TSX: TVE
CALGARY, AB, April 12, 2021 /CNW/ - Tamarack Valley Energy
Ltd. ("Tamarack" or the "Company") (TSX: TVE) is
pleased to announce that it has entered into a definitive agreement
(the "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 the sale
of a 2% newly created gross overriding royalty (the "GORR")
on the acquired assets (the "Assets"). The total net
consideration consists of $247.5
million in cash and debt (net of GORR), subject to
adjustment, and approximately 105.3 million common shares of
Tamarack ("Tamarack Shares") at a deemed price of
$2.34 per Tamarack Share. Tamarack's
credit syndicate has provided commitments to increase the available
capacity under the Company's credit facilities to $600 million and extend the revolving period to
May 31, 2022, concurrent with the
close of the Acquisition.
M. Brandon Swertz, President
& CEO of Anegada, stated: "Our shareholders indicated a desire
to be a part of a larger high-quality entity with greater free cash
flow. We see the combination of the Clearwater and Charlie Lake oil plays providing Tamarack with
top decile inventory with significant free cash flow growth and
yield potential."
Brian Schmidt, President &
CEO of Tamarack, said: "The Acquisition will provide Tamarack with
a material position in the Charlie
Lake, one of the leading oil plays in North America. Our strategic portfolio
approach of investing in high impact oil plays, combined with a
focus on decline mitigation through our waterflood assets enhances
corporate free cash flow sustainability and resiliency. Our team's
execution of integrating new assets into the Company has been
exceptional and we are confident this will continue. We would like
to thank all of our employees for their time and effort in helping
to further our corporate strategy."
Acquisition Highlights
- Establishes a material contiguous position in the
Charlie Lake, one of the most
economic plays in North
America
-
- Approximately 11,800 boe/d(1) of Charlie Lake light oil production (71% oil and
natural gas liquids) with annualized operating field
netback(2) of ~$135
million
- Expect 2022 production to increase and be maintained between
12,000 and 13,000 boe/d(3)
- Over 200 net future drilling locations,(4) across
332.4 (321.2 net) sections of Charlie
Lake land, support current production levels for more than a
decade
- The Charlie Lake ranks among
the most economic plays in North
America, with wells that payout in approximately 6 months
and generate IRRs in excess of 400%
- Enhances Tamarack's free adjusted funds flow and
meaningfully reduces corporate sustaining free adjusted funds flow
breakeven(2)
-
- High productivity wells (IP30 >650 boe/d) with high
operating field netbacks(2) (>$30/boe) and attractive capital costs
($2 to $3.5
million per well, dependent on length) results in asset
level free adjusted funds flow breakeven(2) of
approximately US$30/bbl WTI, reducing
Tamarack's corporate free adjusted funds flow
breakeven(2) below US$36/bbl WTI
- Modest sustaining capital(2) requirements
(~$65 million annually, <50% of
annualized operating field netback(2)) drives meaningful
free adjusted funds flow(2) from the Assets
- Immediately and materially accretive to per share
metrics
-
- Attractive purchase price (<3.7x annualized adjusted funds
flow(2)) provides for immediate accretion to per share
metrics
- Expected to be ~13% accretive to adjusted funds
flow(2) per share and ~20% accretive to free adjusted
funds flow(2) per share in 2022
- Owned infrastructure footprint provides egress, operational
flexibility and blending upside
-
- Strategic ownership in four gas plants, nine operated
multi-well batteries, four operated oil satellites and ~260 km of
pipeline infrastructure
- Positive environmental, social and governance ("ESG")
contributions
-
- Attractive asset base with minimal asset retirement obligation
("ARO") ($18 million,
undiscounted, uninflated)
- Forecasted emissions intensity of 10 to 15 kg
CO2e/boe is in line with the low emissions Veteran oil
play and will positively contribute to lower overall corporate
emissions intensity
- Maintains Tamarack's strong balance sheet and enhances
liquidity
-
- Upon closing of the Acquisition, Tamarack expects to have net
debt(2) of approximately $525
million and over $75 million
of available liquidity under a $600
million credit facility, which is anticipated to close
concurrent with the Acquisition
- Pro forma the Acquisition, Tamarack remains well hedged with
approximately 35%(5) of its H2 2021 oil production
hedged
- Pro forma the Acquisition, Tamarack expects a strong 2021
year-end net debt to Q4 annualized adjusted funds
flow(2) ratio of less than 1.2x, dropping to less than
0.7x in 2022 based on the free adjusted funds flow(2)
profile
Acquisition Metrics
Purchase Price (net
of royalty proceeds)
|
$494
million
|
Current
Production Oil and NGL
Weighting
|
11,800
boe/d(1)
~71%
|
Drilling
Locations(4)
|
224 (207.3
net)
|
Annualized Operating
Field Netback(2)
|
$135
million
|
Total ARO
(undiscounted, uninflated)
|
<$20
million
|
Proved developed producing ("PDP") reserves of 10.5 MMboe (70%
liquids) and total proved plus probable ("TPP") reserves of 40.1
MMboe (71% liquids) based on Tamarack's internal reserves
evaluation effective June 1, 2021. In
conjunction with the Acquisition, Tamarack has entered into an
agreement with Topaz Energy Corp. to sell a 2% GORR on the Assets
for gross proceeds of $32
million.
Pro Forma 2021 Guidance
To reflect the contribution from the Acquisition effective
June 1, 2021, Tamarack is providing
an update to its 2021 guidance.
Preliminary 2021
Guidance
|
|
Tamarack March
2021
Guidance
|
|
Tamarack
Post-Acquisition
|
Capital Budget
($MM)
|
|
125 – 130
|
|
165 – 175
|
Average
Production(6) (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
|
Post-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.
Transaction Details
Concurrent with the execution of the Agreement, shareholders of
Anegada representing 100% of the outstanding common shares executed
letters of transmittal irrevocably accepting Tamarack's offer and
tendering their shares in connection with the Acquisition. The
Agreement provides for, among other things, a non-solicitation
covenant on the part of Anegada. A copy of the Agreement will be
filed on Tamarack's SEDAR profile at www.sedar.com.
The Acquisition is expected to close on May 31, 2021, 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).
In accordance with the rules of the TSX, the issuance of
105,341,880 Tamarack Shares pursuant to the Acquisition (the
"Share Issuance") will require approval of Tamarack's
shareholders as it will result in an issuance in excess of 25% of
the issued and outstanding Tamarack Shares. Tamarack's Board of
Directors has unanimously determined that the Acquisition is in the
best interests of Tamarack, is fair to Tamarack's shareholders, and
has unanimously recommended that Tamarack's shareholders approve
the Share Issuance. Unless the Company obtains approval by way of
written consent of shareholders holding the majority of the issued
and outstanding Tamarack Shares, Tamarack will call a special
meeting of shareholders to vote on the Share Issuance. It is
expected that the special meeting will be held on or about
May 28, 2021.
All of the directors and executive officers and certain other
shareholders representing an aggregate of 71.3 million Tamarack
Shares (or approximately 24% of the issued and outstanding Tamarack
Shares) have agreed to consent to or vote their Tamarack Shares in
favour of the Share Issuance, as applicable.
At closing, Tamarack will enter into lock-up agreements with
each of the directors, officers and insiders of Anegada who,
following completion of the Acquisition, will collectively hold or
exercise control over approximately 18% of the issued and
outstanding Tamarack Shares. Pursuant to the lock-up agreements,
each such shareholder will agree not to sell or trade the Tamarack
Shares received pursuant to the Acquisition, except as follows: (i)
1/2 shall be eligible for disposition on the date that is three
months after closing of the Acquisition; (ii) the remaining 1/2 of
such Tamarack Shares shall be eligible for disposition on the date
that is six months after closing of the Acquisition; and (iii) all
sales of Tamarack Shares within 12 months after closing of the
Acquisition must be effected via block trades facilitated by
Tamarack.
Advisors
RBC Capital Markets is acting as lead financial advisor to
Tamarack with respect to the Acquisition and has provided its
opinion to the Board of Directors of Tamarack that, based upon and
subject to the assumptions, limitations and qualifications set
forth therein, the consideration to be paid by Tamarack in
connection with the Acquisition is fair, from a financial point of
view, to Tamarack. CIBC World Markets is also acting as a
financial advisor to Tamarack with respect to the Acquisition.
Stifel FirstEnergy and Peters & Co. are acting as strategic
advisors to Tamarack with respect to the Acquisition.
National Bank Financial Inc. is acting as exclusive financial
advisor to Anegada and as advisor with respect to the GORR.
Stikeman Elliott LLP is acting as legal counsel to Tamarack with
respect to the Acquisition and the GORR.
McCarthy Tétrault is acting as legal counsel to Anegada with
respect to the Acquisition.
Investor Call and Webcast
Tamarack will host a call and webcast at 9:00AM MT (11:00AM
ET) on April 12, 2021 to
discuss the Acquisition. Participants can access the live webcast
through 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 Energy's
Alberta System
|
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
|
MMboe
|
million barrels of
oil equivalent
|
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
This press release is not an offer of the securities for
sale in the United States. The
securities offered have not been, and will not be, registered under
the U.S. Securities Act or any U.S. state securities laws and may
not be offered or sold in the United
States absent registration or an available exemption from
the registration requirement of the U.S. Securities Act and
applicable U.S. state securities laws. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of these securities, in any
jurisdiction in which such offer, solicitation or sale would be
unlawful.
Notes to Press Release
(1)
|
Comprised of 6,500
bbl/d light and medium oil, 1,900 bbl/d NGL and 20,400 mcf/d
natural gas
|
(2)
|
See "Non-IFRS
Measures"
|
(3)
|
Comprised of 6,550 –
7200 bbl/d light and medium oil, 1,950 – 2,000 bbl/d NGL and 21,000
– 22,800 mcf/d natural gas
|
(4)
|
See "Disclosure of
Oil and Gas Information"
|
(5)
|
Includes the effect
of extensions for Q3 of 3,500 bbl/d ($48.91 US/bbl WTI) and Q4 of
3,000 bbl/d ($48.64 US/bbl WTI).
|
(6)
|
March 2021 comprised
of 11,200 bbl/d light and medium oil, 4,400 bbl/d heavy oil, 2,100
bbl/d NGL and 49,800 mcf/d natural gas; Post-acquisition guidance
comprised of 15,400 bbl/d light and medium oil, 4,400 bbl/day heavy
oil, 3,000 bbl/d NGL and 61,200 mcf/d natural gas
|
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 National Instrument 51-101 –
Standards of Disclosure of Oil and Gas Activities ("NI
51-101"). Boe may be misleading, particularly if used in
isolation.
Reserves Disclosure. All reserves information in this press
release relating to Assets are internally estimated by the
Company's internal qualified reserve evaluators prepared
April 7, 2021 effective June 1, 2021 in accordance with NI 51-101 and the
most recent publication of the Canadian Oil and Gas Evaluations
Handbook ("COGEH"). The estimates of reserves and future net
revenue for the Acquisition may not reflect the same confidence
level as estimates of reserves and future net revenue for all of
Tamarack's properties, due to the effects of aggregation.
All reserve references in this press release are "gross
reserves". Gross reserves are a company's total working interest
reserves before the deduction of any royalties payable by such
company and before the consideration of such company's royalty
interests. It should not be assumed that the present worth of
estimated future cash flow of net revenue presented herein
represents the fair market value of the reserves. There is no
assurance that the forecast prices and costs assumptions will be
attained and variances could be material. The recovery and reserve
estimates of Tamarack's crude oil, NGL and natural gas reserves,
including those of the Assets, provided herein are estimates only
and there is no guarantee that the estimated reserves will be
recovered. Actual crude oil, natural gas and NGL reserves may be
greater than or less than the estimates provided herein.
Drilling Locations. This press release discloses drilling
locations with respect to the Assets in three categories: (i)
proved locations; (ii) probable locations; and (iii) unbooked
locations. Proved locations and probable locations are derived from
the Company's internal reserves evaluation as prepared by a member
of management who is a qualified reserves evaluator in accordance
with NI 51-101 and the COGEH effective June
1, 2021 and account for drilling locations that have
associated proved and/or probable reserves, as applicable. Unbooked
locations are internal estimates based on the Company's assumptions
as to the number of wells that can be drilled per section based on
industry practice and internal review. Unbooked locations do not
have attributed reserves or resources. Of the total 224 (207.3 net)
drilling locations identified herein, 72 (70.5 net) are proved
locations, 6 (6.0 net) are probable locations and 146 (130.8 net)
are unbooked locations. Unbooked locations have been identified by
management as an estimation of Company's multi-year drilling
activities based on evaluation of applicable geologic, seismic,
engineering, production and reserves information assuming
completion of the Acquisition. Assuming completion of the
Acquisition, there is no certainty that the Company will drill all
unbooked drilling locations and if drilled there is no certainty
that such locations will result in additional oil and gas reserves,
resources or production. The drilling locations considered for
future development will ultimately depend upon the availability of
capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While
certain of the unbooked drilling locations have been derisked by
the drilling of existing wells by the Vendor in relative close
proximity to such unbooked drilling locations, other unbooked
drilling locations are farther away from existing wells where
management has less information about the characteristics of the
reservoir and therefore there is more uncertainty whether wells
will be drilled in such locations and if drilled there is more
uncertainty that such wells will result in additional oil and gas
reserves, resources or production.
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; the increased capacity under the
Company's credit facilities and extension of revolving period; the
Acquisition, the GORR and the timing thereof; satisfaction or
waiver of the closing conditions to the Acquisition; receipt of
required shareholder and regulatory approvals for the completion of
the Acquisition (including approval of the TSX and the Commissioner
of Competition pursuant to the Competition Act (Canada)); the purchase price of the
Acquisition net proceeds from the GORR and closing adjustments; the
anticipated benefits of the Acquisition, including the impact of
the Acquisition and the GORR on the Company's operations, reserves,
inventory and opportunities, financial condition, access to capital
and overall strategy; expectations with respect to reserves, oil
and natural gas production levels (including the ability to support
current production for the next decade), operating field netbacks,
decline rates, abandonment and reclamation obligations, adjusted
funds flow, free adjusted funds flow and net debt to Q4 annualized
adjusted funds flow relating to the Assets and Tamarack following
the Acquisition; development and drilling plans for the Assets,
including the drilling locations associated therewith and timing of
results therefrom; expectations regarding the Charlie Lake; oil and NGL weighting;
waterflood response, development of waterflood projects and the
impact thereon on oil recoveries and decline rates; anticipated
operational results for 2021 including, but not limited to,
estimated or anticipated production levels, operating field
netbacks, decline rates, capital expenditures and drilling plans;
the estimated quantity of the oil and gas reserves associated with
the Assets and anticipated future cash flows from such reserves;
future operational, technical, cost and revenue synergies resulting
from the Acquisition; management's ability to replicate past
performance; the ability of Tamarack to optimize production from
the Assets; the Company's capital program, guidance and budget for
2021; expectations regarding commodity prices in 2021; deployment
of the Company's 2021 capital program; the expected allocation of
the Company's 2021 capital expenditure budget; the performance
characteristics of the Company's oil and natural gas properties;
the ability of the Company to achieve drilling success consistent
with management's expectations; Tamarack's commitment to ESG
principles and the impact of the Acquisition thereon, including
with respect to emissions intensity; the source of funding for the
Company's activities including development costs; reserve life
indexes; expected levels of royalty rates, development costs,
operating costs, general and administrative costs, costs of
services and other costs and expenses; and projections of commodity
prices and costs, and exchange rates.
The forward-looking statements contained in this document are
based on certain key expectations and assumptions made by Tamarack,
including relating to: the business plan of Tamarack, Anegada, the
Assets and the GORR; the receipt of all approvals and satisfaction
of all conditions to the completion of the Acquisition; the
timing of and success of future drilling, development and
completion activities; the geological characteristics of Tamarack's
properties; the characteristics of the Assets; the successful
integration of the Assets into Tamarack's operations; 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: counterparty risk to
closing the Acquisition; unforeseen difficulties in integrating the
Assets into Tamarack's operations; incorrect assessments of the
value of benefits to be obtained from acquisitions and exploration
and development programs (including the Acquisition); risks
associated with 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 the annual
information form for the year ended December
31, 2020 and management's discussion and analysis for the
year ended December 31, 2020 (the
"MD&A") for additional risk factors relating to Tamarack, which
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, weightings, operating costs, capital budget and
expenditures, decline rates, operating field netbacks, future
development capital, abandonment and reclamation obligations,
balance sheet strength, adjusted funds flow, free adjusted funds
flow, corporate free adjusted funds flow breakeven, payout of
wells, net debt, net debt to Q4 annualized adjusted funds flow 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
approved by management 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.
References in this press release to IRR, IP30 and other
short-term production rates are useful in confirming the presence
of hydrocarbons, however such rates are not determinative of the
rates at which such wells will commence production and decline
thereafter and are not indicative of long-term performance or of
ultimate recovery. While encouraging, readers are cautioned not to
place reliance on such rates in calculating the aggregate
production of Tamarack.
Non-IFRS Measures
Certain measures commonly used in the oil and natural gas
industry referred to herein, including, "operating field netback",
"adjusted funds flow", "free adjusted funds flow", "free adjusted
funds flow breakeven", "sustaining capital", "net debt" and
"year-end net debt to Q4 annualized adjusted funds flow", do not
have a standardized meaning prescribed by IFRS and therefore may
not be comparable with the calculation of similar measures by other
companies. These non-IFRS measures are further described and
defined below. Such non-IFRS measures are not intended to represent
operating profits nor should they be viewed as an alternative to
cash flow provided by operating activities, net earnings or other
measures of financial performance calculated in accordance with
IFRS.
Operating Field Netback
"Operating Field Netback" equals total petroleum and
natural gas sales, less royalties and net production and
transportation expenses.
Management uses certain industry benchmarks, such as Operating
field netback, to analyze financial and operating performance. This
metric can also be calculated on a per boe basis. Management
considers Operating Field Netback an important measure to evaluate
Tamarack's operational performance, as it demonstrates field level
profitability relative to current commodity prices.
Adjusted Funds Flow and Free Adjusted Funds Flow
"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.
"Free Adjusted Funds Flow Breakeven" is determined by
calculating the minimum WTI price in US/bbl required to generate
Free Adjusted Funds Flow equal to zero with no production growth
and all other variables held constant. Management believes that
Free Adjusted Funds Flow Breakeven provides a useful measure to
establish corporate financial sustainability.
"Sustaining Capital" is calculated as the capital
expenditures required to hold production flat (replace production
declines) with no consideration for growth. Management believes
that Sustaining Capital provides a useful measure to establish
corporate financial sustainability.
Net Debt and Related Measures
"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 Q4 Annualized Adjusted Funds Flow"
is calculated as estimated year-end Net Debt divided by the
annualized estimated Adjusted Funds Flow for the fourth
quarter.
Tamarack closely monitors its capital structure with a goal of
maintaining a strong balance sheet to fund the future growth of the
Company. The Company monitors Net Debt as part of its capital
structure. The Company uses Net Debt as an alternative measure of
outstanding debt. Management considers Net Debt an important
measure to assist in assessing the liquidity of the Company.
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