TSX: TVE
CALGARY, AB, Nov. 10, 2020 /CNW/ - Tamarack Valley Energy
Ltd. ("Tamarack" or the "Company") is pleased to announce its
financial and operating results for the three and nine month
periods ended September 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 nine months ended September 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
Considerable market volatility has dominated 2020 to date,
although the third quarter saw an improvement in WTI benchmark
prices. Given the persistent uncertainty, Tamarack continues to
effectively manage the business through a disciplined capital
program and unwavering focus on generating free adjusted funds
flow1 . This strategy is designed to protect our
financial strength and enhance the long-term sustainability of the
Company.
Looking forward, Tamarack remains well positioned to navigate
the uncertain commodity environment and deliver shareholder value
through:
- A strong balance sheet, with year-end net debt to trailing
annual adjusted funds flow1 forecasted to be
approximately 1.5 times exiting 2020;
- Free adjusted funds flow1 generation in 2020;
- Prudent risk management including a robust hedge book for the
remainder of 2020 and the first half of 2021;
- A diverse drilling inventory which allowed us to accelerate
natural gas drilling opportunities into Q4/20 from Q1/21 to capture
strength in winter gas prices and take advantage of lower service
costs;
- Enhanced sustainability due to lower corporate declines
associated with a disciplined capital program, the impact of a low
decline asset acquisition and the ongoing success of our Veteran
Waterflood program; and
- Continued dedication to upholding the health and safety of our
skilled and valued employees, as well as the residents in all of
the communities where we operate.
I am particularly proud to highlight our commitment to
environmental, social and governance ("ESG") principles with the
publication of our inaugural Sustainability Report. This report,
titled "Future Forward Energy", highlights Tamarack's approach to
sustainability including our commitment to greenhouse gas emissions
management as well as building on our Indigenous and community
partnerships within the areas where we operate. In addition, the
report highlights specific and measurable goals and targets related
to key priorities established by the Company.
On behalf of Tamarack's management team and Board of Directors,
we would like to thank our shareholders, employees and other
stakeholders for their ongoing support during these turbulent
times.
((signed))
Brian Schmidt
President and CEO
1 See
"Non-IFRS Measures"
|
Third Quarter 2020 Highlights
The third quarter was characterized by continued uncertainty
facing the oil and gas sector, largely related to range-bound WTI
prices caused by the demand outlook due to the COVID-19 pandemic.
Despite these challenges, Tamarack was able to manage our business
effectively through this cycle, as we recorded the following:
- Free adjusted funds flow1 of approximately
$20.5 million, which represented a
total payout ratio1 of approximately 34%;
- Average production of 21,533 boe/d in Q3/20, representing an
increase of approximately 3% over Q2/20;
- Investment of approximately $10.4
million in exploration and development capital expenditures,
directed to the equipping of one (1.0 net) Banff oil well plus continued investment in
our Veteran Viking waterflood program with the drilling, completion
and tie-in of a six-well pad along with one water source well;
- Completion of an asset acquisition on July 9, 2020 for $4.0
million which included approximately 2,500 boe/d of
production;
- Operating netback1 of $17.93/boe which contributed to adjusted funds
flow1 of $30.8 million
($0.14 per share basic and diluted);
and
- Reduction of net debt1 to $199.6 million at quarter-end, a 6% decrease
compared to $213.1 million at the end
of Q2/20.
As at September 30, 2020, the
Company had drawn $199.0 million
against its $275 million bank
syndicated credit facility, with redetermination of the facility
currently ongoing. Tamarack expects to generate adjusted funds
flow1 over and above planned capital expenditures and
the Company continues to be well positioned from a liquidity
standpoint.
1 See
"Non-IFRS Measures"
|
Financial & Operating Results
|
Three months
ended
|
Nine months
ended
|
September
30,
|
September
30,
|
|
2020
|
2019
|
%
change
|
2020
|
2019
|
%
change
|
($ thousands,
except per share)
|
|
|
|
|
|
|
Total oil, natural
gas and processing revenue
|
57,790
|
90,542
|
(36)
|
157,200
|
284,686
|
(45)
|
Cash flow from
operating activities
|
26,965
|
42,199
|
(36)
|
101,431
|
150,608
|
(33)
|
Per share –
basic
|
$
0.12
|
$ 0.19
|
(37)
|
$
0.46
|
$ 0.67
|
(31)
|
Per share –
diluted
|
$
0.12
|
$ 0.19
|
(37)
|
$
0.46
|
$ 0.65
|
(29)
|
Adjusted funds flow
1
|
30,837
|
49,283
|
(37)
|
93,854
|
164,692
|
(43)
|
Per share – basic
1
|
$
0.14
|
$ 0.22
|
(36)
|
$
0.42
|
$ 0.73
|
(42)
|
Per share – diluted
1
|
$
0.14
|
$ 0.22
|
(36)
|
$
0.42
|
$ 0.71
|
(41)
|
Net income
(loss)
|
(5,776)
|
(111)
|
5,104
|
(293,164)
|
11,535
|
(2,642)
|
Per share –
basic
|
$
(0.03)
|
(0.00)
|
–
|
$
(1.32)
|
$ 0.05
|
(2,740)
|
Per share –
diluted
|
$
(0.03)
|
(0.00)
|
–
|
$
(1.32)
|
$ 0.05
|
(2,740)
|
Net debt
1
|
(199,561)
|
(213,140)
|
(6)
|
(199,561)
|
(213,140)
|
(6)
|
Capital expenditures
2
|
10,364
|
58,867
|
(82)
|
90,455
|
156,012
|
(42)
|
Weighted average
shares outstanding (thousands)
|
|
|
|
|
|
|
Basic
|
221,611
|
225,271
|
(2)
|
221,610
|
225,864
|
(2)
|
Diluted
|
221,611
|
225,271
|
(2)
|
221,610
|
231,565
|
(4)
|
Share Trading
($ per share, except volume)
|
|
|
|
|
|
|
High
|
$
1.09
|
$ 2.44
|
(55)
|
$
2.27
|
$ 3.09
|
(27)
|
Low
|
$
0.70
|
$ 1.66
|
(58)
|
$
0.39
|
$ 1.66
|
(77)
|
Trading volume
(thousands)
|
56,013
|
27,820
|
101
|
181,659
|
144,882
|
25
|
Average daily
production
|
|
|
|
|
|
|
Light oil
(bbls/d)
|
10,309
|
12,748
|
(19)
|
11,424
|
12,892
|
(11)
|
Heavy oil
(bbls/d)
|
159
|
440
|
(64)
|
165
|
481
|
(66)
|
NGL
(bbls/d)
|
2,162
|
1,779
|
22
|
1,766
|
1,584
|
11
|
Natural gas
(mcf/d)
|
53,420
|
55,224
|
(3)
|
51,986
|
53,101
|
(2)
|
Total
(boe/d)
|
21,533
|
24,171
|
(11)
|
22,019
|
23,807
|
(8)
|
Average sale
prices
|
|
|
|
|
|
|
Light oil
($/bbl)
|
46.77
|
65.10
|
(28)
|
39.58
|
66.96
|
(41)
|
Heavy oil
($/bbl)
|
38.31
|
56.74
|
(32)
|
35.27
|
54.45
|
(35)
|
NGL ($/bbl)
|
23.57
|
19.08
|
24
|
19.29
|
26.91
|
(28)
|
Natural gas
($/mcf)
|
1.61
|
1.54
|
5
|
1.53
|
2.00
|
(24)
|
Total
($/boe)
|
29.02
|
40.28
|
(28)
|
25.97
|
43.60
|
(40)
|
Operating netback
($/Boe)1
|
|
|
|
|
|
|
Average realized
sales
|
29.02
|
40.28
|
(28)
|
25.97
|
43.60
|
(40)
|
Royalty
expenses
|
(2.87)
|
(4.36)
|
(34)
|
(2.95)
|
(4.46)
|
(34)
|
Net production and
transportation expenses
|
(10.64)
|
(9.87)
|
8
|
(10.21)
|
(10.06)
|
1
|
Operating field
netback ($/Boe)1
|
15.51
|
26.05
|
(40)
|
12.81
|
29.08
|
(56)
|
Realized commodity
hedging gain (loss)
|
2.42
|
(1.55)
|
(256)
|
5.28
|
(1.21)
|
(536)
|
Operating
netback
|
17.93
|
24.50
|
(27)
|
18.09
|
27.87
|
(35)
|
Adjusted funds
flow ($/Boe)1
|
15.57
|
22.16
|
(30)
|
15.56
|
25.34
|
(39)
|
|
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 & 2021 Capital Acceleration
Tamarack has elected to accelerate approximately $9.4 million of capital from our Q1/21 program
into Q4/20 to take advantage of stronger winter gas pricing and
lower service costs. The accelerated program includes drilling two
Cardium horizontal wells in Alder
Flats along with one Viking horizontal natural gas well in
Saskatchewan. The capital will be
funded through 2020 free adjusted funds flow[1]. Tamarack has
increased our 2021 natural gas hedging program to lock in the rate
of return on this accelerated capital. Tamarack expects to release
a 2021 capital budget in January, 2021 which is anticipated to be
fully funded by internally-generated funds.
Pro-Forma 2020 Updated Guidance
|
November 10,
2020
Updated Guidance
|
July 9, 2020
Guidance
|
Full Year Capital
Budget (including Acquisitions & ARO spend) ($MM)
|
$111
|
$101
|
Annual Average
Production (boe/d)
|
21,500
|
20,850 -
21,250
|
Annual Average Oil
& Natural Gas Liquids Weighting (%)
|
~60%
|
~60-62%
|
Free Adjusted Funds
Flow(1) (Inclusive of ARO Spend) ($MM)
|
$10
|
$15-20
|
2021 Estimated
Corporate Decline Rate(2)
|
22-24%
|
22-24%
|
|
|
|
|
|
|
(1)
See "Non-IFRS Measures"
|
(2)
Based on December 2020 to December 2021 estimates
|
This guidance is based on average 2020 commodity price
assumptions of WTI US$38.50/bbl,
MSW/WTI differential of US$5.30/bbl
and AECO at $2.20/GJ as well as a
Canadian/US dollar exchange rate of $1.3450.
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
|
__________________________
|
1 see
"Non-IFRS Measures"
|
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; Tamarack's updated 2020
guidance, drilling program and capital acceleration; the release of
a 2021 capital budget and the timing thereof; and the availability
and use of the credit facility.
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, balance sheet, net-debt,
year-end net debt to trailing annual adjusted funds flow ratio,
adjusted funds flow, free adjusted funds flow, operating netback,
operating field netback, total payout ratio, shareholder value 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, free adjusted funds flow, net debt,
year-end 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.
"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