TSX: TVE
CALGARY, AB, June 1, 2021 /CNW/ - Tamarack Valley Energy
Ltd. ("Tamarack" or the "Company") (TSX: TVE) is
pleased to announce that it has successfully closed the previously
announced acquisition (the "Acquisition") of Anegada Oil Corp.
("Anegada"). Tamarack acquired all of the issued and outstanding
common shares of Anegada for total net consideration of 105.3
million common shares of Tamarack and $247.5
million in cash and assumed net debt(1), after
deducting the proceeds from the closing of the previously announced
2% gross overriding royalty (the "GORR"). In conjunction with the
acquisition, Tamarack's credit syndicate has increased the
Company's credit facilities to $600
million and extended the revolving period to May 31, 2022.
Charlie Lake Update
Current production from the newly acquired assets is
approximately 12,500 boe/d(2). The Company forecasts a
range of 12,000 to 13,000 boe/d(3) for the second half
of 2021, maintaining that level of production on a go forward
basis. Tamarack plans to run two rigs in the play during the month
of June, with plans to drill 12 (12.0 net) wells for the remainder
of the year, with seven (7.0 net) in the Pipestone area, two (2.0 net) in Wembley, two (2.0 net) in Saddle Hills and one
(1.0 net) in Valhalla.
Approximately two-thirds of the wells planned are three-mile
horizontals with the remainder being two-mile horizontals.
Tamarack's total budget for 2021 is expected to be approximately
$180 million.
Tamarack has proactively enhanced the inventory of future
drilling locations and Charlie
Lake acreage by an incremental 33 (32.7 net) locations and
greater than 18,000 additional acres of land, through strategic
tuck-in activity in the greater Charlie
Lake fairway since the initial announcement of the
Acquisition. Tamarack's highly economic Charlie Lake inventory represents >257
(240.0 net) locations and over 10 years of planned drilling
inventory in the play. The Charlie
Lake light oil inventory has very robust economics
consisting of: high productivity wells (IP30 rates of >650
boe/d(4)); payouts of less than 6 months; profit to
investment ratios(1) (10% discount) of >1.7; and
long-term net asset value growth (NPV10 per well greater than
$5 million) at US $55/bbl WTI and $2.50/GJ AECO.
Anegada brought on-stream another notable well in late March
(3-16-071-8W6), which produced an average of 919 bbls/d of oil for
the calendar month of April. Two other notable wells in the
Pipestone area that were brought
on-stream in February (2-22 & 3-22-071-08W6) were down for
approximately half of the month in April due to a battery fire. All
of these wells are three-mile horizontals.
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 three 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
|
mcf/d
|
thousand cubic feet
per day
|
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)
|
See "Non-IFRS
Measures"
|
(2)
|
Comprised of 7,100
bbl/d light and medium oil, 1,900 bbl/d NGL and 21,000 mcf/d
natural gas
|
(3)
|
Comprised of 6,550 –
7,200 bbl/d light and medium oil, 1,950 – 2,000 bbl/d NGL and
21,000 – 22,800 mcf/d natural gas
|
(4)
|
Comprised of 370
bbl/d light and medium oil, 100 bbl/d NGL and 1,080 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.
Drilling Locations. This press release discloses drilling
locations with respect to the Anegada 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 most recent publication of the Canadian Oil
and Gas Evaluations Handbook ("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 257 (240.0 net) drilling locations identified herein, 72
(70.5 net) are proved locations, 6 (6.0 net) are probable locations
and 179 (163.5 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. 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 Anegada 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 assets acquired pursuant to the
Acquisition, including anticipated benefits and strategic
rationale; oil and natural gas production levels, including average
production for the second half of 2021; drilling plans and timing
of drilling; Tamarack's liquidity and financial position, the
factors contributing thereto, including the timing and level
capital expenditures, including in connection with the GORR and the
increase to the Company's credit facilities.
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; the assets
acquired pursuant to the Acquisition; the GORR disposition; the
timing of and success of future drilling, development and
completion activities; the geological characteristics of Tamarack's
properties; the characteristics of the acquired assets; the
successful integration of the acquired 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
period ended March 31, 2021 (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, capital budget and expenditures, balance sheet
strength, profit to investment ratios, payout of wells, net debt,
net asset value growth and components thereof, including pro forma
the Acquisition and the GORR disposition, 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", "net
debt" and "profit to investment ratio", 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" 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.
"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. 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.
"Profit to Investment Ratio" is calculated as the present
value of future Adjusted Funds Flows, discounted at 10% per annum,
divided by total capital expenditures. Tamarack uses Profit to
Investment Ratio to assess the long-term profitability and
sustainability as well as to prioritize capital expenditures.
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