Tamarack Valley Energy Ltd T.TVE

RBC Raises Target

[retiredcf]

Their upside scenario target is $6.00. GLTA

November 1, 2024

Outperform
Speculative Risk
TSX: TVE; CAD 4.15
Price Target CAD 5.00 ↑ 4.50

Tamarack Valley Energy Ltd.
Q3/24 - Model Update - Simple is Good

Our view: Tamarack released a drama-free Q3/24 which featured ahead-of- street expectations on both production and cash flow reflecting continued success in the Clearwater/Charlie Lake. The company will release its 2025 budget on December 4, 2024 (pre-market).

Key points:

• Q3/24 ahead of street. Q3/24 volumes of 65,024 boe/d (85% liquids) were ahead of RBC/Street estimates (62,567/62,641); CFPS of $0.40/ sh came in ahead of RBC/Street estimates ($0.37/$0.37) with variances including higher volumes, stronger realizations than expected and lower royalties and operating costs. Q3/24 capital spend of $109 million came in well below RBC/Street estimates ($130/ $132mm).

• Guidance nudged up. 2024 base production guidance increased to 63,500 boe/d (from 62,000 boe/d) (midpoint) with base capital pointed toward the upper end of its previous guidance of $440 million (from $415 million) (midpoint). The company will drill 4 Charlie Lake wells in Q4/24 utilizing a portion of the CIP expansion proceeds prior to CSV Albright commissioning in early 2025 and will expand its waterflood program in the Clearwater.

• Dividend increased. Tamarack increased its base dividend to $0.03825/ sh (from $0.0375/sh) or $0.1530/annually, which represents an increase of 2%. Tamarack exited Q3/24 with $807 million in net debt (RBC/ consensus: $834/$852mm), mapping to a $318 million reduction (-28%) y/y and below its 2nd tranche of its net debt threshold ($900mm). During the quarter, TVE bought back 12mm shares for ~$50mm and YTD, have bought back 12.3mm shares for a total of $83mm.

• Operations update. Highlights include (1) Fan designs in the South Clearwater have been delivering lower declines where secondary recovery has not yet been established. (2) Waterflood activity has resulted in 1.5 mboe/d of incremental oil production. (3) The company expects to have >9% of its Clearwater production supported by waterflood by YE24. (3) In late Q3/24, TVE brought on two wells in Pipestone (14-34 pad) and achieved an IP30 rate of 1.3 mboe/d (86% liquids). (4) During Q3, TVE brought two Wembley wells (11-11 pad) which exhibited encouraging test rates similar to two Q4/23 drills from the same location.

• Updating estimates. We update our estimates to reflect higher production guidance for 2024 and tweaked 2025/26 production with corresponding cash flows increasing by +5%/+3%/+2%. Our price target increases to $5/sh based on 1.7x Tgt/NAV (from $4.50/sh on 1.4x P/NAV) on higher estimates and operational execution.