Tamarack Valley Energy Ltd. ("Tamarack" or the "Company") is pleased to announce its unaudited financial and operating results for the three and six months ended June 30, 2024. Selected financial and operating information should be read with Tamarack's unaudited consolidated financial statements and related management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2024 and 2023, which are available on SEDAR+ at www.sedarplus.ca and on Tamarack's website at www.tamarackvalley.ca.
Q2 2024 Financial and Operational Highlights
Quarterly Production Growth – Achieved average daily production of 64,143 boe/d(1) during Q2/24, exceeding Q1/24 by >3%, reflecting strong performance from the Charlie Lake and Clearwater drilling programs, and outstanding response by our Clearwater team which successfully restored Nipisi production well in advance of the full recovery of operations at the third-party Mitsue facility.
Increasing Funds Flow(2) – Delivered Adjusted Funds Flow(2) of $225.6MM, representing a 43% YoY increase, and Free Funds Flow(2) of $137.2MM, reflecting demonstrated production outperformance relative to the 2024 budget and increased oil price realizations.
Delivering Returns to Shareholders – During Q2/24 the Company repurchased 2.1MM common shares. In total, during H1/24 the Company bought back ~9.7MM shares, representing 1.7% of the year-end 2023 shares outstanding, for a total repurchase value of $33.7MM(3). Total shareholder return value for H1/24, including base dividends of $41.1MM and enhanced returns, was $74.8MM(3), or ~$0.14/share.
Increasing Free Funds Flow Available for Shareholder Returns – Tamarack's exit net debt of $883MM marks a significant milestone arriving within the $500MM - $900MM net debt range and advances the Company to the next phase of the return of capital framework. This enables Tamarack to direct up to 60% of Free Funds Flow(2) to base dividends and enhanced returns (up from 40% previously), with the remaining Free Funds Flow(2) directed to ongoing net debt reduction and strategic growth capital allocation.
Higher Pricing Margins – The Company's heavy and light oil sales price, improved by 21% and 16% respectively YoY. Oil realization increases exceeded performance by the underlying benchmarks owing to improved market access and lower wellhead deductions. Overall, Tamarack's average realized price of $79.04/boe was 20% higher on a YoY basis. Production expense of $9.34/boe in Q2/24 reflected a 9% YoY improvement and is expected to reduce further through the year.
Capital Spending – Total capital expenditures in Q2/24 of $86.3MM reflected the drilling of 17 (13.8 net) Clearwater heavy oil wells and included $3.3MM for gas conservation projects sanctioned with the Clearwater Infrastructure Limited Partnership (the "CIP"). Site access, owing to wet spring conditions, limited Q2/24 activity with planned projects expected to proceed in H2/24. Full year capital guidance is maintained at $390MM - $440MM as Tamarack continues to monitor the status of the CSV Albright sour gas plant and commodity prices prior to allocating any incremental drilling capital for volumes associated with that project.
Achieving Success: Plan, Execute & Deliver
Brian Schmidt, President and CEO of Tamarack stated:
"Tamarack has been steadfast in our commitment to reducing debt, demonstrating operational excellence and delivering on our return of capital framework for shareholders. On a YoY basis, net debt has been reduced by ~$491MM or 36%. This reflects execution and delivery of results, driven by the successful transformation of the Company, that has enabled growth within our Clearwater and Charlie Lake core areas, where both plays delivered record high quarterly production in Q2/24. Leveraging our high quality heavy and light oil assets, Tamarack remains focused on execution of our strategic plan which underpins delivery of long-term value to our shareholders."
2024 Operations Update
Clearwater
West Marten and Nipisi
The North Clearwater assets achieved new record oil production, with rates growing to ~19,500 bopd in Q2/24, which compares to ~15,400 bopd in Q2/23. This represents a YoY increase of ~26%, reflecting the success of Tamarack's drilling and development program. Tamarack rig released 11 operated wells in Q2/24, including 8 (8 net) producing wells and 3 (3 net) water injection wells and participated in 4 (0.83 net) non-operated wells. An additional 32 (32 net) operated wells are planned for H2/24 which includes 24 (24 net) producing wells and 8 (8 net) water injection wells.
Nipisi Outage Recovery Complete – Tamarack successfully recovered oil volumes that had been shut-in as a result of the April 13, 2024, Mitsue third-party plant incident prior to the plant coming back online June 24, 2024. Actions taken by our operations team successfully mitigated downtime impacts and reflect the hard work, focus and creativity of the team. Tamarack was able to deploy various temporary mitigation strategies including redirection of gas to an alternative third-party gas plant, gas injection and storage.
Nipisi B Sand Performance Strength – Tamarack achieved strong results from the 12-14-76-8W5 Nipisi pad where the Company drilled 5 (5 net) B sand wells, with average IP30 rates of ~215 bopd per well, which have outperformed expectations to date. This is owing to higher oil quality (19-20 API), which is highly encouraging as Tamarack continues to step out development of the south end of the Nipisi pool.
West Marten C Sand Success – The C sand program continued to demonstrate success with the two wells on the 12-15 pad (102/12-17-76-5W5 and 103/13-17-76-5W5) delivering average IP30 rates >200 bopd per well. In addition, four wells drilled off the 8-15 pad achieved peak monthly rates of >200 bopd per well. Tamarack plans to follow up on these results with additional C sand wells to be drilled from existing West Marten pads in H2/24. This will leverage the Company's existing infrastructure originally built for the initial B sand development driving enhanced full cycle efficiencies.
Marten Hills
Tamarack advanced key infrastructure at Marten Hills with the pipeline portion of the NW Connector project completed on schedule and under budget. The emulsion line was commissioned in Q2/24 and the gas line is expected to start up in August. The eight well pad at 4-30-75-25W4, which completed drilling in Q1/24, saw production increase to >1,400 bopd in June. The H2/24 program commenced at the end of June with plans to drill 22 wells for the balance of the year, including 20 producers and two source water wells.
South Clearwater
During the quarter the Company rig released two fan wells, with a total of six South Clearwater fan wells being drilled in H1/24. Plans for H2/24 include the drilling of an additional eight fans for a total of 14 fan wells during the year. Notable results were observed from the two Newbrook wells drilled off the 13-30-62-20W4 pad in 2024, which achieved the highest IP90 rates of all wells in the Southern Clearwater trend to date, at >225 bopd per well.
In support of ongoing regional gas conservation, expansion of Tamarack's Rochester gas plant was completed during the second quarter, raising throughput capacity to >3 MMcf/d.
Clearwater Waterflood - Increasing Injection Through H2/24
Tamarack, along with other regional operators, is highly encouraged with the waterflood response in the Clearwater to date. The Company will increase water injection activity in H2/24, supporting waterflood development to reduce future asset decline rates and sustaining capital requirements. Injection will commence in new zones, including the C sand in West Marten and Canal, where the Company has identified high quality targets for waterflood. Total Clearwater water injection is expected to increase by >110% from 7,000 bbl/d to 15,000 bbl/d exiting the year.
Charlie Lake
Tamarack's Charlie Lake play continued to drive production growth having achieved the asset's highest quarterly production to date delivering Q2/24 average production of 17,900 boe/d(4). In total, seven Tamarack operated Charlie Lake wells were brought on-stream in H1/24 with average IP90 rates exceeding 1,180 boe/d(5) per well.
2024 Production and Capital Guidance Maintained
Tamarack reiterates prior annual production guidance of 61,000 - 63,000 boe/d(6) and capital investment of $390MM - $440MM for 2024. Capital for the remainder of the year is expected to be allocated approximately 60% in Q3/24 and 40% in Q4/24. Tamarack continues to demonstrate discipline within our capital program and is monitoring the status of the CSV Albright sour gas plant onstream timing along with commodity prices. At this time, the Company is not allocating any incremental 2024 capital to expand the Charlie Lake program. The status of this decision will be updated in the fall.
Risk Management
The Company takes a systematic approach to manage commodity price risk and volatility to ensure sustaining capital, debt servicing requirements and the base dividend are protected through a prudent hedging management program. For the reminder of 2024, approximately ~50% of net after royalty oil production is hedged against WTI with an average floor price of ~US$67.70/bbl with structures that allow for upside price participation at an average ceiling price of ~US$88.00/bbl. Our strategy provides protection to the downside while maximizing upside exposure.
Additional details of the current hedges in place can be found in the corporate presentation on the Company's website.
Quarterly Investor Call
9:30 AM MDT (11:30 AM EDT)
Tamarack will host a webcast at 9:30 AM MDT (11:30 AM EDT) on Thursday August 1, 2024 to discuss the first quarter financial results and an operational update. Participants can access the live webcast via this link or through links provided on the Company's website. A recorded archive of the webcast will be available on the Company's website following the live webcast.
