TSX: TVE
CALGARY, AB, May 4, 2021 /CNW/ - Tamarack Valley Energy Ltd.
("Tamarack" or the "Company") is pleased to announce its financial
and operating results for the three months ended March 31, 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 months ended
March 31, 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: "We are proud to report another very strong
quarter driven by the effective execution of our drilling program
and integration of the Clearwater
acquisitions. The Company exceeded our Clearwater winter drilling program exit
production expectations with volumes greater than 4,000
bbl/d(1). Furthermore, we continued to deliver on our
strategy of enhancing the sustainability and resilience of our free
adjusted funds flow(2) with the closing of the Greater
Nipisi and Provost acquisitions on March
25th, which added ~2,800 boe/d(3) of
low decline oil production under waterflood and grew our highly
economic Clearwater oil inventory.
These transactions, combined with our recently announced Anegada
Oil Corp. acquisition continue to drive down our sustaining free
adjusted funds flow breakeven price(2) to the mid
US$30/bbl, while offering significant
upside to shareholders through a sector leading total return
profile. In addition, we remain focused on advancing the 2021
initiatives and targets set within our robust environmental, social
and governance ("ESG") reporting."
Q1 2021 Financial and Operating Highlights
- Closed two separate agreements in March
2021 to acquire assets in the Greater Nipisi and Provost
areas of Alberta, including
approximately 2,800 boe/d(3) of low decline (~16%) oil
weighted assets under waterflood and approximately 38,400 net acres
in the Clearwater oil play of
Alberta for a net cash purchase
price of approximately $121 million.
These acquisitions were financed through a combination of debt, a
$68.2 million bought deal financing
(30.3 million common shares at $2.25
per share) and a gross overriding royalty ("GORR") disposition on
the newly acquired Greater Nipisi Clearwater and Slave Point lands
for proceeds of approximately $13.5
million.
- Achieved quarterly production of 23,938 boe/d in Q1/21, a 2%
increase over the same period in 2020.
- Generated adjusted funds flow(2) of $41.2 million in Q1/21 ($0.16 per share basic and diluted).
- Invested $48.7 million in
exploration and development ("E&D") capital expenditures,
excluding acquisitions, during Q1/21, which contributed to the
drilling of 44 (42.3 net) wells, comprised of 22 (22.0 net) Viking
oil wells, 16 (15.5 net) Clearwater oil wells, two (0.8 net)
Falher gas wells and four (4.0
net) water source and injector wells. The Company continued to
direct significant capital to our Viking waterflood program which
represented approximately 34% of the total E&D capital
expenditures.
- Successfully executed on our Viking waterflood program, with
first quarter production exit volumes of approximately 2,540 bbls/d
of light oil, delivering 91% growth on Q1/21 average volumes versus
Q1/20.
Clearwater Update
Tamarack executed a successful winter capital program with the
drilling of 16 (15.5 net) wells, with the faster execution of
drilling operations enabling three wells from our planned second
quarter to be accelerated to the first quarter. The winter drilling
program exit production volumes in excess of 4,000
bbl/d(1) exceeded previous expectations. The
outperformance was driven by better than forecast well results,
with the winter program exhibiting stabilized average IP30 rates (6
leg horizontal wells) of approximately 170 bbl/d, exceeding
Tamarack's Nipisi internal type 1 curve of 147 bbl/d (see the
Company's investor presentation for additional details). Drilling
results on the Company's newly acquired Nipisi have exhibited some
of the strongest results seen to date with IP30 rates of 235, 300
and 253 bbl/d respectively. Well costs continue to track below
internal estimates, averaging approximately $1.06 million (drill, complete, equip and tie-in)
versus our planned costs of $1.1
million per well.
The Company plans to keep one rig active through Q2/21 with a
seven well program, ramping back up to two rigs in Q3/21, with
plans to convert 27 six-leg wells to 23 seven to eight leg wells.
The seven to eight leg wells are expected to enhance the economics
of the play, with internal estimates of an incremental $950,000 of net present value (discounted at 10%)
per section. In total, Tamarack plans to drill 38 horizontal
Clearwater wells on a total
capital program investment of $54
million, driving Q4/21 production from the play to over
5,000 bbl/d(4). In addition, the Company has commenced
construction of a gas gathering system to further gas conservation
efforts and plans to pilot our first waterflood in the Nipisi area
in Q4/21.
Anegada Transaction & Updated Guidance
Subsequent to the end of the quarter, Tamarack entered into a
definitive agreement to acquire Anegada Oil Corp. ("Anegada") – a
privately held, pure play, Charlie
Lake light oil producer – for total net consideration of
$494 million (the "Acquisition"),
after deducting the proceeds from a newly created 2% GORR on the
acquired assets. As announced on April
28th, 2021, the Company has received written
consent from shareholders holding a majority of the issued and
outstanding shares to approve the Acquisition and as such will not
be holding a special meeting on the Acquisition. Furthermore, on
May 4, 2021, Tamarack and Anegada
received the required approval from Competition Bureau under the
Competition Act (Canada) with
respect to the Acquisition. With receipt of the Competition Act
approval, the parties intend to work expeditiously towards closing
the Acquisition and anticipate closing will occur on or about
May 31, 2021.
Concurrent with the Acquisition, Tamarack provided updated 2021
pro-forma guidance effective June 1,
2021.
Preliminary 2021
Guidance
|
|
Tamarack March
2021 Guidance
|
|
Tamarack
Post-Acquisition
|
Capital Budget
($MM)
|
|
125 – 130
|
|
165 – 175
|
Average
Production(5) (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
|
Pro-Forma 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 $1.2545.
Executive Change
Tamarack congratulates Mr. Ken
Cruikshank, Vice President Land, on his retirement effective
June 30, 2021. Tamarack would like to
thank Mr. Cruikshank for his contributions to the Company since its
inception, which span more than eleven years. The Company has
planned for succession and has senior experience that will ensure
efficient execution moving forward.
"On behalf of the board of directors, executive management team
and all of our staff, I would like to extend sincere appreciation
to Ken for his many contributions which are imprinted in our
success. He has been instrumental in building the Company to what
it is today" said Brian Schmidt,
President and Chief Executive Officer. "We wish him well in his
retirement."
Financial & Operating Results
|
|
|
Three months
ended
|
March 31,
|
|
2021
|
2020
|
%
change
|
($ thousands,
except per share)
|
|
|
|
Total oil, natural
gas and processing revenue
|
93,434
|
66,283
|
41
|
Cash flow from
operating activities
|
38,436
|
46,359
|
(17)
|
Per share –
basic
|
$
0.14
|
$ 0.21
|
(33)
|
Per share –
diluted
|
$
0.14
|
$ 0.21
|
(33)
|
Adjusted funds
flow(2)
|
41,236
|
42,045
|
(2)
|
Per share –
basic(2)
|
$
0.16
|
$ 0.19
|
(16)
|
Per share –
diluted(2)
|
$
0.16
|
$ 0.19
|
(16)
|
Net loss
|
(166)
|
(251,321)
|
100
|
Per share –
basic
|
(0.00)
|
$ (1.13)
|
100
|
Per share –
diluted
|
(0.00)
|
$ (1.13)
|
100
|
Net
debt(2)
|
(286,175)
|
(227,151)
|
26
|
Capital
expenditures(7)
|
48,704
|
73,873
|
(34)
|
Weighted average
shares outstanding (thousands)
|
|
|
|
Basic
|
265,415
|
222,048
|
20
|
Diluted
|
265,415
|
222,048
|
20
|
Share Trading
(thousands, except share price)
|
|
|
|
High
|
$
2.46
|
$ 2.27
|
9
|
Low
|
$
1.25
|
$ 0.39
|
221
|
Trading volume
(thousands)
|
181,132
|
58,945
|
207
|
Average daily
production
|
|
|
|
Light oil
(bbls/d)
|
10,120
|
12,867
|
(21)
|
Heavy oil
(bbls/d)
|
2,654
|
180
|
1,374
|
NGL
(bbls/d)
|
2,420
|
1,665
|
45
|
Natural gas
(mcf/d)
|
52,466
|
52,912
|
(1)
|
Total
(boe/d)
|
23,938
|
23,531
|
2
|
Average sale
prices
|
|
|
|
Light oil
($/bbl)
|
64.01
|
46.42
|
38
|
Heavy oil
($/bbl)
|
48.00
|
49.76
|
(4)
|
NGL ($/bbl)
|
37.17
|
19.44
|
91
|
Natural gas
($/mcf)
|
3.15
|
1.61
|
96
|
Total
($/boe)
|
43.03
|
30.76
|
40
|
Operating netback
($/Boe)(2)
|
|
|
|
Average realized
sales
|
43.03
|
30.76
|
40
|
Royalty
expenses
|
(5.37)
|
(3.77)
|
42
|
Net production and
transportation expense(2)
|
(11.17)
|
(9.98)
|
12
|
Operating field
netback ($/Boe)(2)
|
26.49
|
17.01
|
56
|
Realized commodity
hedging gain (loss)
|
(3.81)
|
5.10
|
(175)
|
Operating
netback(2)
|
22.68
|
22.11
|
3
|
Adjusted funds
flow ($/Boe)(2)
|
19.14
|
19.64
|
(3)
|
|
|
|
|
Investor Webcast
Tamarack will host a webcast at 9:00 AM
MT (11:00 AM ET) on
May 5, 2021 to discuss the first
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.
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
Notes to Press Release
(1)
|
Comprised of 4,000
bbl/d heavy oil; winter drilling program exit corresponds to April
production month
|
(2)
|
See "Non-IFRS
Measures"
|
(3)
|
Comprised of 2,370
bbl/d light and medium oil, 50 bbl/d NGL and 2,280 mcf/d natural
gas
|
(4)
|
Comprised of 5,000
bbl/d heavy oil
|
(5)
|
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
|
(6)
|
Capital expenditures
include exploration and development expenditures but exclude asset
acquisitions and dispositions
|
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; the Acquisition, the GORR and the
timing thereof; satisfaction or waiver of the closing conditions to
the Acquisition; 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, 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, adjusted funds flow, free adjusted funds flow and net debt
to Q4 annualized adjusted funds flow relating to the Anegada and
Tamarack following the Acquisition; development and drilling plans
for Anegada's assets, including the drilling locations associated
therewith and timing of results therefrom; anticipated operational
results for 2021 including, but not limited to, estimated or
anticipated production levels, capital expenditures and drilling
plans; 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; the source of funding for the Company's activities
including development costs; 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 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
Anegada's assets; the successful integration of Anegada's 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
Anegada's 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 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, balance
sheet strength, adjusted funds flow, free adjusted funds flow, free
adjusted funds flow breakeven, 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 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, "adjusted funds flow",
"free adjusted funds flow", "free adjusted funds flow breakeven",
"net production and transportation expenses", "operating field
netback", "operating netback", "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.
"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 per share is calculated using the same weighted average
basic and diluted shares that are used in calculating 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.
"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.
"Net production and
transportation expenses" Net production expenses are determined
by deducting processing income primarily generated by processing
third party volumes at processing facilities where the Company has
an ownership interest. Under IFRS this source of funds is
required to be reported as revenue. Where the Company has
excess capacity at one of its facilities, it will process third
party volumes as a means to reduce the cost of operating/owning the
facility, and as such third-party processing revenue is netted
against production expenses. Transportation expense are an IFRS
measure but are included with net production expenses for
simplicity of presentation. Full details of these expenses are
outlined in the Company's MD&A.
"Operating Field Netback"
equals total petroleum and natural gas sales, less royalties and
net production and transportation expenses.
"Operating Netback" is
calculated as total petroleum and natural gas sales, including
realized gains and losses on commodity, interest rate and foreign
exchange derivative contracts, less royalties and net production
and transportation costs.
"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.
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