Tamarack Valley Energy Ltd. (“Tamarack” or the “Company“) is pleased to announce its unaudited financial and operating results for the three and nine months ended September 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 nine months ended September 30, 2024, and 2023, which are available on SEDAR+ at www.sedarplus.ca and on Tamarack’s website at www.tamarackvalley.ca.
Q3 2024 Financial and Operational Highlights
Quarterly Production Growth – Production averaged 65,024 boe/d(1), exceeding the high end of prior guidance, reflecting ongoing strength in corporate performance driven by the Clearwater and Charlie Lake drilling programs and waterflood initiatives. Q3/24 Clearwater production increased to 43,300 boe/d(2) reflecting a 15% (19% per share) increase YoY as Tamarack continues to expand its heavy oil operations.
Increasing Funds Flow(3) – Delivered Adjusted Funds Flow(3) of $220.4MM ($0.41 per share), and Free Funds Flow(3) of $108.7MM. YTD Tamarack has generated $297.7MM of Free Funds Flow(3) which, on a per share basis, represents a 72% increase YoY(4).
Margin Enhancement – Continued cost reductions and better wellhead realizations are driving stronger margins across the business. Per boe transportation expense demonstrated a 43% improvement YoY. Higher pipeline flows, reduced trucking and a one-time royalty cost recovery all contributed to the improvement. Wellhead price realizations continue to improve due to enhanced blending, sales of CWH oil (Clearwater Heavy) and strong trading differentials driven by the TMX pipeline.
Delivering Returns to Shareholders – Total shareholder return value for first nine months of 2024, was $144.7MM, or ~$0.26/share(5), including base dividends of $61.4MM and share buybacks.
Continued Debt Reduction – Exit net debt of $807.4MM reflected a further strengthening of the balance sheet. Net debt has been reduced by $176.2MM YTD.
Increased Share Buybacks – During Q3/24, Tamarack repurchased 12.3MM common shares. During the first nine months of 2024, the Company bought back and cancelled 4.0% of the year-end 2023 shares outstanding.
Dividend Increase – Tamarack’s per share monthly dividend will increase by 2% for the November dividend, payable in December, to $0.01275 from $0.0125 previously, which equates to $0.1530 annually.
Expanded Clearwater Infrastructure Partnership – Added a 13th Indigenous community to the Clearwater Infrastructure Limited Partnership (the “CIP”) arrangement. Tamarack transferred an additional $50.8MM of Clearwater assets to the partnership for $43.2MM in cash and retained 15% operated working interest in the assets.
Achieving Success: Plan, Execute & Deliver
Brian Schmidt, President and CEO of Tamarack stated:
“Tamarack’s Q3/24 results continue to highlight the quality of the Clearwater and Charlie Lake asset base that has been built over the past three years, and the operational excellence of the team that is driving this performance. Growth in Clearwater production of 15%, relative to the same period in 2023, was achieved while at the same time debt has been materially reduced and enhanced returns to shareholders have been increasing. By demonstrating improved efficiencies, the Company continues to deliver more while spending less.”
2024 Production Guidance Update
In response to the continued strong well performance and benefits from infrastructure optimization during the year, the Company has increased the full-year production guidance range to 63,000 to 64,000 boe/d(6).
The 2024 capital program, which is delivering higher production than originally budgeted, is forecasted to be achieved at a lower cost, benefitting from drilling and facilities efficiencies. Utilizing a portion of the CIP expansion proceeds, Tamarack will drill 4 (4.0 net) Charlie Lake wells in Q4/24, expand regional pipeline capacity in advance of the third-party plant commissioning in early 2025, and expand its waterflood investment program in the Clearwater. Tamarack anticipates spending for the year to be approximately $440MM(7), consistent with prior guidance, which is inclusive of the incremental Charlie Lake wells and waterflood investment as the Company continues to out deliver against the capital deployed.
Tamarack is also updating its 2024 corporate costs guidance on the back of a continued focus on reducing costs and enhancing margins. Transportation cost guidance is reduced in response to improved oil transportation contracts and lower trucking costs. Guidance regarding carbon tax is updated to reflect savings related to anticipated taxable emissions reductions in 2024, resulting from ongoing Clearwater carbon abatement initiatives. Interest expense guidance was reduced primarily due to lower net debt and lower interest rates. The change to income tax guidance reflects Tamarack’s profitability outperformance and the impact of the CIP expansion.
Returns to Shareholders
The Company will raise its monthly dividend to $0.01275 per share, or $0.1530 per share annually, starting with the November dividend that is payable in December. This will represent the fourth increase, and a 53% uplift, since announcing the inaugural dividend in December 2021.
2024 Operations Update
Clearwater
Total Clearwater production averaged 43,300 boe/d(14) (91% oil) in Q3/24, representing a 15% increase YoY (19% per share growth). This result was driven by the Nipisi and West Marten assets which averaged ~20,800 bbl/d of heavy oil Q3/24, demonstrating an increase of approximately 10% year-to-date. The strong growth reflects de-bottlenecking efforts, base optimization, better than forecast new well performance, and West Nipisi waterflood response. Investment in gas conservation has seen total sales gas from Tamarack’s Clearwater assets more than double YoY.
At West Marten, the Company continues to see positive results from the C sand delineation program with an IP30 rate of ~200 bbl/d observed at 02/13-30-076-04W5/0. Stacked sand development continues in the area, where the Company rig released six B sand and two C sand wells in Q3/24 from its 14-23-076-05/W5 pad. Initial productivity is strong, and the Company plans to pursue waterflood in both sands.
The continued refinement of drilling designs, coupled with program optimizations, are driving efficiency enhancements and lower overall capital costs throughout the Clearwater asset base. This has resulted in a 5% reduction in per meter drilling costs across the Clearwater, highlighted by a 15% reduction in Marten Hills.
The application of fan well designs in the Clearwater is illustrative of this progression, where results have improved efficiencies through lower costs and increased recoveries in areas where economic secondary recovery potential has not yet been established. Success of the fan design is demonstrated through results in the South Clearwater. The two Newbrook 13-30-062-20/W4 pad wells brought onstream in 2024, continue to exhibit strong production, with average daily oil rates exceeding 235 bbl/d per well after seven months on production. This pad represents the best wells drilled by industry, across the trend to date, and Tamarack’s overall South Clearwater fan production has grown to 1,650 bbl/d. Results to date have demonstrated the fan design contributes to shallower declines and higher per well estimated ultimate recoveries (EUR), compared to the conventional design historically applied in the area. This provides positive implications for future development by reducing long-term sustaining capital while optimizing project economics.
Waterflood – Production Response to Increased Injection at Nipisi and Marten Hills
Clearwater secondary recovery initiatives are exhibiting strong early results across multiple areas and sands in the play. Pilots initiated by Tamarack continue to demonstrate strong performance from secondary recoveries with wells trending ahead of expectations, indicating the potential to more than double the primary EUR of the well. Total water injection across the Clearwater is currently ~8,650 bbl/d and forecasted to grow to 14,000 bbl/d by year end, representing >60% growth through Q4/24. Waterflood activity to date has resulted in an estimated 1,500 bbl/d of incremental oil production, and the Company expects to have >9% of its Clearwater production supported by waterflood by year-end 2024.
Year-to-date the company has drilled seven total injectors in Nipisi. Based on the strong results from waterflood in the area, the Company plans to drill five additional injectors from the 12-14-076-08/W5 pad in Q4/24. Tamarack’s first C sand injector at West Marten commenced water injection in August 2024, and currently is injecting at a rate of 400 bbl/d.
At Marten Hills, the Company is now seeing oil response from all its implemented waterflood patterns. Oil production from Tamarack’s first “W” pattern at 102/01-11-074-25/W4 is currently 25 bbl/d above its primary baseline and ramping up. The 100/16-02-075-25/W4 pattern, offsetting the highly successful 102/15-02-075-25/W4 pattern, is also seeing a strong initial response that is 25 bbl/d above its primary baseline. Based on these results, Tamarack plans to drill two water source wells in Q4/24 to accelerate further conversions in the area, which are designed to maximize per well injectivity, promoting quicker response times and delivering shorter payout periods. Total water injection at Marten Hills is currently at approximately 4,750 bbl/d.
At Canal, Tamarack implemented a pilot waterflood at the 100/16-16-70-23W4/0 well which has demonstrated strong initial injectivity greater than 800 bbl/d.
Charlie Lake
During the quarter, Tamarack achieved production of 16,200 boe/d(15) from its Charlie Lake assets, which continued to benefit from sustained outperformance related to wells brought online during H1/24 in the Wembley area. Tamarack resumed drilling in the Charlie Lake play in July, rig releasing 4 (4.0 net) horizontal wells in Q3/24.
Late in Q3/24, Tamarack brought two wells online in the Pipestone area that were drilled from the 14-34-071-08/W6 pad. These two wells achieved average IP30 rates of 1,320 boe/d(16) (86% oil & liquids) per well, which compare to outperforming wells brought on-stream by Tamarack in H1/24. Also, in Q3/24 the Company has brought online two Wembley area wells from the 11-11-074-08/W6 pad that have exhibited encouraging tests rates similar to the prior two Q4/23 drills from this location.
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 and the first half of 2025, approximately ~50% of net after royalty oil production is hedged against WTI with an average floor price of ~US$67/bbl in Q4/24 and ~US$65/bbl in H1/25, with structures that allow for upside price participation at an average ceiling price of ~US$85/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 website (www.tamarackvalley.ca).
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 October 31, 2024, to discuss the Q3/24 financial results and provide 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.
