TSX: TVE
CALGARY, AB, May 3, 2022 /CNW/ - Tamarack Valley Energy Ltd. ("Tamarack" or the "Company") (TSX: TVE) is pleased to announce its financial and operating results for the three months ended March 31, 2022. Selected financial and operating information is outlined below and should be read with Tamarack's consolidated financial statements and related management's discussion and analysis (MD&A) for the three months ended March 31, 2022, which are available on SEDAR at www.sedar.com and on Tamarack's website at www.tamarackvalley.ca.
Brian Schmidt, President and CEO of Tamarack commented: "We successfully executed on our first quarter capital program, closed and integrated the Crestwynd Exploration acquisition and grew our Clearwater oil footprint through the execution of strategic agreements with the Peavine Metis Settlement and crown land sales. The Company delivered on its return of capital framework with the inaugural payment of our base dividend and look forward to further enhancing shareholder returns through our focus on generating sustainable free funds flow(1). We have provided updated 2022 guidance, inclusive of the previously announced Rolling Hills Energy acquisition that is expected to close in June, which reflects our updated greater Peavine Clearwater appraisal program that is set to commence in the second half of the year."
Q1 2022 Financial and Operating Highlights
- Achieved quarterly production volumes of 41,335 boe/d(2) in Q1/22, representing an 73% increase compared to the same period in 2021.
- Generated adjusted funds flow(1) of $166.6 million in Q1/22 ($0.40/share basic and $0.39/share diluted) compared to $42.0 million in the same period in 2021 ($0.16/share basic and diluted).
- Generated free funds flow(1), excluding acquisition expenditures, of $41.2 million.
- Generated net income of $26.5 million ($0.06/share basic and diluted) during the quarter as compared to a net loss of $0.2 million ($0.00/share basic and diluted) in the same period of 2021.
- Dividends declared of $10.6 million during the quarter ($0.0083/share per month), delivering on the Company's return of capital framework.
- Invested $106.8 million in exploration and development (E&D) capital expenditures, excluding acquisition expenditures, and $18.6 million on undeveloped land in the Clearwater and Charlie Lake areas during Q1/22.This contributed to the drilling of 18 (17.5 net) Clearwater oil wells, eight (8.0 net) Viking oil wells, seven (7.0 net) Charlie Lake oil wells and five (5.0 net) water source and injector wells.
- Exited the quarter with $556.4 million of net debt(1)and net debt to Q1/22 annualized adjusted funds flow(1) of 0.8x.
- Issued $200.0 million aggregate principal amount of 7.25% senior unsecured sustainability-linked notes due May 10, 2027.
- Successfully closed the acquisition of Crestwynd Exploration Ltd. during the quarter, further consolidating the Company's position in the Southern Clearwater Fairway.
Financial & Operating Results
| | Three months ended |
| March 31, |
| | 2022 | 2021 | % change |
| ($ thousands, except per share) | | | |
| Total oil, natural gas and processing revenue | 298,895 | 93,434 | 220 |
| Cash flow from operating activities | 132,853 | 38,436 | 246 |
| Per share - basic | $ 0.32 | $ 0.14 | 129 |
| Per share - diluted | $ 0.31 | $ 0.14 | 121 |
| Adjusted funds flow(1) | 166,581 | 41,952 | 297 |
| Per share - basic(1) | $ 0.40 | $ 0.16 | 150 |
| Per share - diluted(1) | $ 0.39 | $ 0.16 | 144 |
| Net income (loss) | 26,457 | (166) | 16,038 |
| Per share - basic | $ 0.06 | (0.00) | - |
| Per share - diluted | $ 0.06 | (0.00) | - |
| Net debt(1) | (556,374) | (286,175) | 94 |
| Capital expenditures(3) | 125,367 | 48,704 | 157 |
| Weighted average shares outstanding (thousands) | | | |
| Basic | 419,251 | 265,415 | 58 |
| Diluted | 427,546 | 265,415 | 61 |
| Share Trading (thousands, except share price) | | | |
| High | $ 6.09 | $ 2.46 | 148 |
| Low | $ 3.90 | $ 1.25 | 212 |
| Trading volume (thousands) | 233,689 | 181,132 | 29 |
| Average daily production | | | |
| Light oil (bbls/d) | 17,868 | 10,120 | 77 |
| Heavy oil (bbls/d) | 7,522 | 2,654 | 183 |
| NGL (bbls/d) | 4,113 | 2,420 | 70 |
| Natural gas (mcf/d) | 70,989 | 52,466 | 35 |
| Total (boe/d) | 41,335 | 23,938 | 73 |
| Average sale prices | | | |
| Light oil ($/bbl) | 110.07 | 64.01 | 72 |
| Heavy oil ($/bbl) | 94.43 | 48.00 | 97 |
| NGL ($/bbl) | 56.21 | 37.17 | 51 |
| Natural gas ($/mcf) | 5.70 | 3.15 | 81 |
| Total ($/boe) | 80.17 | 43.03 | 86 |
| Operating netback(1) ($/Boe) | | | |
| Average realized sales | 80.17 | 43.03 | 86 |
| Royalty expenses | (15.72) | (5.37) | 193 |
| Net production and transportation expenses | (12.07) | (11.17) | 8 |
| Operating field netback(1) ($/Boe) | 52.38 | 26.49 | 98 |
| Realized commodity hedging loss | (4.00) | (3.81) | 5 |
| Operating netback(1) ($/Boe) | 48.38 | 22.68 | 113 |
| Adjusted funds flow(1) ($/Boe) | 44.78 | 19.47 | 130 |
| | | | |
Return of Capital
Base Dividend
In accordance with the Company's dividend program, monthly dividends of $0.0083/share were declared January - April 2022. Effective the June 2022 dividend declaration, the Company expects to increase the monthly dividend to $0.0100/share per month or ~20% (as previously announced on April 21st) in conjunction with the closing of the acquisition of Rolling Hills Energy Ltd. The base dividend increase has been driven by improved sustainable free funds flow(1) along with the Crestwynd Exploration Ltd. and Rolling Hills acquisitions which are accretive at flat pricing of US$55/bbl WTI and $2.50/GJ AECO.
Enhanced Return
The Company remains committed to balancing long-term sustainable free funds flow(1) growth with returning capital to shareholders. Based on the forecasted commodity price outlook, Tamarack anticipates the declaration of an enhanced return, through special dividend and/or share buybacks, in Q3 2022 for free funds flow(1) from Q2 2022.
The incremental net debt associated with the current 2022 tax expense, which has not yet impacted adjusted funds flow(1), along with the cash considerations for the Rolling Hills Acquisition and Q1 2022 land purchases, will be adjusted accordingly when considering the enhanced return debt target.
2022 Capital Budget and Guidance Update
To reflect the pro-forma Rolling Hills acquisition, announced on April 21, 2022, as well as changes in the commodity price environment, Tamarack has updated its 2022 corporate guidance. The Company remains focused on capital discipline and growing sustainable free funds flow(1) and will proactively adapt our spending plans within the context of the market and inflationary pressures to maximize returns
Capital Budget
Total capital expenditures for the year have been updated to a range of $280 to $300 million. The revised capital guidance is inclusive of the future E&D capital associated with the previously announced Rolling Hills acquisition, along with capital directed towards the Company's Clearwater appraisal program, and is inclusive of forecasted inflationary pressures with respect to the higher service and material costs and supply chain constraints that the industry is facing at this time.
Production
Production guidance has been increased to a range of 46,200 to 47,200 boe/d to reflect the Rolling Hills acquisition that is expected to close on or about June 10, 2022. Production volumes from the Rolling Hills acquisition are expected to average ~2,100 bbl/d of heavy oil from close through to year end.
| | Original 2022
Guidance(4) | Revised 2022
Guidance(5) |
| Capital Budget (including ARO)(6) ($mm) | $250-$270 | $280-$300 |
| Annual Average Production(7) (boe/d) | 45,000-46,000 | 46,200-47,200 |
| Expenses: | | |
| Royalty Rate (%) | 16-17% | 19-21% |
| Operating ($/boe) | $8.50-$8.70 | $9.45-$9.65 |
| Transportation ($/boe) | $2.00-$2.10 | $2.35-$2.45 |
| General and Administrative ($/boe)(8) | $1.30-$1.35 | $1.35-$1.45 |
| Interest(9) ($/boe) | $1.60-$1.65 | $1.65-$1.70 |
| Taxes ($/boe) | $1.60-$1.70 | $4.75-$4.80 |
| Leasing Expenditures ($mm) | $3.7 | $3.7 |
| Asset Retirement Obligations ($mm) | $7.5 | $7.5 |
| Revenue: | | |
| Average Oil & Natural Gas Liquids Weighting | 74% | 75% |
| Light Oil Wellhead Differential | $3.00-$3.50 | $3.50-$4.00 |
| Heavy Oil Wellhead Differential | $4.50-$5.00 | $4.50-$5.00 |
| Price Assumptions: | | |
| WTI (US$/bbl) | $70.00 | $90.00 |
| AECO (CAD$/GJ) | $3.00 | $4.70 |
Operations Update
Clearwater
Peavine Metis Settlement Strategic Land Agreement(s) - Tamarack has expanded its strategic partnership with the Peavine Metis Settlement in the High Prairie area to include an additional 15 sections of land prospective for the Clearwater formation. This addition results in a total of 44.5 sections included in the strategic partnership in proximity to competitor activity with strong well results to date. Tamarack plans to begin its appraisal program in the second half of 2022.
Greater Peavine Land Acquisition - Tamarack has accumulated 26 net sections of land in the greater Peavine Clearwater trend prospective for both Clearwater and Bluesky oil. The Company plans to drill on these lands in the second half of the year through its outlined Clearwater de-risk/appraisal capital program.
West Marten Hills Exploration - The successful West Marten Hills 02/8-33 appraisal well, which exhibited IP30 rates of ~150 bopd, has been shut-in due to road access; however, planning is underway to upgrade the road into the area, enabling further future full season development of the lands. The success of the 02/8-33 well has de-risked 6 sections of land in the West Marten area. The Company plans to drill an additional eight wells at West Marten Hills in 2022.
West Nipisi - Tamarack's strategy at West Nipisi is focused on waterflood development moving forward. The Company has rig released five of six wells planned on the 15-20 pad, all of which are being developed under Tamarack's Nipisi Clearwater waterflood configuration. All six wells are expected to be on production by the end of May, with the two of the six wells that are currently producing oil in line with expectations at ~200 bopd. Surface facilities and downhole work is completed on the three planned injection wells and injection is expected to commence in May. Further to this, Tamarack plans to drill an appraisal well in H2 2022 testing the northwest Nipisi Clearwater sands based on encouraging offsetting competitor well results.
Southern Clearwater - Tamarack continues to actively develop its Clearwater assets in the Jarvie, Perryvale and Meanook areas with four rigs currently operating. Nineteen wells have been rig released to date in 2022, with 13 wells currently onstream. The wells currently producing have averaged peak rates of greater than 150 bopd with additional optimization upside as production is moved to permanent facilities. The Company plans to drill 45 gross (45.0 net) wells in the area in 2022 and execute on operational synergies on recently acquired production.
Charlie Lake
In the Charlie Lake, Tamarack has brought nine of 16 planned wells onstream in 2022. Results continue to exceed expectations. Most notably, the 100/05-30-073-07W6 well achieved an IP60 of 775 bopd (1260 boe/d(10)) and the Company's first Upper Charlie Lake well exceeded expectations adding further inventory upside in the Charlie Lake. The most recent three Pipestone wells to come onstream successfully piloted a pumpjack artificial lift to reduce capital and are exceeding expectations with an average test rate of 560 bopd.
Veteran/Eyehill Waterfloods
Tamarack has drilled 13 wells through its Q1 program targeting the Viking (6.0 net) and Sparky (7.0 net) at its Veteran and Eyehill properties. Tamarack continues to add injection to its Veteran waterflood with the addition of one injection well and six injector conversions in Q1.
Environmental, Social and Governance
Phase two of the Nipisi gas conservation project was completed ahead of schedule in the first quarter. The project is currently conserving 0.5 mmcf/d. Conserved volumes from the project are anticipated to increase to 1 mmcf/d by the end of 2022 with continued drilling in the area.
Risk Management
The Company manages commodity price risk and volatility through a prudent hedging management program, with approximately 50%, on average, of gross oil production hedged against WTI for the remainder of 2022, through instruments including puts and enhanced collars. Tamarack also has WTI-MSW and WCS differential hedges in place on approximately 46% of our production in 2022. For 2023, we have entered into WTI put floors and enhanced collars as we systematically roll our risk management program forward on approximately 20% of our first half production. Our strategy provides protection to the sustainability of the business and dividend while maximizing upside. Additional details of the current hedges in place can be found in the corporate presentation on the Company website (www.tamarackvalley.ca).