CALGARY, AB, Oct. 27, 2021 /CNW/ – Tamarack Valley Energy Ltd. (“Tamarack” or the “Company”) is pleased to announce its financial and operating results for the three and nine months ended September 30, 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 and nine months ended September 30, 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: “The third quarter was very strong operationally and included the successful integration of the Charlie Lake assets into our portfolio. I am very proud and confident in our team’s ability to execute and drive outperformance in our assets, which is evident through our production guidance increase for 2021. Tamarack is pleased to announce its inaugural dividend and return of capital framework. Our plan to initiate a sustainable base monthly dividend commencing in January 2022, with the framework working towards distributing up to 50% of our free funds flow(1) as we reach our long-term debt target. The successful repositioning of the Company into the Clearwater and Charlie Lake oil plays, coupled with our strong portfolio of waterflood assets is expected to generate sustainable long-term growth in free funds flow(1) and return of capital to shareholders.”
Q3 2021 Financial and Operating Highlights
- Achieved quarterly production volumes of 41,256 boe/d(2) in Q3 2021, representing a 92% increase compared to the same period in 2020.
- Generated adjusted funds flow(1) of $102.5 million in Q3 2021 ($0.25 per share basic and diluted) compared to $30.8 million in the same period in 2020 ($0.14 per share basic and diluted) and $216.2 million for the nine months ended September 30, 2021 ($0.64 per share basic and $0.63 per share diluted) compared to $93.9 million in the same period in 2020 ($0.42 per share basic and diluted).
- Generated free funds flow(1), excluding acquisition expenditures, of $32.5 million and net income of $20.0 million during the quarter.
- Invested $70.0 million in exploration and development (“E&D”) capital expenditures, excluding acquisitions, during the third quarter of 2021. This contributed to the drilling of 8 (8.0 net) Clearwater oil wells, 7 (7.0 net) Charlie Lake oil wells and 3 (3.0 net) Viking oil wells along with the investment in the Nipisi Clearwater gas gathering project, which currently is conserving 2.0 mmcf/d of natural gas, and other Clearwater infrastructure initiatives.
- Exited the third quarter with $519.7 million of net debt(1) with a forecasted 2021 year-end net debt to Q4 annualized adjusted funds flow(1) of less than 1.2x.
- Successfully executed $42.9 million of further tuck-in acquisitions in the Clearwater oil (previously announced Southern Clearwater acquisition) and Charlie Lake light oil plays which included 53 net sections of land and 63 gross (59.7 net) future drilling locations(3) in the Clearwater and added 20 gross (12.5 net) sections in the Charlie Lake. These acquisitions further our strategy of both adding to and enhancing the resiliency of our drilling inventory and free funds flow(1) profile.
2021 Guidance Increase & Preliminary 2022 Capital Program
Given the strong operational outperformance, Tamarack is pleased to provide updated production guidance for both the second half and full year 2021.
- Production Guidance Increase – Second half 2021 production guidance is increased to 40,500 boe/d(4) with full year production guidance of 34,250 boe/d(4) up from 33,000 boe/d.
- Preliminary 2022 Capital Program – Tamarack plans to spend $200 to $225 million in 2022 and plans to announce its comprehensive 2022 budget in January 2022.
Dividend Policy and Return of Capital Framework
Tamarack is pleased to announce the implementation of its dividend policy and return of capital framework. The free funds flow(1) return will be achieved through modest, sustainable base dividend growth, special dividends and tactical share buybacks.
- Sustainable Base Dividend – Providing shareholders with a sustainable base monthly dividend which grows in conjunction with earnings over time is a key focus for the Company. Tamarack will initiate a base dividend of up to 25% of free funds flow(1) predicated on the Tamarack five-year plan price deck of US$55/bbl WTI and $2.50/GJ AECO. The remainder of free funds flow(1) will primarily be allocated to net debt(1) reduction and strategic asset acquisitions in existing core areas.
- Enhanced Return to Shareholders – Once the Company reaches its long term $250 to $300 million net debt(1) target, Tamarack plans to return up to 50% of the previous quarter’s free funds flow(1) inclusive of base dividends, taking into consideration market conditions, to its shareholders through tactical share buybacks and/or special dividends. The long-term debt target is predicated on a forecasted year-end net debt to trailing annual adjusted funds flow(1) of 1.0x at US$45/bbl WTI. The remaining 50% of free funds flow(1) will be allocated to further debt repayment and future acquisitions.
Given the continued success of our development program and strong free funds flow(1) generation, Tamarack expects the inaugural monthly cash dividend of $0.0083 per share to be payable on February 15, 2022, to holders of common shares (“Common Shares”) of the Company of record at the close of business on January 31, 2022. The base dividend is modelled to be sustainable down to less than US$35/bbl WTI and at US$70/bbl WTI would only represent 7% of 2022 adjusted funds flow(1), highlighting the resiliency of the dividend level. On current strip pricing, the Company looks to achieve its long-term debt target of $250 to $300 million in the second half of 2022. The base dividend will be designated as an “eligible dividend” for Canadian federal and provincial income tax purposes. Dividends paid to shareholders who are non-residents of Canada will be subject to Canadian non-resident withholding taxes.
Strategic and opportunistic M&A remains a key focus for Tamarack in enhancing and growing the sustainable free funds flow(1) for the Company and shareholders. The Company will continue to execute potential M&A in a disciplined manner with a focus on free funds flow breakeven(1) levels and debt adjusted free funds flow(1) per share accretion within our five-year plan.
NCIB Application
Tamarack has applied to the TSX for approval of a normal course issuer bid (“NCIB”). If approved, the NCIB would allow Tamarack to purchase up to approximately 20,354,360 common shares (representing approximately 5% of the 407,087,206 outstanding Common Shares as of October 25, 2021) over a period of twelve months. The actual number of Common Shares which may be purchased pursuant to the NCIB would be determined by management of the Company. Any Common Shares that are purchased under the NCIB would be cancelled upon their purchase by Tamarack.
The NCIB would provide an additional tool for the reinvestment of excess free funds flow(1) to increase long-term total shareholder returns. Tamarack believes that, at times, the prevailing share price does not reflect the underlying value of the Common Shares and the repurchase of Common Shares represents an opportunity to improve per share metrics. As with all expenditures, if the NCIB is approved, Tamarack will remain vigilant in ensuring it retains flexibility and liquidity on its balance sheet.
Operations & Sustainability Update
Tamarack has one rig active in the Charlie Lake with 2 (2.0 net) wells planned to be drilled during the fourth quarter and has two rigs active in the Clearwater play (one operated and one non-operated) with plans for 8 (7.0 net) wells to be drilled. The Company continues to achieve production rates ahead of our internal type curves in both the Charlie Lake and Clearwater oil plays. Tamarack remains on track with its planned production range of 12,000-13,000 boe/d(5) for the Charlie Lake asset going forward, with current production in excess of 13,000 boe/d(5). Total Clearwater production averaged 5,450 boe/d(6) for the third quarter with current production of approximately 5,750 boe/d(6). The Company is also pleased to announce the completion of its Nipisi Clearwater gas gathering project during the third quarter which is currently conserving approximately 2.0 mmcf/d of natural gas. In addition, technical work continues to progress on an initial Clearwater waterflood pilot which is expected to be initiated in the first quarter of 2022 in West Nipisi.
Tamarack’s commitment to progressing our environment, social and governance (“ESG”) initiatives continued during the third quarter with the commissioning of our Nipisi Clearwater gas conservation project in addition to furthering our community engagement and Indigenous partnerships. Tamarack plans to release our 2021 Sustainability Report in November of this year.
Investor Webcast
Tamarack will host a webcast at 9:00 AM MT (11:00 AM ET) on October 28, 2021 to discuss the third 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.
Financial & Operating Results
Three months ended |
Nine months ended |
|||||
September 30, |
September 30, |
|||||
2021 |
2020 |
% change |
2021 |
2020 |
% change |
|
($ thousands, except per share) |
||||||
Total oil, NGL, natural gas and processing revenue |
212,265 |
57,790 |
267 |
457,867 |
157,200 |
191 |
Cash flow from operating activities |
100,558 |
26,965 |
273 |
179,247 |
101,431 |
77 |
Per share – basic |
$ 0.25 |
$ 0.12 |
108 |
$ 0.53 |
$ 0.46 |
15 |
Per share – diluted |
$ 0.24 |
$ 0.12 |
100 |
$ 0.52 |
$ 0.46 |
13 |
Adjusted funds flow (1) |
102,486 |
30,837 |
232 |
216,179 |
93,854 |
130 |
Per share – basic (1) |
$ 0.25 |
$ 0.14 |
79 |
$ 0.64 |
$ 0.42 |
52 |
Per share – diluted (1) |
$ 0.25 |
$ 0.14 |
79 |
$ 0.63 |
$ 0.42 |
50 |
Net income (loss) |
20,032 |
(5,776) |
447 |
250,060 |
(293,164) |
185 |
Per share – basic |
$ 0.05 |
$ (0.03) |
267 |
$ 0.74 |
$ (1.32) |
156 |
Per share – diluted |
$ 0.05 |
$ (0.03) |
267 |
$ 0.73 |
$ (1.32) |
155 |
Net debt (1) |
(519,708) |
(199,561) |
160 |
(519,708) |
(199,561) |
160 |
Capital expenditures (7) |
69,978 |
10,364 |
575 |
149,487 |
90,455 |
65 |
Weighted average shares outstanding (thousands) |
||||||
Basic |
406,152 |
221,611 |
83 |
335,913 |
221,610 |
52 |
Diluted |
414,342 |
221,611 |
87 |
344,072 |
221,610 |
55 |
Share Trading (thousands, except share price) |
||||||
High |
$ 3.31 |
$ 1.09 |
204 |
$ 3.31 |
$ 2.27 |
46 |
Low |
$ 2.05 |
$ 0.70 |
193 |
$ 2.05 |
$ 0.39 |
426 |
Trading volume (thousands) |
180,490 |
56,013 |
222 |
346,720 |
181,659 |
91 |
Average daily production |
||||||
Light oil (bbls/d) |
19,405 |
10,309 |
88 |
14,720 |
11,424 |
29 |
Heavy oil (bbls/d) |
5,438 |
159 |
3,320 |
4,275 |
165 |
2,491 |
NGL (bbls/d) |
4,257 |
2,162 |
97 |
3,243 |
1,766 |
84 |
Natural gas (mcf/d) |
72,935 |
53,420 |
37 |
62,171 |
51,986 |
20 |
Total (boe/d) |
41,256 |
21,533 |
92 |
32,600 |
22,019 |
48 |
Average sale prices |
||||||
Light oil ($/bbl) |
79.12 |
46.77 |
69 |
74.43 |
39.58 |
88 |
Heavy oil ($/bbl) |
67.97 |
38.31 |
77 |
61.40 |
35.27 |
74 |
NGL ($/bbl) |
33.67 |
23.57 |
43 |
36.37 |
19.29 |
89 |
Natural gas ($/mcf) |
3.44 |
1.61 |
114 |
3.14 |
1.53 |
105 |
Total ($/boe) |
55.73 |
29.02 |
92 |
51.27 |
25.97 |
97 |
Operating netback ($/Boe) (1) |
||||||
Average realized sales |
55.73 |
29.02 |
92 |
51.27 |
25.97 |
97 |
Royalty expenses |
(8.97) |
(2.87) |
213 |
(7.51) |
(2.95) |
155 |
Net production and transportation expenses (1) |
(10.53) |
(10.64) |
(1) |
(10.75) |
(10.21) |
5 |
Operating field netback ($/Boe) (1) |
36.23 |
15.51 |
134 |
33.01 |
12.81 |
158 |
Realized commodity hedging gain (loss) |
(6.21) |
2.42 |
(357) |
(5.62) |
5.28 |
(206) |
Operating netback |
30.02 |
17.93 |
67 |
27.39 |
18.09 |
51 |
Adjusted funds flow ($/Boe) (1) |
27.00 |
15.57 |
73 |
24.29 |
15.56 |
56 |
About Tamarack Valley Energy Ltd.
Tamarack is an oil and gas exploration and production company committed to free funds flow generation and financial stability through the identification, evaluation and operation of resource plays in the Western Canadian Sedimentary Basin. Tamarack’s strategic direction is focused on three 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 on Charlie Lake, Clearwater and EOR plays 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 Energy’s Alberta System |
bbls |
barrels |
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 Accounting Standards Board |
mcf |
thousand cubic feet |
mcf/d |
thousand cubic feet per day |
mmcf/d |
million cubic feet per day |
MSW |
Mixed sweet blend, the benchmark for conventionally produced light sweet crude oil in Western Canada |
WTI |
West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for the crude oil standard grade |
Reader Advisories
Notes to Press Release |
|
(1) |
See “Non-IFRS Measures”; free funds flow and free funds flow breakeven were previously referred to as free adjusted funds flow and free adjusted funds flow breakeven, respectively |
(2) |
Comprised of 19,405 bbl/d light and medium oil, 5,438 bbl/d heavy oil, 4,257 bbl/d NGL and 72,935 mcf/d natural gas |
(3) |
See “Disclosure of Oil and Gas Information – Drilling Locations” |
(4) |
Comprised of 17,500-18,0000 bbl/d light and medium oil, 6,500-7,000 bbl/d heavy oil, 4,000-4,200 bbl/d NGL and 69,500-70,500 mcf/d natural gas for second half and 15,250-15,750 bbl/d light and medium oil, 4,800-5,000 bbl/d heavy oil, 3,300-3,500 bbl/d NGL and 64,000-65,000 mcf/d natural gas for full year |
(5) |
Comprised of 6,550-7,200 bbl/d light and medium oil, 1,950-2,000 bbl/d NGL and 21,000-22,800 mcf/d natural gas |
(6) |
Comprised of 5,450 bbl/d heavy oil for the third quarter with 5,475-5,525 bbl/d heavy oil and 15-20 bbl/d NGL and 1,200-1,500 mcf/d natural gas for current production |
(7) |
Capital expenditures include exploration and development expenditures but exclude asset acquisitions and dispositions |