
180 |
1,374 |
NGL (bbls/d) |
2,420 |
1,665 |
45 |
Natural gas (mcf/d) |
52,466 |
52,912 |
(1) |
Total (boe/d) |
23,938 |
23,531 |
2 |
Average sale prices |
|||
Light oil ($/bbl) |
64.01 |
46.42 |
38 |
Heavy oil ($/bbl) |
48.00 |
49.76 |
(4) |
NGL ($/bbl) |
37.17 |
19.44 |
91 |
Natural gas ($/mcf) |
3.15 |
1.61 |
96 |
Total ($/boe) |
43.03 |
30.76 |
40 |
Operating netback ($/Boe)(2) |
|||
Average realized sales |
43.03 |
30.76 |
40 |
Royalty expenses |
(5.37) |
(3.77) |
42 |
Net production and transportation expense(2) |
(11.17) |
(9.98) |
12 |
Operating field netback ($/Boe)(2) |
26.49 |
17.01 |
56 |
Realized commodity hedging gain (loss) |
(3.81) |
5.10 |
(175) |
Operating netback(2) |
22.68 |
22.11 |
3 |
Adjusted funds flow ($/Boe)(2) |
19.14 |
19.64 |
(3) |
Investor Webcast
Tamarack will host a webcast at 9:00 AM MT (11:00 AM ET) on May 5, 2021 to discuss the first quarter financial results and provide an investor update. Participants can access the live webcast via this link or through links provided on the Company’s website. A recorded archive of the webcast will be available on the Company’s website following the live webcast.
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: (i) targeting repeatable and relatively predictable plays that provide long-life reserves; (ii) using a rigorous, proven modeling process to carefully manage risk and identify opportunities; and (iii) operating as a responsible corporate citizen with a focus on environmental, social and governance (ESG) commitments and goals. The Company has an extensive inventory of low-risk, oil development drilling locations focused primarily in the Cardium, Clearwater and Viking fairways in Alberta that are economic over a range 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 returns while managing its balance sheet.
Abbreviations
AECO |
the natural gas storage facility located at Suffield, Alberta connected to TC |
bbls/d |
barrels per day |
boe |
barrels of oil equivalent |
boe/d |
barrels of oil equivalent per day |
GJ |
gigajoule |
IFRS |
International Financial Reporting Standards as issued by the International |
MMboe |
million barrels of oil equivalent |
MMcf/d |
million cubic feet per day |
MSW |
Mixed sweet blend, the benchmark for conventionally produced light sweet |
WTI |
West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, |