From Banque NationaleTamarack Valley Energy Ltd. Clear Sailing Through Clearwater
TVE (TSX) STOCK RATING TARGET EST. TOTAL RETURN C$5.03 Outperform (Unchanged) C$8.00 (Unchanged) 62.0% Q3/22
Financial & Operating Results Q3/22 Financial & Operating Results
TVE reported Q3/22 results ahead of expectation, including average production of 43.5 mboe/d (76% liquids) and associated CFPS of $0.40 (vs. consensus $0.37). During the quarter, the company realized the benefits of high proportional exposure to the high-margin profile of its Clearwater & Charlie Lake assets, delivering a $44.50/boe cash netback (-16% Q/Q) that comes as a result of solid realizations ($82/boe; -20% Q/Q) and improving cash costs (-14% Q/Q), and which supported a 55% payout for the quarter with an implied 18% annualized FCF yield.
Clear Sailing Through Clearwater
The strength of its profile continues to resonate further, as its proportional exposure to the Clearwater expands. The highlight, and as a reflection of the high economic velocity of scalability of the Clearwater project, the company offered two analogies at greater Nipisi depicting the establishment of material production from pad developments (4 mbopd & 2 mbopd, respectively) under low capital efficiencies (i.e., ~$5k/bopd), which with high associated netbacks and support of low sustainable declines & waterflood to be established, should support fast a multiplicative payback. A massive value opportunity and multiple extensions and expansions within the project (including multi-zonal opportunities) should continue to broaden inventory and the project’s scope of returns (MORE WITHIN).
R.O.C. n' Roll Corporate guidance remains intact (MORE WITHIN), and with that, its return of capital framework remains intact, with key debt thresholds and inflection points to enhanced payout to be met through 2023, and which should continue to accelerate given the strength of the economic backdrop supported by its Clearwater & Charlie Lake assets.
Maintain Outperform Rating & $8/sh Target Price A solid quarter, positively reflecting the strength of returns in its core Clearwater & Charlie Lake assets, which should accelerate with increased proportional exposure and tailwinds of high velocity of returns, to the benefit of its return of capital strategy and shareholder value over the long term. TVE is poised for a 57% return profile (vs. peers 26%) on leverage of 0.6x (vs. peers 0.1x), while trading at 3.1x 2023e EV/DACF (vs. peers 2.9x).