TSX: TVE
CALGARY,
AB, July 28, 2022 /CNW/ - Tamarack
Valley Energy Ltd. ("Tamarack" or the "Company")
(TSX: TVE) is pleased to announce its financial and operating
results for the three and six months ended June 30, 2022. Selected financial and operating
information is outlined below and should be read with Tamarack's
consolidated financial statements and related management's
discussion and analysis (MD&A) for the three and six months
ended June 30, 2022, which are
available on SEDAR at www.sedar.com and
on Tamarack's website at www.tamarackvalley.ca.
The Company is also pleased to announce the disposition of
non-core Viking assets (the "Non-Core Viking Disposition"), for
total gross proceeds of $70
million(2), along with an operational update, H2
2022 guidance and an update to the return of capital
framework.
Brian Schmidt, President
and CEO of Tamarack commented: "We closed and successfully
integrated the Rolling Hills Energy Clearwater oil acquisition
during the quarter. In addition, our base dividend was increased by
20%, which was underpinned by our strategy and commitment to
long-term sustainable free funds flow(1) per share
growth, and we initiated our enhanced return framework in Q2
through the purchase of 1.2 million common shares under our Normal
Course Issuer Bid (NCIB)"
Q2 2022 Financial and Operating
Highlights
- Achieved quarterly production volumes of 43,777
boe/d(3) in Q2/22, representing a 35% increase compared
to the same period in 2021.
- Generated Q2/22 adjusted funds flow(1) of
$203.6 million ($0.47/share basic; $0.46/share diluted).
- Generated free funds flow(1), excluding
acquisition expenditures, of $94.1
million.
- Generated net income of $143.5
million ($0.33/share basic and
diluted) during the quarter.
- Increased the monthly cash dividends on common shares by
20%, from $0.0083/share in April and
May to $0.0100/share in June,
and initiated the enhanced return of capital framework with
the purchase of 1.2 million common shares under our
NCIB.
- Invested $80.3 million in
exploration and development (E&D) capital expenditures and
$29.0 million on undeveloped land in
the Clearwater and Charlie Lake
areas during Q2/22. This contributed to the drilling of 19 (19.0
net) Clearwater oil wells and three (2.8 net) Charlie Lake oil wells. The undeveloped
purchases were partially funded through the disposition of a gross
overriding royalty (GORR) on certain lands for net proceeds of
$14.9 million.
- Exited the quarter with $470.6
million of net debt(1), inclusive of assets held
for sale with respect to the Non-Core Viking Disposition, and net
debt to Q2/22 annualized adjusted funds flow(1) of
0.6x.
- Closed the acquisition of Rolling Hills Energy Ltd.
during the quarter, completing the consolidation of the Company's
position in the Southern
Clearwater fairway for consideration of 9.3 million common
shares of Tamarack and $49.3 million
in cash.
- Subsequent to the quarter, completed the disposition of
certain assets in the Viking for gross proceeds of $70 million(2). This is consistent
with our portfolio rationalization strategy and focus on long-term
sustainable free funds flow(1) growth.
Financial & Operating Results
|
Three months
ended
|
Six months
ended
|
June 30,
|
June 30,
|
|
2022
|
2021
|
%
change
|
2022
|
2021
|
%
change
|
($ thousands, except per
share)
|
|
|
|
|
|
|
Total oil, natural
gas and processing revenue
|
407,195
|
152,168
|
168
|
706,090
|
245,602
|
187
|
Cash flow from
operating activities
|
214,708
|
40,253
|
433
|
347,561
|
78,689
|
342
|
Per share – basic
|
$
0.49
|
$ 0.12
|
308
|
$
0.81
|
$ 0.26
|
212
|
Per share – diluted
|
$
0.49
|
$ 0.12
|
308
|
$
0.81
|
$ 0.26
|
212
|
Adjusted funds flow
(1)
|
203,622
|
71,741
|
184
|
352,481
|
113,693
|
210
|
Per share – basic (1)
|
$
0.47
|
$ 0.21
|
124
|
$
0.83
|
$ 0.38
|
118
|
Per share – diluted (1)
|
$
0.46
|
$ 0.21
|
119
|
$
0.82
|
$ 0.37
|
122
|
Net income
|
143,507
|
230,194
|
(38)
|
169,964
|
230,028
|
(26)
|
Per share – basic
|
$
0.33
|
$ 0.69
|
(52)
|
$
0.40
|
$ 0.77
|
(48)
|
Per share – diluted
|
$
0.33
|
$ 0.67
|
(51)
|
$
0.39
|
$ 0.75
|
(48)
|
Net debt
(1)
|
(470,563)
|
(505,992)
|
(7)
|
(470,563)
|
(505,992)
|
(7)
|
Capital
expenditures(4)
|
109,483
|
30,805
|
255
|
234,850
|
79,509
|
195
|
Weighted average shares outstanding
(thousands)
|
|
|
|
|
|
|
Basic
|
434,924
|
333,908
|
30
|
427,175
|
300,013
|
42
|
Diluted
|
438,206
|
341,935
|
28
|
430,406
|
307,608
|
40
|
Share Trading (thousands, except share
price)
|
|
|
|
|
|
|
High
|
$
6.48
|
$ 2.90
|
123
|
$
6.48
|
$ 2.90
|
123
|
Low
|
$
4.12
|
$ 2.16
|
91
|
$
3.90
|
$ 1.25
|
212
|
Trading volume
(thousands)
|
261,745
|
155,905
|
68
|
495,434
|
337,037
|
47
|
Average daily production
|
|
|
|
|
|
|
Light
oil (bbls/d)
|
18,233
|
14,535
|
25
|
18,052
|
12,340
|
46
|
Heavy
oil (bbls/d)
|
10,805
|
4,701
|
130
|
9,172
|
3,683
|
149
|
NGL
(bbls/d)
|
3,540
|
3,032
|
17
|
3,825
|
2,728
|
40
|
Natural
gas (mcf/d)
|
67,195
|
60,887
|
10
|
69,082
|
56,699
|
22
|
Total
(boe/d)
|
43,777
|
32,416
|
35
|
42,563
|
28,201
|
51
|
Average sale prices
|
|
|
|
|
|
|
Light
oil ($/bbl)
|
135.66
|
75.30
|
80
|
123.07
|
70.69
|
74
|
Heavy
oil ($/bbl)
|
115.51
|
61.20
|
89
|
106.91
|
56.47
|
89
|
NGL
($/bbl)
|
63.61
|
39.57
|
61
|
59.65
|
38.51
|
55
|
Natural
gas ($/mcf)
|
7.81
|
2.77
|
182
|
6.73
|
2.94
|
129
|
Total
($/boe)
|
102.16
|
51.55
|
98
|
91.54
|
47.95
|
91
|
Operating netback ($/Boe)
|
|
|
|
|
|
|
Average
realized sales
|
102.16
|
51.55
|
98
|
91.54
|
47.95
|
91
|
Royalty
expenses
|
(19.64)
|
(7.20)
|
173
|
(17.75)
|
(6.43)
|
176
|
Net
production and transportation expenses
|
(13.00)
|
(10.74)
|
21
|
(12.55)
|
(10.91)
|
15
|
Operating field netback ($/Boe)
(1)
|
69.52
|
33.61
|
107
|
61.24
|
30.61
|
100
|
Realized
commodity hedging loss
|
(9.40)
|
(6.20)
|
52
|
(6.79)
|
(5.19)
|
31
|
Operating netback ($/Boe)
(1)
|
60.12
|
27.41
|
119
|
54.45
|
25.42
|
114
|
Adjusted funds flow ($/Boe)
(1)
|
51.11
|
24.32
|
110
|
45.75
|
22.27
|
105
|
|
|
|
|
|
|
|
Operations Update
Clearwater
Peavine/Seal – Tamarack continued to
be active with its Clearwater land expansion strategy to drive
long-term sustainable free funds flow(1) growth. The
Company accumulated an additional 15 net sections through crown
land sales and a strategic farm-in executed during the quarter,
bringing our total greater Peavine/Seal land holdings to 77.5 net
sections in proximity to competitor activity with strong well
results. The Company sees the potential of up to three separate
Clearwater sands on the new lands and plans to begin its expanded
appraisal program in Q4/22 which will consist of 4-5 wells along
with road and drilling pad infrastructure.
West Marten Hills Exploration – Based
on the successful West Marten Hills 02/8-33 appraisal well, which
exhibited IP30 rates of approximately 150 bopd(5),
Tamarack is in the process of building an all-season road into the
area with plans to drill an additional seven wells at West Marten
Hills in 2022, including an Upper Clearwater A appraisal
well.
West Nipisi – Tamarack's strategy at
West Nipisi is focused on waterflood development moving forward.
The Company has rig released nine of 17 wells planned from 3
different pad sites, all of which are being developed under
Tamarack's Nipisi Clearwater waterflood configuration. Seven
wells are currently on production and exhibiting rates within
expectations of approximately 200 bopd(6).
Injection commenced on 3 wells at Tamarack's waterflood pilot in
early May. Initial results have been very encouraging, and
Tamarack plans to drill an additional 5 injectors in H2/22.
Tamarack is currently drilling an appraisal well to test the
northwest Nipisi Clearwater sands based on encouraging offsetting
competitor well results.
Southern
Clearwater – Tamarack continues to actively
develop its Clearwater assets in the Jarvie, Perryvale and Meanook areas with two
rigs currently operating. Development has been highlighted at West
Perryvale, where production results have outperformed the area type
curve and further inventory has been added through continued pool
delineation. Thirty-two wells have been rig released to date
in 2022, with 25 wells currently onstream. The wells currently
producing have averaged peak oil rates of greater than 150
bopd(7). The Company plans to drill 48 gross (48.0 net)
wells in the area in 2022 and execute on operational synergies on
recently acquired production.
Charlie
Lake
In the Charlie Lake,
Tamarack has brought nine of 17 planned wells onstream in 2022.
Results continue to exceed expectations. Most notably, the
100/02-16-071-08W6 well achieved an IP30 of 1,155 bopd (1,685
boe/d(8)) .
During the quarter, the Company experienced significant
third-party infrastructure downtime which resulted in a production
impact of approximately 2,500 boe/d(9). Current
production from the area has averaged approximately 13,500
boe/d(10) month to date in July. The second quarter
production impact along with updated third quarter turnaround
timing at the Tidewater Midstream Pipestone plant and CNRL TeePee
Creek plant is reflected in our guidance for the second half of
2022 below.
Tamarack is advancing plans to construct a new owned and
operated gas plant in the Grand Prairie area, with engineering,
planning and design work currently underway. Phase 1 of the plant
will add approximately 15-20 mmcf/d of gas processing capacity and
is forecasted to be commissioned in the first half of 2023. This
plant will serve to provide further egress enhancement and cost
savings in the Charlie Lake moving
forward and could be expanded as part of a Phase 2 development to
support future development and processing capacity
requirements.
Veteran/Eyehill Waterfloods
Tamarack drilled 13 wells in the H1/2022 capital program
targeting the Viking (6.0 net) and Sparky (7.0 net) at its Veteran
and Eyehill properties. Through Q2, Tamarack continued to add
injection to its Veteran waterflood, completing 6 injector
conversions. The waterflood response in Eyehill is meeting
expectations, reaffirming the value of the Sparky asset.
Non-Core Viking Disposition
Subsequent to the quarter, Tamarack closed the disposition
of approximately 2,000 boe/d(11) (~44 % liquids) of
non-core Viking production for total gross proceeds of $70 million(2). This
disposition is consistent with the Company's portfolio
rationalization strategy and driving long-term sustainable free
funds flow(1) growth. The proceeds from the disposition
will be directed towards both debt repayment and capital activity,
including Tamarack's increased Clearwater appraisal expenditures in
the greater Peavine and Seal area and West Nipisi waterflood
programs.
2022 Second Half Capital Budget and
Guidance
To reflect the disposition of non-core Viking assets on
July 21, 2022, as well as changes in
the commodity price environment and inflationary pressures facing
the industry, Tamarack is providing H2/22 corporate guidance. The
Company remains focused on capital discipline and growing
sustainable free funds flow(1) and will proactively
adapt our spending plans within the context of the market and
inflationary pressures to maximize returns.
A 2022 capital reconciliation table is provided below to
highlight the re-distribution of the Viking asset and GORR
disposition proceeds into expanded Clearwater appraisal, Clearwater
waterflood development and strategic Peavine/Seal land capture to
manage overall capital outlay for the year. The Company continues
to execute on its strategy of repositioning and growing its
footprint in the top tier economic oil plays in North America.
Capital Budget
Exploration and development capital expenditures for the
second half of 2022 have been updated to a range of $160-$170 million,
totalling $340-$360 million for the year. This capital guidance
is inclusive of the future E&D capital associated with the
Company's expanded Clearwater appraisal at Peavine/Seal and the
West Nipisi waterflood program. It is also inclusive of forecasted
inflationary pressures with respect to the higher service and
material costs, as well as supply chain constraints facing the
industry at this time
Production
Second half production guidance has been updated to a
range of 44,500 to 46,500 boe/d(12) to reflect the sale
of the non-core Viking assets along with forecasted turnaround
activity in the Charlie Lake
operating area in the third quarter. The Clearwater appraisal
program is expected to have minimal impact to the 2022 production,
given the timing of the drill program, with appraisal success
setting up development programs for 2023.
|
H2 2022 Guidance(13)
|
E&D Capital
Budget(14) ($mm)
|
$160–$170
|
Annual Average
Production(12) (boe/d)
|
44,500–46,500
|
Expenses:
|
|
Royalty Rate
(%)
|
20–22%
|
Operating
($/boe)
|
$10.00–$10.25
|
Transportation
($/boe)
|
$3.00–$3.10
|
General and
Administrative ($/boe)
|
$1.45–$1.55
|
Taxes
($/boe)(15)
|
$4.50–$5.00
|
Leasing Expenditures
($mm)
|
$1.8
|
Asset Retirement
Obligations ($mm)
|
$5.0
|
Revenue:
|
|
Average Oil &
Natural Gas Liquids Weighting
|
76 %
|
Light Oil Wellhead
Differential
|
$3.00-$3.50
|
Heavy Oil Wellhead
Differential
|
$5.50-$6.00
|
Price
Assumptions:
|
|
WTI
(US$/bbl)
|
$85.00
|
AECO
(CAD$/GJ)
|
$4.00
|
2022 Annual Capital Expenditure Reconciliation
|
($mm)
|
2022 E&D Capital Budget(4) – May 2022
Guidance
|
$300
|
+ Strategic Land
Acquisitions (Clearwater/Charlie Lake)
|
$55
|
+ H2/22 Clearwater
Capital Additions:
|
|
Peavine/Seal
Appraisal
|
$25
|
West Nipisi
Waterflood Expansion
|
$15
|
+ H2/22 Capital
Inflation Adjustment
|
$20
|
- GORR
Disposition
|
($15)
|
- Viking Non-Core
Disposition Total Proceeds
|
($70)
|
Adjusted 2022 Net Capital Expenditure
Outlay
|
$330
|
Return of Capital Framework
The Company remains committed to balancing long-term
sustainable free funds flow(1) growth with returning
capital to shareholders and has further defined its return of
capital framework to balance debt repayment, future potential
acquisitions to bolster our long-term inventory resiliency and
increased clarity around delivering enhanced return to shareholders
through opportunistic share buybacks and/or enhanced
dividends.
The return of capital framework includes the base
dividend, which is a structural component of the financial
framework and is set at a level approximated to 25% of corporate
free funds flow(1) at our long-term 5-year plan price
deck of US$55/bbl WTI and
$2.50/GJ AECO, and can be sustainably
covered at bottom cycle pricing of less than US$40/bbl WTI. In addition to the base dividend,
the Company continues to allocate 50% of its free funds
flow(1) to enhanced return of capital, inclusive of base
dividends, when net debt(1) is less than $400 million with the remaining 50% allocated to
further debt repayment and future acquisition
opportunities.
Tamarack executed on its enhanced return during the
quarter with the purchase of 1.2 million shares under the Company's
NCIB. The incremental net debt(1) associated with the
current H1 2022 tax expense, along with the cash considerations for
the Rolling Hills Acquisition and the H1 2022 land purchases, were
adjusted accordingly when considering the enhanced return debt
target.
Base Dividend
As previously announced, the Company increased the base
dividend by 20% during the quarter in conjunction with the close of
the Rolling Hills acquisition to
$0.01/share per month, payable in
July. The base dividend increase was driven by the enhanced
sustainable free funds flow(1) in conjunction with the
base business and H1 2022 Clearwater acquisitions which were
accretive to our five year plan at flat pricing of US$55/bbl WTI and $2.50/GJ AECO.
Updated Enhanced Return Framework
Based on the existing return of capital framework outlined
above, Tamarack plans to deliver incremental shareholder return as
follows:
- Net debt(1) >$200
million and <$400 million:
the Company continues to target to deliver 50% of discretionary
free funds flow(1), inclusive of base dividends, from
the prior quarter through tactical share buybacks and/or enhanced
dividends.
- Net debt reaches the $200
million floor: the Company will target delivering 75% of
discretionary free funds flow(1), inclusive of base
dividends, from the prior quarter through tactical share buybacks
and/or enhanced dividends.
Any enhanced dividend will be paid to shareholders on a
quarterly basis, one month following the declaration date. Tamarack
looks forward to continuing to deliver on enhanced shareholder
returns in 2022 based on the current commodity price outlook.
Executive Changes
The Company announces the resignation of Mr. Martin Malek as VP Engineering of the Company.
As a result of this change, Tamarack is also pleased
to announce the promotion of Mr. Ben
Stoodley, Director, Clearwater
Development, to the role of VP Engineering. Mr. Stoodley has
been with Tamarack since August 2021.
He brings more than 17 years of industry experience in production
engineering, business development and field development, most
recently serving as Manager, Development at West Lake Energy
(formerly Twin Butte Energy), where he led their development group,
focused on conventional heavy and medium oil assets in East Central
Alberta.
"On behalf of the Board of Directors, executive management
team and all of our staff, I would like to extend sincere
appreciation to Martin for his many contributions during the
transformation of the Company. His hard work and dedication have
been instrumental during the many acquisitions across Tamarack's
history" said Brian Schmidt,
President and Chief Executive Officer. "We wish him luck in all his
future endeavours. I would also like to congratulate Ben on his new
role. We are excited to have Ben's contributions and talent as part
of our senior leadership team".
Risk Management
The Company manages commodity price risk and volatility
through a prudent hedging management program, with approximately
54%, on average, of gross oil production hedged against WTI for the
remainder of 2022, through instruments including puts and enhanced
collars. Tamarack also has WTI-MSW and WCS differential hedges in
place on approximately 42% of our production in 2022. For 2023, the
Company has entered into WTI put floors and enhanced collars as it
systematically rolls the risk management program forward on
approximately 25% of first half production. Tamarack's strategy
provides protection to the sustainability of the business and
dividend while maximizing upside. Additional details of the current
hedges in place can be found in the corporate presentation on the
Company website (www.tamarackvalley.ca).
Investor Webcast
Tamarack will host a webcast at 9:00 AM MDT (11:00 AM
EDT) on July 29, 2022 to
discuss the second quarter results and operations 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 creating long-term value for its shareholders
through sustainable free funds flow generation, financial stability
and the return of capital. The Company has an extensive inventory
of low-risk, oil development drilling locations focused primarily
on Charlie Lake, Clearwater and
EOR plays in Alberta. Operating as
a responsible corporate citizen is a key focus to ensure we deliver
on our environmental, social and governance (ESG) commitments and
goals. For more information, please visit the Company's website at
www.tamarackvalley.ca.
Abbreviations
AECO
|
the natural gas
storage facility located at Suffield, Alberta connected to TC
Energy's Alberta System
|
ARO
|
asset retirement
obligation
|
bbls
|
barrels
|
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
|
IP30
|
average production
for the first 30 days that a well is onstream
|
Mcf
|
thousand cubic
feet
|
mcf/d
|
thousand cubic feet
per day
|
MM
|
Million
|
mmcf/d
|
million cubic feet
per day
|
MSW
|
Mixed sweet blend,
the benchmark for conventionally produced light sweet crude oil in
Western Canada
|
WCS
|
Western Canadian
select, the benchmark for conventional and oil sands heavy
production at Hardisty 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 "Specified Financial
Measures"
|
(2) Total gross proceeds are
comprised of $50.0 million cash and a $ 20.0 million promissory
note. Net proceeds for the transaction of $59.9 million represent
the $70.0 million total gross proceeds less transaction costs and
net income adjustments back to the effective date of April 1, 2022.
|
(3)
Comprised of 18,233 bbl/d light and medium oil, 10,805 bbl/d heavy
oil, 3,540 bbl/d NGL and 67,195 mcf/d natural gas
|
(4) Capital expenditures
include exploration and development capital, ARO, ESG initiatives,
facilities, land and seismic but excludes asset acquisitions and
dispositions.
|
(5)
Comprised of approximately 150 bbl/d heavy oil
|
(6)
Comprised of approximately 200 bbl/d heavy oil
|
(7)
Comprised of approximately 150 bbl/d heavy oil
|
(8)
Comprised of 1,155 bbl/d light and medium oil, 285 bbl/d NGL and
1,470 mcf/d natural gas
|
(9) Comprised of 1,500 bbl/d
light and medium oil, 350 bbl/d NGL and 3,900 mcf/d natural
gas
|
(10)
Comprised of 8,150 bbl/d light and medium oil, 1,850 bbl/d NGL and
21,000 mcf/d natural gas
|
(11)
Comprised of 640 bbl/d light and medium oil, 240 bbl/d NGL and
~6,720 mcf/d natural gas
|
(12)
Comprised of 16,500-17,500 bbl/d light and medium oil,
14,000-15,000 bbl/d heavy oil, 3,000-3,500 bbl/d NGL and
63,000-65,000 mcf/d natural gas
|
(13)
Reflective of the Viking Non-Core disposition effective July 21,
2022, with H2/22 average pricing assumptions of: $85.00USD/bbl WTI;
4.00 CAD/GJ AECO; 1.305 CAD/USD; 4.00 USD/bbl MSW; and 21.00
USD/bbl WCS
|
(14) Capital
E&D budget includes exploration and development capital, ESG
initiatives, and facilities but excludes asset acquisitions and
dispositions, ARO, land and seismic.
|
(15) Tax
costs per boe are particularly sensitive to changes in commodity
pricing and are represented here under the Company's best outlook
of budget and strip pricing but may change significantly under
alternate price conditions in the second half of the
year.
|
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 ("NI 51-101"). 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; future consolidation
activity, organic growth and development and portfolio
rationalization; future intentions with respect to return of
capital, including enhanced dividends and share buybacks; oil and
natural gas production levels, adjusted funds flow, free funds
flow; anticipated operational results for H2 2022 including, but
not limited to, estimated or anticipated production levels, capital
expenditures and drilling plans; the Company's capital program,
guidance and budget for H2 2022 and H2 2022 capital program; use of
proceeds from the Non-Core Viking Disposition and GORR disposition;
expectations regarding commodity prices; 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; risk management activities,
Tamarack's commitment to ESG principles and sustainability; and the
source of funding for the Company's activities including
development costs. Future dividend payments and share buybacks, if
any, and the level thereof, is uncertain, as the Company's return
of capital framework and the funds available for such activities
from time to time is dependent upon, among other things, free funds
flow financial requirements for the Company's operations and the
execution of its growth strategy, fluctuations in working capital
and the timing and amount of capital expenditures, debt service
requirements and other factors beyond the Company's control.
Further, the ability of Tamarack to pay dividends and buyback
shares will be subject to applicable laws (including the
satisfaction of the solvency test contained in applicable corporate
legislation) and contractual restrictions contained in the
instruments governing its indebtedness, including its credit
facility.
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
timing of and success of future drilling, development and
completion activities; the geological characteristics of Tamarack's
properties; the characteristics of recently acquired assets; the
successful integration of recently 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; impact
of inflation on costs; the application of regulatory and licensing
requirements; the continued availability of capital and skilled
personnel; the ability to maintain or grow the banking facilities;
the accuracy of Tamarack's geological interpretation of its
drilling and land opportunities, including the ability of seismic
activity to enhance such interpretation; and Tamarack's ability to
execute its plans and strategies.
Although management considers these assumptions to be
reasonable based on information currently available, undue reliance
should not be placed on the forward-looking statements because
Tamarack can give no assurances that they may prove to be correct.
By their very nature, forward-looking statements are subject to
certain risks and uncertainties (both general and specific) that
could cause actual events or outcomes to differ materially from
those anticipated or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to: the
risk that future dividend payments thereunder are reduced,
suspended or cancelled; unforeseen difficulties in integrating of
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, including
increased operating and capital costs due to inflationary
pressures; health, safety, litigation and environmental risks;
access to capital; the COVID-19 pandemic; and Russia's military actions in Ukraine. 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, 2021 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 generating sustainable long-term growth in free funds
flow, prospective results of operations and production, weightings,
operating costs, H2 2022 capital budget and expenditures, balance
sheet strength, adjusted funds flow and free funds flow, including
pro forma the acquisition of Rolling
Hills and the Non-Core Viking 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
and its management believe that FOFI has been prepared on a
reasonable basis, reflecting management's best estimates and
judgments, and represent, to the best of management's knowledge and
opinion, the Company's expected course of action. However, because
this information is highly subjective, it should not be relied on
as necessarily indicative of future results. 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. Changes in forecast commodity prices, differences
in the timing of capital expenditures, and variances in average
production estimates can have a significant impact on the key
performance measures included in Tamarack's guidance. The Company's
actual results may differ materially from these
estimates.
References in this press release to peak rates, test
rates, 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. The Company
cautions that test rates should be considered to be
preliminary.
Specified Financial Measures
This press release includes various specified financial
measures, including non-IFRS financial measures, non-IFRS financial
ratios and capital management measures as further described herein.
These measures do not have a standardized meaning prescribed by
International Financial Reporting Standards ("IFRS") and,
therefore, may not be comparable with the calculation of similar
measures by other companies.
"Adjusted funds flow (capital
management measure)" is calculated by taking
cash-flow from operating activities, on a periodic basis, deducting
current income taxes and adding back changes in non-cash working
capital, expenditures on decommissioning obligations and
transaction costs 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 (capital management
measure)" (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.
"Operating field netback
(non-IFRS financial measure or ratio)" is calculated
as total petroleum and natural gas sales, less royalties, net
production expenses and transportation expense. These metrics can
also be calculated on a per boe basis. Management considers
operating netback and operating field netback important measures to
evaluate Tamarack's operational performance, as it demonstrates
field level profitability relative to current commodity prices. See
the MD&A for a detailed calculation and reconciliation of
operating field netback per boe to the most directly comparable
measure calculated and presented in accordance with
IFRS.
"Operating netback (non-IFRS financial
measure or ratio)" is calculated as total
petroleum and natural gas sales, including realized gains and
losses on commodity and foreign exchange derivative contracts, less
royalties, net production expenses and transportation expense
(non-IFRS financial measure). This metrics can also be calculated
on a per boe basis (non-IFRS financial ratio). 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. See the
MD&A for a detailed calculation and reconciliation of operating
netback per boe to the most directly comparable measure calculated
and presented in accordance with IFRS.
"Net debt (capital management
measure)" is calculated as bank debt plus senior
unsecured notes, plus working capital surplus or deficit, plus
other liability, including the fair value of cross-currency swaps
plus government loans, less assets held for sale (net of
liabilities associated with assets held for sale), and excluding
the fair value of financial instruments, decommissioning
obligations, lease liabilities and the cash award incentive plan
liability.
"Net debt to annualized adjusted funds
flow (capital management measure)" is calculated
as estimated period end net debt divided by the annualized adjusted
funds flow for the preceding quarter (multiplied by 4 for
annualization).
Please refer to the MD&A for additional information
relating to specified financial measures including non-IFRS
financial measures, non-IFRS financial ratios and capital
management 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