In conjunction with these transactions the Company is pleased to announce a return of capital update, including a 20% base dividend increase and shareholder guidance with respect to delivering enhanced returns through tactical share buybacks and/or enhanced dividends.
Brian Schmidt (Aakaikkitstaki), Tamarack’s President and CEO highlighted: “Tamarack’s announcements today are the result of our disciplined focus on sustainable free funds flow(1) growth and accretive acquisitions. Through our strategic focus over the past two years, we have positioned the Company for long-term sustainable free funds flow(1) growth and shareholder returns. The acquisition of Rolling Hills completes the consolidation of our core operating area in the Southern Clearwater, which will allow us to fully optimize development and maximize returns from this area. The Corporate Acquisition coupled with our second strategic Peavine Metis Settlement agreement and additional land sales in the Peavine area will expand our total Clearwater footprint to 593.2 net sections (379,650 net acres).”
The Corporate Acquisition represents another step forward in Tamarack’s consolidation and expansion of our holdings in the prolific Clearwater fairway. The $93.0 million of consideration consists of: (i) $46.5 million in cash, subject to adjustment; and (ii) the issuance of 9,276,623 common shares of Tamarack (“Tamarack Shares“) at a deemed price of $5.0126 per Tamarack Share. Key aspects of the Corporate Acquisition include:
- Strategic fit with Tamarack’s existing Southern Clearwater portfolio
- The Corporate Acquisition fully consolidates Tamarack’s working interest and operatorship to 100% in the greater Jarvie play in the Southern Clearwater area
- Significant Clearwater development and exploration potential
- 70 (54.0 net) future development drilling locations(3), across only 1/3 of the 34,560 net acres acquired
- Additional unbooked future exploitation and drilling upside
- Attractive environmental, social and governance (ESG) profile
- Consistent with Tamarack’s previous acquisitions in the Clearwater, the assets have minimal asset retirement obligations and limited freshwater requirements
- Tamarack expects to realize synergies in gas conservation and other infrastructure, lowering the GHG intensity of the assets, due to the strategic fit of the acquired assets in the Southern Clearwater
- Accretive to Tamarack shareholders
- Forecast production of ~2,100 boe/d(2) is expected to deliver $61.0 million of annualized operating field netback(1)
- Low sustaining capital of $15 to $20 million required to hold production levels flat
- Purchase price implies on an annualized basis 1.5x operating funds flow
- Rolling Hills has approximately 63% of remaining 2022 oil production hedged through a combination of WTI swaps and collars that ensure a minimum average WTI price >C$83/bbl
- The Corporate Acquisition is accretive on a per share basis to forecasted 2023 adjusted funds flow(1) by 5% and to free funds flow(1) by 7% on strip prices
- Further enhances the 5-year plan and return of capital framework
- Increases debt adjusted free funds flow per share(1) by more than 3% throughout Tamarack’s 5-year plan at WTI oil prices of US$55/bbl
Purchase Price |
$93.0 million |
7 Months 2022 Average Production |
2,100 boe/d(2) |
Annualized Operating Field Netback(1) |
$61.0 million |
Drilling Locations |
70 gross (54.0 net)(3) |
Proved Plus Probable Reserves |
3.8 MMboe(4) |
Total Clearwater Acreage |
34,560 net acres |
Total ARO (Undiscounted) |
<$1.0 million |
- Second strategic Peavine Metis Settlement agreement
- Tamarack is pleased to announce it has entered into a second partnership with the Peavine Metis settlement on an additional 15 net sections (9,600 net acres) of prospective Clearwater land
- Together, the strategic Peavine Metis Settlement agreements encompass a total of 44.5 net sections (28,500 net acres) of Clearwater land
- Greater Peavine area land acquisitions
- Tamarack has amassed 26 net sections (16,640 net acres) in the greater Peavine Clearwater trend, providing further scale in the region. These lands are highly prospective offsetting recent drill results in up to three prospective Clearwater sand intervals
- Exploration program plan set to commence
- Tamarack plans to commence with its initial exploration program on these lands in Q3 2022
Tamarack is pleased to announce that it plans to increase its base cash dividend by 20% to $0.010 per share per month beginning with the June dividend declaration, with an anticipated payment date of July 15, 2022. The increase in Tamarack’s monthly cash dividend reflects the improvement in sustainable free funds flow (FFF)(1) per share the Company has generated since implementation of its dividend policy in October 2021. The Company’s improved FFF(1) per share profile is a cumulative result of enhanced sustainable FFF(1) along with the acquisitions of Crestwynd Exploration Ltd. (closed February 2022) and Rolling Hills, which will continue to drive accretion at flat pricing of US$55/bbl WTI and $2.50/GJ AECO.
Based on current forward commodity prices, Tamarack is pleased to announce that it expects to implement an enhanced return to shareholders payable in Q3 2022 that will be funded through free funds flow(1) that the Company generates during Q2 2022, prior to giving effect to the Clearwater Transactions. Tamarack’s implementation of the enhanced return is based on Tamarack’s expectation that, prior to giving effect to the Clearwater Transactions, it would have achieved the upper end of its current long-term debt threshold of $325 to $375 million during Q2 2022. Details of the enhanced return will be specified with Tamarack’s release of Q2 2022 results in August 2022.
Upon closing of the Clearwater Transactions, Tamarack will increase its long-term debt threshold to $350 to $400 million, predicated on a forecasted net debt to annual adjusted funds flow of 1.0x at US$45/bbl WTI. Pending market conditions and subject to the stated debt targets, Tamarack plans to return up to 50% of the previous quarter’s free funds flow(1), inclusive of base dividends, to its shareholders through tactical share buybacks and/or special dividends. The remaining free funds flow(1) will be allocated to further debt repayment and future acquisition opportunities.
Tamarack will provide updated 2022 guidance, including pro forma estimates, in conjunction with Q1 2022 results on May 3, 2022.
Contemporaneous with the execution of the Agreement, certain shareholders of Rolling Hills, representing approximately 50% of the outstanding common shares of Rolling Hills, executed voting support agreements in connection with Corporate Acquisition. The Agreement provides for, among other things, a non-solicitation covenant on the part of Rolling Hills, a right to match in favour of Tamarack and a break fee in the amount of $5.0 million payable to Tamarack in certain circumstances. Pursuant to the Agreement, certain assets of Rolling Hills will be conveyed to a newly created company owned by the existing shareholders of Rolling Hills. A copy of the Agreement will be filed on Tamarack’s SEDAR profile at www.sedar.com.
The Corporate Acquisition is expected to close on or about June 10, 2022, subject to certain customary conditions and regulatory and other approvals, including the approval of the Toronto Stock Exchange (the “TSX”) and the Commissioner of Competition pursuant to the Competition Act (Canada).
At closing, Tamarack will enter into hold period agreements with each of the directors, officers and insiders of Rolling Hills who will, prior to the completion of the Corporate Acquisition, collectively hold or exercise control over approximately 34% of the issued and outstanding common shares of Rolling Hills (on a non-diluted basis). One-third (1/3) of the Tamarack Shares issuable to such shareholders of Rolling Hills will be subject to escrow and released as to one-half on each of the dates that is three and six months following the closing, to be facilitated via block trades, with Tamarack approval. In addition, for a period of 12 months following closing, all trades of escrowed shares by such shareholders must be facilitated in block trades facilitated by Tamarack.
- Peters & Co. Limited and RBC Capital Markets are acting as financial advisors to Tamarack with respect to the Corporate Acquisition.
- Stikeman Elliott LLP is acting as legal counsel to Tamarack with respect to the Corporate Acquisition.
- National Bank Financial Inc. is acting as financial advisor to Rolling Hills.
- Burnet, Duckworth & Palmer LLP is acting as legal counsel to Rolling Hills.
Tamarack will host a webcast at 9:00 AM MT (11:00 AM ET) on April 21, 2022 to discuss the acquisitions and return of capital updates. Participants can access the live webcast via this link or through the link provided on the Company’s website. A recorded archive of the webcast will be available on the Company’s website following the live webcast.
Tamarack is an oil and gas exploration and production company committed to creating long-term value for its shareholders through sustainable free funds flow generation, financial stability and the return of capital. The Company has an extensive inventory of low-risk, oil development drilling locations focused primarily on Charlie Lake, Clearwater and EOR plays in Alberta. Operating as a responsible corporate citizen is a key focus to ensure we deliver on our environmental, social and governance (ESG) commitments and goals. For more information, please visit the Company’s website at www.tamarackvalley.ca.
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