Tamarack increased 2022 Clearwater guidance, expecting production volumes to average 13,500 boe/d in 2022, exiting at approximately 16,000 boe/d. Management also highlighted a ~3,000 boe/d increase in Clearwater potential, now expecting its assets to support 21,000–22,000 boe/d long-term. Notably, this excludes the impact of Nipisi waterfloods and potential success in Peavine, which could present material upside.
Return of capital on track. Alongside the acquisition, Tamarack increased its dividend 20% to $0.12/share annually (paid monthly), effective in June. The team also lifted its net debt target by $25 million to $350–400 million, which we expect the company to achieve in early Q3/22. Management reiterated its commitment to returning 50% of funds flow to shareholders on a trailing quarterly basis through buybacks and/or special dividends. The company expects this to begin in Q3/22 and should provide details with Q2/22 results in July.
Balance sheet in good shape. Based on our updated estimates, we forecast Tamarack to carry $251/$72 million net debt at year-end 2022E/23E, representing a 2022E D/CF ratio of 0.3x, compared to peers at 0.4x, with most peers reaching net cash by 2023E. In 2023, we model full NCIB utilization (20.4 million shares), a 25% dividend increase, and $30 million in special dividends per quarter. We do not currently model incremental M&A, though we view this as likely over time, concentrated to core areas including the Clearwater and Charlie Lake.
Recommendation unchanged. We reiterate our Outperform recommendation and raise our price target to $7.50 from $7.00 following the acquisition. We believe Tamarack will continue to gain momentum with increased scale, plenty of high-quality development locations in the Clearwater and Charlie Lake oil plays, and a shift to enhanced shareholder returns.