TSX:TVE
CALGARY, Sept. 20, 2018 /CNW/ - Tamarack Valley Energy
Ltd. ("Tamarack" or the "Company") is pleased to
announce that, due to exceptional 2018 drilling results, current
production is ahead of forecast. As a result, the Company is
pleased to provide its second guidance increase for 2018 annual and
exit production and preliminary 2019 annual production guidance.
The Company also announces that it will be added to the TSX
Composite Index and its sub-indices effective September 24, 2018.
As a result of better than expected performance from its Alberta
Viking drilling program thus far in 2018, production for the last
four weeks has averaged over 25,000 boe/d based on field estimates.
Tamarack expects third quarter 2018 production to average
approximately 24,700 boe/d.
With the Company's continued outperformance and operational
success realized to date in 2018, Tamarack is pleased to increase
production guidance for 2018 annual, 2018 exit and preliminary 2019
budget by 500 boe/d for each period with no corresponding change to
the capital expenditure forecasts. Annual production guidance
for 2018 has been increased to 24,000 to 24,500 boe/d (64 to 66%
liquids), up from 23,500 to 24,000 boe/d, while 2018 fourth quarter
exit production guidance has been increased to 24,500 to 25,000
boe/d (65 to 67% liquids), up from 24,000 to 24,500 boe/d.
Tamarack's 2018 capital budget remains unchanged from previous
guidance at $223 to $233 million (including $28.4 million of capital accelerated from 2019
into 2018) and is expected to be fully funded from adjusted
operating field netback. Approximately half of the $28 million of accelerated capital will be
directed to the Veteran waterflood. Tamarack plans to drill nine
new injector wells and to install the associated pipe and
facilities to ensure water injection can commence by early 2019. In
keeping with Tamarack's capital allocation strategy, all of the
planned Veteran waterflood projects are expected to achieve a 1.5
year payout based on current strip prices. The other half of
the accelerated capital will be directed to initiate the Company's
Q1/19 drilling program in the fourth quarter, which includes
de-risking lands located east of Veteran that were originally
targeted for delineation in early 2019.
Annual average production volumes under its preliminary 2019
budget are increased to 25,500 to 26,500 boe/d (up from 25,000 to
26,000 boe/d) and assume a capital budget of $222 million (originally $250 million with $28.4
million accelerated into 2018). The Company
anticipates that approximately 77% of its 2019 capital budget will
be weighted towards drilling and completions operations with 7%
weighted towards waterflood projects given a large portion of
Tamarack's waterflood budget will be spent in late 2018.
Tamarack expects its 2019 adjusted operating field netback to
exceed its capital budget, assuming commodities average
US$60/bbl WTI, US$6.50/bbl WTI /Edmonton light oil differential, $1.65/GJ AECO and a $0.78 Canadian dollar. Tamarack intends to
release a comprehensive 2019 budget later in 2018 or early
2019.
As Tamarack's operational performance to date has exceeded
internal expectations, the Company is able to maintain a
fully-funded program throughout 2018 and 2019 and has been able to
allocate capital to initiatives that, while not immediately adding
to production, provide long-term value that can be realized through
2019 and beyond.
Operational Update
During the third quarter, Tamarack drilled 45 (44.3 net) Viking
wells, three (3.0 net) wells at Penny, four (4.0 net) horizontal
wells plus one exploratory vertical stratigraphic well at
Redwater and three (1.8 net) Cardium wells. The 45
Viking wells drilled include nine wells at Veteran which will be
converted to injector wells in early 2019 to further advance the
Company's ongoing waterflood. As a result of its development
spending during the quarter, Tamarack currently has two wells at
Penny that are expected to be brought on production in early Q4,
and 20 Viking wells in Veteran that are expected to be brought on
production by the middle of the fourth quarter. Through the
balance of 2018, Tamarack anticipates spending
approximately $20-25 million of the remaining capital budget
directed to completing the 20 Viking wells drilled in the third
quarter, pipeline installation to handle water injections in early
2019 and drilling 16 Viking wells in veteran that will be completed
in early Q1 2019.
Revised 2018 Guidance and 2019 Preliminary Guidance:
|
2018
Guidance
|
2019
Budget
(Preliminary)
|
Average annual
production (boe/d)
|
24,000 -
24,500
|
25,500 -
26,500
|
|
Liquids weighting
(%)
|
~64 - 66
|
~65 - 67
|
Exit production
(boe/d)
|
24,500 -
25,000
|
27,500 -
28,000
|
|
Liquids weighting
(%)
|
~65 - 67
|
~66 – 68
|
Capital expenditure
range ($millions)
|
$223 to
$2333
|
$222
|
|
|
|
Year end net
debt(1) to Q4 annualized adjusted operating
field
|
|
-
|
|
netback(2) ratio (including
hedges)
|
<1.0
times
|
|
Liquidity on existing
credit facilities ($millions)
|
~$100
|
-
|
|
|
|
Original price
assumptions:
|
|
|
|
WTI
($US/bbl)
|
$56.75
|
$60.00
|
|
Edmonton Par
($CDN/bbl)
|
$64.60
|
$68.50
|
|
AECO
($CDN/GJ)
|
$1.65
|
$1.65
|
|
Canadian/US dollar
exchange rate
|
$0.79
|
$0.78
|
(1)
|
Refer to definition
of net debt under "Non-IFRS Measures"
|
(2)
|
Refer to definition
of adjusted operating field netback under "Non-IFRS
Measures"
|
(3)
|
Includes 2019
acceleration of ~$28 million
|
Index Inclusion
Tamarack is pleased to announce that the Company will be added
to the TSX Composite Index and its sub-indices at the next
rebalancing period on September 24,
2018. Tamarack will be the only energy company to be
added to the index during this rebalancing period, demonstrating
the growth and successful execution realized by the Company over
the past several years. Tamarack anticipates that the index
inclusion will position the Company to attract new incremental
buyers and funds to invest in Tamarack's stock.
About Tamarack Valley Energy Ltd.
Tamarack is an oil and gas exploration and production company
committed to long-term growth and the identification, evaluation
and operation of resource plays in the Western Canadian Sedimentary
Basin. Tamarack's strategic direction is focused on two key
principles – targeting repeatable and relatively predictable plays
that provide long-life reserves, and using a rigorous, proven
modeling process to carefully manage risk and identify
opportunities. The Company has an extensive inventory of low-risk,
oil development drilling locations focused primarily in the Cardium
and Viking fairways in Alberta
that are economic over a range of oil and natural gas prices. With
this type of portfolio and an experienced and committed management
team, Tamarack intends to continue delivering on its strategy to
maximize shareholder returns while managing its balance sheet.
Abbreviations
bbl
|
barrels
|
boe
|
barrels of oil
equivalent
|
boe/d
|
barrels of oil
equivalent per day
|
GJ
|
gigajoule
|
WTI
|
West Texas
Intermediate, the reference price paid in U.S. dollars at Cushing,
Oklahoma for the crude oil standard grade
|
AECO
|
the natural gas
storage facility located at Suffield, Alberta connected to
TransCanada's Alberta System
|
IFRS
|
International
Financial Reporting Standards as issued by the International
Accounting Standards Board
|
Oil and Gas Advisories
Unit Cost Calculation. For the purpose of
calculating unit costs, natural gas volumes have been converted to
a barrel of oil equivalent using six thousand cubic feet equal to
one barrel unless otherwise stated. A boe conversion ratio of 6:1
is based upon an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. This conversion conforms with Canadian
Securities Administrators' National Instrument 51–101 Standards
of Disclosure for Oil and Gas Activities. Boe may be
misleading, particularly if used in isolation.
Forward-Looking Information
This press release contains certain forward-looking information
(collectively referred to herein as "forward-looking statements")
within the meaning of applicable Canadian securities
laws. Forward-looking statements are often, but not always,
identified by the use of words such as "target", "plan",
"continue", "intend", "ongoing", "estimate", "expect", "may",
"should", "will" or similar words suggesting future
outcomes. More particularly, this press release contains
statements concerning: Tamarack's business strategy, objectives,
strength and focus; the ability of the Company to achieve drilling
success consistent with management's expectations; drilling
plans including the timing of drilling; allocating capital to the
Veteran waterflood and the Company's Q1/19 drilling program and the
plans, timing and production of these projects; forecast 2018
annual production range and liquid weighting percentage; the
preliminary 2019 budget and the timing of the release of a
comprehensive 2019 budget; oil and natural gas production levels;
timing and level of 2018 capital expenditures; Q3/18 production
guidance; 2018 annual and exit production guidance; 2018 drilling
program; the inclusion on the TSX Composite Index and the impact
thereof; and shareholder returns. The forward-looking statements
contained in this document are based on certain key expectations
and assumptions made by Tamarack relating to prevailing commodity
prices, the availability of drilling rigs and other oilfield
services, the cost of such oilfield services, the timing of past
operations and activities in the planned areas of focus, the
drilling, completion and tie-in of wells being completed as
planned, the performance of new and existing wells, the application
of existing drilling and fracturing techniques, the continued
availability of capital and skilled personnel, the ability to
maintain or grow the banking facilities and the accuracy of
Tamarack's geological interpretation of its drilling and land
opportunities. Although management considers these assumptions to
be reasonable based on information currently available to it, undue
reliance should not be placed on the forward-looking statements
because Tamarack can give no assurances that they may prove to be
correct.
By their very nature, forward-looking statements are subject to
certain risks and uncertainties (both general and specific) that
could cause actual events or outcomes to differ materially from
those anticipated or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to:
risks associated with the oil and gas industry (e.g. operational
risks in development, exploration and production; delays or changes
in plans with respect to exploration or development projects or
capital expenditures); commodity prices; the uncertainty of
estimates and projections relating to production, cash generation,
costs and expenses; health, safety, litigation and environmental
risks; and access to capital. Due to the nature of the oil and
natural gas industry, drilling plans and operational activities may
be delayed or modified to react to market conditions, results of
past operations, regulatory approvals or availability of services
causing results to be delayed. Please refer to Tamarack's annual
information form for the year ended December
31, 2017 (the "AIF") for additional risk factors relating to
Tamarack. The AIF can be accessed either on Tamarack's website at
www.tamarackvalley.ca under the Company's profile on
www.sedar.com.
The forward-looking statements contained in this press release
are made as of the date hereof and the Company does not undertake
any obligation to update publicly or to revise any of the included
forward-looking statements, except as required by applicable law.
The forward-looking statements contained herein are expressly
qualified by this cautionary statement.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Tamarack's prospective results of operations,
production, liquids weighting, liquidity on existing credit
facilities, net debt to adjusted operating field netback ratio,
adjusted operating field netback, operating costs, capital
expenditures and components thereof, all of which are subject to
the same assumptions, risk factors, limitations and qualifications
as set forth in the above paragraphs and the assumption outlined in
the Non-IFRS Measures section below. FOFI contained in this press
release was made as of the date of this press release and was
provided for the purpose of providing further information about
Tamarack's anticipated future business operations. Tamarack
disclaims any intention or obligation to update or revise any FOFI
contained in this press release, whether as a result of new
information, future events or otherwise, unless required pursuant
to applicable law. Readers are cautioned that the FOFI contained in
this press release should not be used for purposes other than for
which it is disclosed herein.
Non-IFRS Measures
Certain financial measures referred to in this press release,
such as net debt, adjusted operating field netback and net debt to
annualized adjusted operating field netback ratio are not
prescribed by IFRS. Tamarack uses these measures to help evaluate
its financial and operating performance as well as its liquidity
and leverage. These non-IFRS financial measures do not have any
standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other issuers.
"Net debt" is calculated as
long-term debt plus working capital surplus or deficit adjusted for
risk management contracts.
"Adjusted operating field netback"
is calculated as net income or loss before taxes and adding back
items including: transaction costs; and deducting non-cash items
including: stock-based compensation; accretion expense on
decommissioning obligations; depletion, depreciation and
amortization; impairment; unrealized gain or loss on financial
instruments; and gain or loss on dispositions.
"Net debt to annualized adjusted
operating field netback ratio" is calculated as net debt divided by
annualized adjusted operating field netback for the most recent
quarter.
Please refer to the management's discussion and analysis for the
three and six months ended June 30,
2018 ("MD&A") for additional information relating to
Non-IFRS measures. The MD&A can be accessed either on
Tamarack's website at www.tamarackvalley.ca or under the Company's
profile on www.sedar.com.
SOURCE Tamarack Valley Energy