Goldman Sachs says $65 Oil 🛢 in 2021 thus Tamarack $3Tamarack Valley Energy (TSX: TVE) announces that approved a 2021 capital budget of $110 million , designed to grow corporate oil production by approximately 30% on an exit-over-exit basis, generate significant free adjusted funds flow and maintain a strong balance sheet with a debt to trailing annual adjusted funds flow of less than 1.5 times. While 2020 was a challenging year on many fronts, Tamarack's financial discipline and operational strength enabled the Company to capture additional accretive opportunities through both the tuck-in of an asset in West Central Alberta and a recent entry into the Clearwater oil play, adding low decline production and high rate-of-return drilling inventory, respectively. The Company expects to exceed the forecasted 21,500 boe/d annual average production for 2020 as referenced within Tamarack's November 10, 2020 press release. 2021 Corporate Guidance
Through 2021, Tamarack plans to invest approximately $105 to $110 million , which includes the drilling of 65 net wells. This investment is expected to result in average annual production of approximately 23,000 boe/d, while increasing our oil production volumes by approximately 30% in Q4/21 over Q4/20. Tamarack's 2021 corporate guidance reflects material year-over-year growth in free adjusted funds flow with a focus on oil growth in the Clearwater play, along with continued strong performance from the Company's Veteran waterflood project which further enhances the resiliency and sustainability of the business moving forward. The 2021 budget also reflects our dedication to environmental, social and governance (" ESG ") factors, with significant capital dedicated to emissions reduction projects and abandonment and reclamation projects.
The Company continues to manage commodity price risk and volatility through a prudent hedging management program, with 48% of gross oil production hedged against WTI for the first half of 2021. Additional details of the current hedges in place can be found in the corporate presentation on the Company's website ( www.tamarackvalley.ca ).
| Annual Average Production (boe/d) | 23,000 |
| Annual Average Oil & Natural Gas Liquids Weighting | 64% |
| Q4 2021 Oil & Natural Gas Liquids Weighting | 68% |
| Capital Budget (1) ($mm) | $105-$110 |
| Annual Adjusted Funds Flow (2) ($mm) | $135-$140 |
| Year-End Net Debt to Trailing Annual Adjusted Funds Flow (2) | <1.5x |
| Annual Free Adjusted Funds Flow (2) ($mm) | $30-$35 |
| 2021 Estimated Corporate Decline Rate (3) | 22%-24% |
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| (1) | Capital budget includes exploration and development ("E&D") capital, asset retirement obligation ("ARO"), ESG initiatives, facilities, land and seismic |
| (2) | See "Non-IFRS Measures" |
| (3) | Based on December 2020 to December 2021 estimates |
| Pricing (Based on December 31 st , 2020 Forward Strip) | |
| Crude Oil – WTI ($US/bbl) | $48.40 |
| Crude Oil – MSW Differential ($US/bbl) | $5.50 |
| Crude Oil – WCS Differential ($US/bbl) | $14.50 |
| Natural Gas – AECO ($CAD/GJ) | $2.40 |
| Foreign Exchange – $CAD/$US | 0.78 |
| Capital Expenditures Breakdown | |
| Clearwater Medium Oil (incl. facilities) ($mm) | $53.0-55.0 |
| Viking Waterflood ($mm) | $29.0-30.0 |
| Viking Conventional ($mm) | $7.0 |
| West Central AB ($mm) | $5.0 |
| Land, Seismic and Other ($mm) | $4.0-5.0 |
| ARO & ESG Initiatives ($mm) | $7.0-8.0 |
| Total | $105-110 |
Clearwater Oil Play Operations Update/Outlook
Tamarack's Clearwater activity is ongoing with two rigs running in the play and a total of 16.0 net wells planned through to the end of the first quarter of 2021. Total E&D capital spend in the Clearwater is expected to be approximately $45 million for 2021 with approximately 41 (40.0 net) wells expected to be drilled along with approximately $8 million allocated to facilities, infrastructure, land and seismic. This investment is expected to drive average Q4/21 production from the Clearwater play to between 4,500-5,500 boe/d. Given the proximity of the Nipisi core operations to infrastructure with all-season accessibility, Tamarack is able to carry out activity through Q2 and Q3 2021 and ensure the majority of our production remains on-stream year-round. Enhanced Oil Recovery (" EOR ") has the potential to increase recovery factors in the Clearwater and as such, Tamarack plans to commence EOR studies through the third quarter, with learnings from these studies, along with offsetting waterflood activity, applied in the latter months of 2021. Tamarack expects to have a more detailed operational update on the Clearwater in conjunction with our year-end financials and reserves, which are expected to be released after market on March 1 st , 2021 Tamarack energy TVE