From National BankTamarack Valley Energy Ltd. Quality Portfolio Driving Returns
TVE (TSX) STOCK RATING TARGET EST. TOTAL RETURN C$4.48 Outperform (Unchanged) C$7.25 (Unchanged) 65.2% Q4/22
Financial & Operating Results
Q4/22 Financial & Operating Results
The company reported fourth quarter operating & financial results in line with expectations, including average production of 64.3 mboe/d (82% liquids) and associated CFPS of $0.36 (vs. consensus $0.40 & NBF $0.36). During the quarter, the company pushed production through the high end of its guided range on the low end of suggested capital, indicative of its efficiency of operations in the face of extreme cold. With that backdrop, and inclusive of a widening differential environment (+30% Q/Q), the company saw realizations contract (-13% Q/Q) and a modest creep in costs (+11% Q/Q) resulting in a cash netback of $33/boe (-25% Q/Q), the profile of which should only improve over the coming quarter (differentials plus integration & synergies to come).
Quality Portfolio Driving Returns
Operationally, its suite of high-quality assets continue to positively evolve, including: 1) In aggregate, its Clearwater portfolio continues to contribute strong results (in addition to Nipisi), with recent well rates (+220 bbl/d ERH wells at West Marten & Southern Fairway) and waterflood expanding across the project, while ongoing initiatives (including ERH wells, pad development and coming infrastructure support) should all serve to compound its returns profile, and 2) The Charlie Lake remains strong, delivering strong and low capital efficiency well results (1,900/boed IP, 4x project type curve), while coming infrastructure should contribute to growth and synergies to augment potential returns. With that, its 2023 capital program remains intact, to support sustainable growth (-5-10%) and excess FCF (~20% yield) to support deleveraging a ROC (More Within).
Maintain Outperform Rating & $7.25/sh Target Price
A sound conclusion to the year, with its efficiency and value proven through outperformance of reserves and within ongoing operations (realizing efficiencies in support of sustainability), and all of which continue to support a view towards a future inflection point of FCF, return of capital and value. TVE is poised for a 49% return profile (vs. peers 23%) on leverage of 0.9x (vs. peers 0.4x), while trading at 3.2x 2023e EV/DACF (vs. peers 2.9x).