TSX: TVE
CALGARY, AB, Sept. 13, 2021 /CNW/ - Tamarack Valley
Energy Ltd. ("Tamarack" or the "Company") is pleased to announce a
corporate five-year plan along with the continued consolidation of
assets in the Clearwater. The
five-year plan highlights the significant free funds
flow(1) the Company's assets generate and the
flexibility to direct funds to achieving long-term debt targets,
return of capital to shareholders, and incremental growth of the
business both organically and through M&A opportunities.
Tamarack continues to take a disciplined approach to consolidating
its core assets and is pleased to announce the acquisition of
approximately 53 net sections of land in the Southern Clearwater fairway, in the
Jarvie area, with an inventory of
>63 gross (59.7 net) future development locations and
approximately 400 boe/d(2) of Clearwater oil production.
Five Year Plan
Tamarack's five-year plan is expected to generate sustainable
long-term growth in free funds flow(1). The strategic
principles of the plan include 1) low leverage and balance sheet
strength with a long-term target net debt to annualized adjusted
funds flow of 0.5-1.0x; 2) low free funds flow
breakeven(1) driven by highly economic inventory
supporting positive free funds flow(1) down to the low
to mid $30/bbl WTI price range; 3)
inventory resiliency to ensure the duration of drillable locations
and growth of free funds flow(1) beyond the five-year
plan horizon and 4) the flexibility to direct a percentage of free
funds flow(1) towards enhancing total shareholder return
through the return of capital, which can be a combination of
dividends and share buybacks.
Highlights of the five-year plan include:
- Generation of approximately $1.0
billion of free funds flow(1) at $55/bbl WTI and $2.50/GJ AECO flat pricing (the "planned pricing
scenario"). This plan is sensitized down to $45/bbl WTI with $400
million of free funds flow(1) and torque to a
$70/bbl WTI scenario with
$1.7 billion of free funds
flow(1), respectively.
- Free funds flow breakeven(1) in the low to mid
$30/bbl WTI price range; affords
downside protection with upside torque given the short payout and
low breakeven nature of the Clearwater, Charlie
Lake and waterflood core oil plays.
- The planned pricing scenario contemplates a sustaining
production base of 41,000 to 43,000 boe/d(3) with the
flexibility to target an incremental 2-3% growth annually, while
balancing return of capital to shareholders.
- Sustaining capital representing approximately 40-45% of
adjusted funds flow(1) supports a production base of
between 41,000 to 43,000 boe/d(3), inclusive of ARO
spend. Annual capital to achieve sustaining production plus
moderate growth will range between $200-$250
million.
- Long-term net debt to annualized adjusted funds
flow(1) target of 0.5-1.0x, achieved in 2022/2023 under
the planned pricing scenario, with a path to eliminating debt by
2024. At current strip prices target debt is achieved in early
2022, paving a path to potential return of capital through a
combination of dividends and share buybacks.
- Flexibility to enhance return of capital and growth, both
organically and through M&A, as the lower end of the debt
target is achieved.
- The five-year plan is underpinned with >10 years of drilling
inventory capable of delivering payout in <1.5 years based on
the five-year plan capital forecast.
- A strong commitment to ESG and sustainability with planned
abandonment and reclamation spend incorporated into the sustaining
capital assumptions which exceed government mandated levels along
with capital focused on the lower emission Charlie Lake, Clearwater and waterflood assets.
Clearwater Update
On August 31st, the
Company closed the acquisition of 53 net sections of highly
prospective Clearwater lands which
included approximately 400 boe/d(2) of heavy oil
production for total consideration of $36
million. The acquisition includes 2.5 million boe of
internally estimated proved plus probable reserves(4)
and over 63 gross (59.7 net) highly prospective future development
locations in the Southern
Clearwater fairway. This acquisition fits with the Company's
strategic and disciplined approach of enhancing the free funds
flow(1) of the business both on a short-term and
long-term basis. The drilling inventory is expected to drive
payouts of approximately 6 months per well at current strip prices
and a free funds flow breakeven(1) of ~$32-33/bbl WTI. Tamarack's Southern Clearwater lands represent some ~120
net sections along with over 226 gross (164.0 net) identified
drilling locations and complements our core Nipisi and West Marten
Hills core Clearwater development
area.
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 Charlie Lake, 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
|
ARO
|
asset retirement
obligation
|
bbls/d
|
barrels per
day
|
boe
|
barrels of oil
equivalent
|
boe/d
|
barrels of oil
equivalent per day
|
bopd
|
barrels of oil per
day
|
GJ
|
gigajoule
|
IFRS
|
International
Financial Reporting Standards as issued by the International
Accounting Standards Board
|
M&A
|
mergers and
acquisitions
|
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
|
READER ADVISORIES
Notes to Press
Release
|
|
(1)
See "Non-IFRS Measures"; free funds flow and free funds
flow breakeven were previously referred to as free adjusted funds
flow and free adjusted funds flow breakeven, respectively.
|
(2)
Comprised of 400 bbl/d heavy oil.
|
(3)
Comprised of 18,000-19,000 bbl/d light and medium oil,
8,500-9,000 bbl/d heavy oil, 3,300-3,500 bbl/d NGL and
67,000-70,000 mcf/d natural gas.
|
(4) Proved plus probable reserves are
derived from the Company's internal Qualified Reserve Evaluators
("QRE") and prepared in accordance with National Instrument 51-101
("NI 51-101") and the most recent publication of the Canadian Oil
and Gas Evaluations Handbook ("COGEH"). "Internally estimated"
means an estimate that is derived by the Company's internal QRE and
prepared in accordance with NI 51-101. All internal estimates
contained in this news release have been prepared effective as of
May 1, 2021.
|
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 NI 51-101. Boe may be misleading,
particularly if used in isolation.
Drilling Locations. This press release discloses drilling
locations 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 COGEH effective May 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 226 (164.0 net)
drilling locations identified herein, 21 (21.0 net) are proved
locations, 15 (13.0 net) are probable locations and 190 (130.0 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 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,
including the Company's five year plan and the anticipated benefits
thereof, future consolidation activity and organic growth, future
intentions with respect to return of capital including dividends
and share buybacks, debt targets, expectations with respect to
reserves, oil and natural gas production levels including with
respect to the recently acquired Clearwater assets, adjusted funds flow, free
funds flow and net debt to annualized adjusted funds flow relating
Tamarack, future development and drilling plans and drilling
locations; 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; development costs,
operating costs, general and administrative costs, costs of
services and other costs and expenses; and projections of commodity
prices and costs including sustaining breakeven prices, and
exchange rates. Statements relating to "reserves" are also deemed
to be forward looking statements, as they involve the implied
assessment, based on certain estimates and assumptions, that the
reserves described exist in the quantities predicted or estimated
and that the reserves can be profitably produced in the future.
The forward-looking statements contained in this document are
based on certain key expectations and assumptions made by Tamarack,
including relating to: the timing of and success of future
drilling, development and completion activities; the geological
characteristics of Tamarack's properties; the characteristics of
the recently acquired Clearwater
assets; the successful integration of 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: unforeseen
difficulties in integrating recently acquired assets into
Tamarack's operations; incorrect assessments of the value of
benefits to be obtained from acquisitions and exploration and
development programs; 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
management's discussion and analysis for the three and six months
ended June 30, 2021 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 five year plan, including generating
sustainable long-term growth in free funds flow, prospective
results of operations and production, costs, capital expenditures,
profit, payouts, balance sheet strength, adjusted funds flow, free
funds flow, free funds flow breakeven, net debt, net debt to
annualized adjusted funds flow, debt targets, total returns 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.
Non-IFRS Measures
Certain measures commonly used in
the oil and natural gas industry referred to herein, including,
"adjusted funds flow", "free funds flow", "free funds flow
breakeven", "net debt" and "net debt to 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 funds
flow" (previously referred to as "free adjusted
funds flow") is calculated by taking adjusted funds flow and
subtracting capital expenditures, excluding acquisitions and
dispositions, Management believes that free 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 funds flow breakeven"
(previously referred to as "free adjusted funds flow breakeven") is
determined by calculating the minimum WTI price in US/bbl
required to generate free funds flow equal to zero sustaining
current production levels and all other variables held constant.
Management believes that free 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 Debt to Annualized
Adjusted Funds Flow" is calculated as net debt divided by
the annualized adjusted funds flow for the most recently completed
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