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Tamarack Valley Energy Ltd.
(TVE-T) C$1.38
Formal 2021 Budget Focused on Oil Growth, FCF
Event
Tamarack Valley announces formal 2021 guidance and corporate update.
Impact: NEUTRAL
2021 expected production in line with previous preliminary outlook on slightly higher total capex. The company expects to spend $105mm-$110mm this year (slightly above its previous outlook of $102mm). This is expected to result in average 2021 production of 23.0 mBOE/d (64% liquids), unchanged from the previous guidance. The capital program is anticipated to result in oil production growth of ~30% from Q4/20-Q4/21, which is driven by material growth in the Clearwater play. The company also announced that FY2020 average production is expected to be higher than previous guidance of 21.5 mBOE/d.
Tamarack Valley is forecasting 2021 cash flow of $135mm-$140mm (assuming WTI of US$48.40/bbl and AECO of C$2.40/GJ). CF expectations are largely unchanged from the company's previous forecasts and we estimate that this would result in a 2021 FCF yield of ~8%; however, it includes meaningful production growth.
Recently acquired Clearwater assets expected to attract capex of $53mm- $55mm or ~50% of total spending. As the company highlighted in conjunction with the acquisition in the play on December 14 (see our note here), Tamarack Valley is targeting Q4/21 oil volumes of between 4,500-5,500 bbl/d in Clearwater. This is up from ~2,000 bbl/d at the time of the transaction. As part of the concurrent GORR sale to Topaz Energy Corp., the company remains committed to spending a minimum of $80mm in the play by the end of 2022.
Remaining 2021 E&D capital will be focused largely in the Viking. This includes $29mm-30mm in Viking waterflood areas, $7mm on Viking conventional production, and $5mm in West Central AB. Remaining capex will be spent on land and seismic ($4mm-$5mm) and ARO/ESG initiatives ($7mm-$8mm).
The company is planning to commence EOR studies in Clearwater in Q3/21. Successful implementation here could help mitigate future production decline rates on the assets, in our view.
Given that the formal budget is largely in line with previous preliminary guidance (and our forecasts), we will update our estimates at the next appropriate opportunity.
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