TSX: TVE
CALGARY, AB, Aug. 12, 2020 /CNW/ - Tamarack Valley Energy
Ltd. ("Tamarack" or the "Company") is pleased to announce its
financial and operating results for the three and six month periods
ended June 30, 2020. 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 six
months ended June 30, 2020 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.
Message to Shareholders
The past few months have been an extremely challenging period
for the oil and gas sector given the demand destruction caused by
the COVID-19 pandemic. Despite these challenges, our team has
managed our business effectively, taking decisive action to protect
our financial strength and enhance the sustainability of the
Company. We elected to reduce our 2020 capital investment program,
shut-in uneconomic production and through disciplined efforts to
streamline the business, realized both operating and general and
administrative ("G&A") cost reductions.
As WTI prices strengthened during the quarter, our focus turned
to capturing value-creating opportunities given the Company's
strong position, which features:
- a healthy balance sheet, expected to be at less than 1.5 times
estimated net debt to trailing annual adjusted funds flow ratio
(see "Non-IFRS Measures") exiting 2020;
- forecasted free adjusted funds flow (see "Non-IFRS Measures")
in 2020;
- high operating netbacks;
- strong hedge book with both WTI and oil differential hedges in
place to protect a large portion of our oil production for the
remainder of 2020; and
- enhanced sustainability due to lower production declines,
associated with lower capital spending and the ongoing success of
our Veteran Waterflood program; all of which help to reduce our
estimated corporate breakeven sustaining capital WTI price (see
"Non-IFRS Measures") to approximately US$37/bbl in 2021.
Tamarack's commitment to our core environmental, social and
governance ("ESG") principles is ongoing and is reflected in our
response to the COVID-19 crisis. This includes the phased reopening
of our corporate headquarters along with the constant assessment of
risk management policies that are dedicated to upholding the health
and safety of our skilled and valued employees, as well as the
public in the communities in which we operate. Strategically, we
are advancing our broader initiatives with a dedicated team of
senior members leading the development of Tamarack's ESG targets
and inaugural report to integrate and enhance our accountability
and sustainability moving forward.
On behalf of the management team and our Board of Directors, we
would like to thank our shareholders, stakeholders and employees
for their ongoing support during these unprecedented times.
((signed))
Brian Schmidt
President
and CEO
Second Quarter 2020 Highlights
Tamarack generated free adjusted funds flow of approximately
$14.8 million for the second quarter,
representing a total payout ratio (see "Non-IFRS Measures") of
approximately 30%, which will be directed to further enhancing our
financial position. Average production was 20,997 boe/d in Q2/20,
inclusive of shut-ins, representing a decrease of approximately 11%
over Q1/20. The Company invested approximately $6.2 million in capital expenditures which
included the completion of one (1.0 net) Banff oil well, along with the finalization of
the remaining carryover projects from Q1/20, as all other spending
was put on hold due to the effects of COVID-19 on commodity prices.
Tamarack's focus on cutting costs resulted in lower
quarter-over-quarter production, transportation and G&A
expenses.
The Company's second quarter operating netback (see "Non-IFRS
Measures") of $13.75/boe generated
adjusted funds flow (see "Non-IFRS Measures") of $21.0 million ($0.09 per share basic and diluted). The
Company recorded a net loss in the quarter of $36.1 million ($0.16 per share basic and diluted), inclusive of
realized hedging gains of $16.2
million. Tamarack remains well hedged through the second
half of 2020.
During Q2/20, the Company completed its bank syndicated credit
facility redetermination, which was established at $275 million, and at June
30, 2020, the Company had $206.5
million drawn against this facility. Tamarack is committed
to maintaining financial flexibility and is well positioned from a
liquidity standpoint to continue executing on its business
strategy. The Company exited the quarter with net debt totaling
$213.1 million, including working
capital deficiency but excluding the fair value of financial
instruments and lease liabilities, compared to $227.2 million at the end of Q1/20. Tamarack has
sufficient liquidity for the remainder of 2020 and expects to
generate free adjusted funds flow with a forecasted year-end net
debt to trailing annual adjusted funds flow ratio of less
than 1.5 times.
Financial & Operating Results
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
2020
|
2019
|
%
change
|
2020
|
2019
|
%
change
|
($ thousands,
except per share)
|
|
|
|
|
|
|
Total oil, natural
gas and processing revenue
|
33,127
|
98,526
|
(66)
|
99,410
|
194,144
|
(49)
|
Cash flow from
operating activities
|
28,107
|
60,320
|
(53)
|
74,466
|
108,409
|
(31)
|
Per share –
basic
|
$
0.13
|
$ 0.27
|
(52)
|
$
0.34
|
$ 0.48
|
(30)
|
Per share –
diluted
|
$
0.13
|
$ 0.26
|
(51)
|
$
0.34
|
$ 0.47
|
(28)
|
Adjusted funds flow
1
|
20,972
|
57,906
|
(64)
|
63,017
|
115,409
|
(45)
|
Per share – basic
1
|
$
0.09
|
$ 0.26
|
(65)
|
$
0.28
|
$ 0.51
|
(45)
|
Per share – diluted
1
|
$
0.09
|
$ 0.25
|
(64)
|
$
0.28
|
$ 0.50
|
(44)
|
Net income
(loss)
|
(36,067)
|
16,472
|
(319)
|
(287,388)
|
11,646
|
(2,568)
|
Per share –
basic
|
$
(0.16)
|
$ 0.07
|
(329)
|
$
(1.30)
|
$ 0.05
|
(2,700)
|
Per share –
diluted
|
$
(0.16)
|
$ 0.07
|
(329)
|
$
(1.30)
|
$ 0.05
|
(2,700)
|
Net debt
1
|
(213,066)
|
(195,892)
|
9
|
(213,066)
|
(195,892)
|
9
|
Capital expenditures
2
|
6,218
|
25,902
|
(76)
|
80,091
|
97,145
|
(18)
|
Weighted average
shares outstanding (thousands)
|
|
|
|
|
|
|
Basic
|
221,142
|
225,989
|
(2)
|
221,612
|
226,166
|
(2)
|
Diluted
|
221,142
|
231,152
|
(4)
|
221,612
|
231,287
|
(4)
|
Share Trading
(thousands, except share price)
|
|
|
|
|
|
|
High
|
$
1.09
|
$ 3.09
|
(65)
|
$
2.27
|
$ 3.09
|
(27)
|
Low
|
$
0.43
|
$ 1.85
|
(77)
|
$
0.39
|
$ 1.85
|
(79)
|
Trading volume
(thousands)
|
66,702
|
52,198
|
28
|
125,647
|
117,062
|
7
|
Average daily
production
|
|
|
|
|
|
|
Light oil
(bbls/d)
|
11,107
|
13,237
|
(16)
|
11,988
|
12,965
|
(8)
|
Heavy oil
(bbls/d)
|
156
|
521
|
(70)
|
168
|
502
|
(67)
|
NGL
(bbls/d)
|
1,466
|
1,423
|
3
|
1,565
|
1,485
|
5
|
Natural gas
(mcf/d)
|
49,610
|
53,451
|
(7)
|
51,261
|
52,022
|
(1)
|
Total
(boe/d)
|
20,997
|
24,090
|
(13)
|
22,265
|
23,622
|
(6)
|
Average sale
prices
|
|
|
|
|
|
|
Light oil
($/bbl)
|
24.92
|
70.17
|
(64)
|
36.46
|
67.88
|
(46)
|
Heavy oil
($/bbl)
|
15.47
|
65.14
|
(76)
|
33.81
|
53.43
|
(37)
|
NGL ($/bbl)
|
12.73
|
21.81
|
(42)
|
16.30
|
31.68
|
(49)
|
Natural gas
($/mcf)
|
1.37
|
1.71
|
(20)
|
1.50
|
2.24
|
(33)
|
Total
($/boe)
|
17.42
|
45.04
|
(61)
|
24.47
|
45.32
|
(46)
|
Operating netback
($/Boe) 1
|
|
|
|
|
|
|
Average realized
sales
|
17.42
|
45.04
|
(61)
|
24.47
|
45.32
|
(46)
|
Royalty
expenses
|
(2.12)
|
(4.20)
|
(50)
|
(3.00)
|
(4.52)
|
(34)
|
Net production and
transportation expenses
|
(10.01)
|
(10.12)
|
(1)
|
(9.99)
|
(10.16)
|
(2)
|
Operating field
netback ($/Boe) 1
|
5.29
|
30.72
|
(83)
|
11.48
|
30.64
|
(63)
|
Realized commodity
hedging gain (loss)
|
8.46
|
(1.58)
|
(635)
|
6.68
|
(1.03)
|
(749)
|
Operating
netback
|
13.75
|
29.14
|
(53)
|
18.16
|
29.61
|
(39)
|
Adjusted funds
flow ($/Boe) 1
|
10.98
|
26.41
|
(58)
|
15.55
|
26.99
|
(42)
|
|
Notes:
|
(1)
|
Net debt, adjusted
funds flow, operating netback and operating field netback do not
have any standardized meaning prescribed by IFRS and therefore may
not be comparable with the calculation of similar measures for
other entities. See "Non-IFRS Measures".
|
(2)
|
Capital expenditures
include exploration and development expenditures but exclude asset
acquisitions and dispositions.
|
Updated Guidance
On July 9, 2020, Tamarack
announced a strategic asset acquisition in West Central,
Alberta for total cash proceeds of
$4.25 million. This included
approximately 2,500 boe/d (52% oil and NGL) of low decline
production, supported by a high quality, multi-zone light oil and
liquids-rich gas drilling inventory and approximately 105,000 net
acres of land. In conjunction with the acquisition, Tamarack
provided updated 2020 pro-forma guidance inclusive of the curtailed
production volumes that had been brought back on-stream and the
increase to the Company's reclamation and abandonment spending in
2020, which reflects the Company's ongoing commitment to enhancing
its ESG initiatives.
Pro-Forma 2020 Updated Guidance
July 9, 2020
Updated Guidance
|
Full Year Capital
Budget (including Acquisitions & ARO spend) ($MM)
|
|
$101
|
Annual Average
Production (boe/d)
|
|
20,850 -
21,250
|
Annual Average Oil
& Natural Gas Liquids Weighting (%)
|
|
~60-62%
|
Free Adjusted Funds
Flow(1) (Inclusive of ARO Spend) ($MM)
|
|
$15-20
|
Year-End Net Debt to
Trailing Annual Adjusted Funds Flow Ratio(1)
(times)
|
|
~1.5x
|
2021 Estimated
Corporate Decline Rate(2)
|
|
22-24%
|
2021 Estimated
Corporate Sustaining Capital Breakeven Price
($/Bbl)(1)
|
|
~US$37.00
|
|
Notes:
|
(1)
|
See Non-IFRS
Measures.
|
(2)
|
Based on December
2020 to December 2021 estimates.
|
The above guidance is based on average 2020 commodity price
assumptions of WTI US$39.00/bbl,
MSW/WTI differential of US$6.00/bbl
and AECO at $2.00/GJ as well as a
Canadian/US dollar exchange rate of $1.3625.
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; and (ii) 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 primarily in the Cardium
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
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
|
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
|
Disclosure of Oil and Gas Information
Unit Cost Calculation. For the purpose of calculating
unit costs, natural gas volumes have been converted to a boe using
six thousand cubic feet equal to one barrel unless otherwise
stated. A boe conversion ratio of 6:1 is based upon an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
This conversion conforms with Canadian Securities Administrators'
National Instrument 51–101 - Standards of Disclosure for Oil and
Gas Activities. Boe may be misleading, particularly if used in
isolation.
Forward Looking Information
This press release contains certain forward-looking information
(collectively referred to herein as "forward-looking statements")
within the meaning of applicable Canadian securities
laws. Forward-looking statements are often, but not always,
identified by the use of words such as "guidance", "outlook",
"anticipate", "target", "plan", "continue", "intend", "consider",
"estimate", "expect", "may", "will", "should", "could" or similar
words suggesting future outcomes. More particularly, this
press release contains statements concerning: Tamarack's business
strategy, objectives, strength and focus; Tamarack's commitment to
ESG principles, measures taken in response to COVID-19 and plans
relating thereto; Tamarack's hedging position; Tamarack's liquidity
and financial position, the factors contributing thereto, the
impact thereof and plans relating thereto; and Tamarack's updated
2020 guidance.
The forward-looking statements contained in this document are
based on certain key expectations and assumptions made by Tamarack,
including relating to: prevailing commodity prices, price
volatility, price differentials and the actual prices received for
the Company's products; the availability and performance of
drilling rigs, facilities, pipelines and other oilfield services;
the timing of past operations and activities in the planned areas
of focus; the drilling, completion and tie-in of wells being
completed as planned; the performance of new and existing wells;
the application of existing drilling and fracturing techniques;
prevailing weather and break-up conditions; royalty regimes and
exchange rates; the application of regulatory and licensing
requirements; the continued availability of capital and skilled
personnel; the ability to maintain or grow the banking facilities;
the accuracy of Tamarack's geological interpretation of its
drilling and land opportunities, including the ability of seismic
activity to enhance such interpretation; and Tamarack's ability to
execute its plans and strategies.
Although management considers these assumptions to be reasonable
based on information currently available, undue reliance should not
be placed on the forward-looking statements because Tamarack can
give no assurances that they may prove to be
correct. By their very nature, forward-looking
statements are subject to certain risks and uncertainties (both
general and specific) that could cause actual events or outcomes to
differ materially from those anticipated or implied by such
forward-looking statements. These risks and uncertainties include,
but are not limited to: the oil and gas industry in general (e.g.
operational risks in development, exploration and production; and
delays or changes in plans with respect to exploration or
development projects or capital expenditures); commodity prices;
the uncertainty of estimates and projections relating to
production, cash generation, costs and expenses; health, safety,
litigation and environmental risks; access to capital; and the
COVID-19 pandemic. Due to the nature of the oil and natural gas
industry, drilling plans and operational activities may be delayed
or modified to react to market conditions, results of past
operations, regulatory approvals or availability of services
causing results to be delayed. Please refer to Tamarack's annual
information form for the year ended December
31, 2019 (the "AIF"), management's discussion and analysis
for the year ended December 31, 2019
(the "2019 MD&A") and the MD&A for additional risk factors
relating to Tamarack. The AIF, the 2019 MD&A and the MD&A
can be accessed either on Tamarack's website at
www.tamarackvalley.ca or under the Company's profile on
www.sedar.com.
The forward-looking statements contained in this press release
are made as of the date hereof and the Company does not undertake
any obligation to update publicly or to revise any of the included
forward-looking statements, except as required by applicable law.
The forward-looking statements contained herein are expressly
qualified by this cautionary statement.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Tamarack's prospective results of operations and
production, corporate decline rates, net debt to trailing annual
adjusted funds flow ratio, free adjusted funds flow, estimated
corporate sustaining capital breakeven price and components
thereof, all of which are subject to the same assumptions, risk
factors, limitations, and qualifications as set forth in the above
paragraphs. FOFI contained in this document was made as of the date
of this document and was provided for the purpose of providing
further information about Tamarack's future business operations.
Tamarack disclaims any intention or obligation to update or revise
any FOFI contained in this document, whether as a result of new
information, future events or otherwise, unless required pursuant
to applicable law. Readers are cautioned that the FOFI contained in
this document should not be used for purposes other than for which
it is disclosed herein.
Non-IFRS Measures
Certain financial measures referred to in this press release,
such as adjusted funds flow, estimated corporate sustaining capital
breakeven price, free adjusted funds flow, net debt, net debt to
trailing annual adjusted funds flow ratio, operating netback,
operating field netback and total payout ratio are not prescribed
by IFRS. Tamarack uses these measures to help evaluate its
financial and operating performance as well as its liquidity and
leverage. These non-IFRS financial measures do not have any
standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other issuers.
"Adjusted funds flow" is calculated by taking cash-flow from
operating activities and adding back changes in non-cash working
capital and expenditures on decommissioning obligations since
Tamarack believes the timing of collection, payment or incurrence
of these items is variable. Expenditures on decommissioning
obligations may vary from period to period depending on capital
programs and the maturity of the Company's operating areas.
Expenditures on decommissioning obligations are managed through the
capital budgeting process which considers available adjusted funds
flow. Tamarack uses adjusted funds flow as a key measure to
demonstrate the Company's ability to generate funds to repay debt
and fund future capital investment. Adjusted funds flow can also be
calculated on a per boe basis. Adjusted funds flow per share is
calculated using the same weighted average basic and diluted shares
that are used in calculating income (loss) per share.
"Estimated corporate sustaining capital breakeven price" is
calculated as the WTI crude oil benchmark price needed to generate
sufficient adjusted funds flow in order to cover the level
sustaining capital needed in order to hold current production
volumes stable.
"Free adjusted funds flow" is calculated by taking adjusted
funds flow and subtracting capital expenditures, excluding
acquisitions and dispositions. Management believes that free
adjusted funds flow provides a useful measure to determine
Tamarack's ability to improve returns and to manage the long-term
value of the business.
"Net debt" is calculated as bank debt plus working capital
surplus or deficit, including the fair value of cross-currency
swaps and excluding the fair value of financial instruments and
lease liabilities.
"Year-end net debt to trailing annual adjusted funds flow ratio"
is calculated as estimated year-end net debt divided by the
estimated adjusted funds flow for the four preceding quarters at
year-end.
"Operating netback" is calculated as total petroleum and natural
gas sales, including realized gains and losses on commodity,
foreign exchange and interest rate derivative contracts, less
royalties and net production and transportation costs and can also
be calculated on a per boe basis. "Operating field netback" is
calculated as total petroleum and natural gas sales, less royalties
and net production and transportation costs and can also be
calculated on a per boe basis.
"Total payout ratio" is calculated as capital expenditures
excluding acquisitions and dispositions, divided by adjusted funds
flow. Management considers total payout ratio an important measure
to evaluate its operational performance and capital allocation
processes. It demonstrates the return of cash flow and allows the
Company to understand how a capital program is funded under
different operating scenarios, which helps assess the Company's
ability to generate value.
Please refer to the MD&A for additional information relating
to Non-IFRS measures. The MD&A can be accessed either on
Tamarack's website at www.tamarackvalley.ca or under the Company's
profile on www.sedar.com.
SOURCE Tamarack Valley Energy