TSX:
TVE
CALGARY, Jan. 15, 2019 /CNW/ - Tamarack Valley Energy Ltd.
("Tamarack" or the "Company") is pleased to announce
its 2019 capital budget, associated guidance and an operational
update. Incorporating December field estimates, the Company
achieved record production of approximately 24,780 boe/d in Q4/18
with an oil and natural gas liquids ("NGL") weighting of
approximately 66%, in line with its exit guidance range of 24,500 -
25,000 boe/d (65-67% oil and NGL), while spending approximately
$7.0 million less than the budgeted
capital for the quarter due to the volatility of commodity prices
in Western Canada.
2019 Guidance
The Company's 2019 guidance and assumptions are outlined
below:
- Annual average production between 23,500 – 24,500 boe/d (64-66%
oil and NGL), with 2019 exit production estimated between 25,500 –
26,500 boe/d (64-66% oil and NGL);
- Capital expenditures between $170
to $180 million to maintain the
Alberta government's mandatory
production curtailments during Q1 of 2019;
- Estimated year end 2019 net debt to Q4 annualized adjusted
operating field netback ratio of approximately 1.0 times with an
estimated $100 million of liquidity
on existing credit facilities; and
- Average 2019 commodity price assumptions of WTI US$50.00/bbl, Edmonton Par C$52.33/bbl, WTI / Edmonton Par differential of
US$10.75/bbl, AECO $1.31/GJ and a Canadian/US dollar exchange rate
of $0.75.
2019 Capital Program Highlights
Tamarack's capital allocation strategy over the past several
years has remained consistent with the objective of achieving
sustainability at low oil prices, while generating debt-adjusted
per share growth. Due to the Company's success in accumulating an
inventory of Viking and Cardium locations that payout in 1.5 years
or less at current commodity prices, Tamarack expects to be
self-funding again in 2019 and estimates it will achieve 3-5%
debt-adjusted production per share growth in Q4/19 over Q4/18.
The Company remains well positioned to withstand further
crude oil price volatility given approximately 25% of its 2019
production is protected with hedges that include a US$60.00/bbl WTI put option and another
approximately 3% is protected with fixed price contracts at
US$64.60/bbl.
Tamarack's 2019 capital expenditure plans are to invest between
$170 and $180
million, funded entirely through adjusted operating field
netback. This capital program is expected to result in
production of 23,500 – 24,500 boe/d (64-66% oil and NGL), despite
spending approximately 23% less than in 2018 while maintaining flat
year over year average production. The 2019 budget anticipates
drilling 125 net wells, including 110 Viking light oil wells (94 at
Veteran), 13 Cardium light oil wells and two wells at Penny. In
addition, the 2019 budget includes $19.8
million of waterflood investments, including 15 well
conversions in H1/19 and the drilling and conversion of six
additional injection wells in East Veteran. In the context of
continued volatility in oil prices and supported by the
Company's exceptional operational execution, Tamarack remains
committed to investing in longer-term projects, including the
Veteran waterflood, which the Company expects will reduce the
overall corporate decline rate in 2020 and enhance Tamarack's
sustainability.
Effective as of January 1, 2019,
the Alberta government imposed
mandatory oil curtailments designed to mitigate the wide price
differential related to a lack of pipeline capacity, which is
ultimately expected to lead to stronger oil prices. While the
Company's 2019 capital guidance assumes activity levels will be
weighted evenly between H1 and H2 of 2019, the program timing for
H1 has been designed to comply with the required production cuts.
Following expected stable production levels in H1/19 due to
the mandatory volume curtailments, Tamarack anticipates realizing a
meaningful ramp-up in production volumes during the second half of
2019, assuming no additional government intervention.
Operational Update
Based on field estimates for December
2018, Tamarack achieved record Q4/18 production of 24,780
boe/d, exceeding the upper end of its annual average 2018 guidance
range of 24,000 to 24,500 boe/d (66% oil and NGL).
As previously announced, Tamarack planned to accelerate
$28.4 million of 2019 capital into
Q4/18 for waterflood projects ($13.2
million) and for drilling to de-risk lands at Veteran
($15.2 million). However, in
response to the rapid and extreme widening of Canadian oil price
differentials, Tamarack elected to defer approximately $7.0 million of its Q4/18 drilling capital.
As a result, the Company's full year 2018 capital spending will be
below its $230 to $235 million guidance range. With the combination
of lower Q4/18 capital spending and strong production performance,
Tamarack anticipates that approximately $10-12 million of free cash flow was generated in
Q4/18. The Company used approximately $4.1 million of this free cash flow to purchase
common shares to either: (i) cancel under its normal course issuer
bid ("NCIB") (926,800 shares totaling $2.3
million); or (ii) hold in treasury to offset future dilution
from potential restricted share unit settlements (834,009 shares
totaling $1.8 million). The balance
of the free cash flow was allocated to year-end debt reduction.
Tamarack's increased liquids weighting, streamlined cost
structure and operational performance have contributed to its
ongoing financial flexibility. Should realized commodity
prices strengthen through 2019, the Company anticipates generating
additional adjusted operating field netback which could be
directed to increased capital spending and / or further share
purchases through its NCIB program.
Tamarack plans to release its Q4 and year-end 2018 financial and
operating results and annual information form for the year ended
December 31, 2018 before market on
Wednesday, February 27, 2019.
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: (i) targeting repeatable and relatively predictable
plays that provide long-life reserves; and (ii) 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
bbls
|
barrels
|
bbls/d
|
barrels per
day
|
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
|
Disclosure of Oil and Gas Information
Unit Cost Calculation. For the purpose of calculating
unit costs, natural gas volumes have been converted to a boe 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.
Any references in this press release to production rates are
useful in confirming the presence of hydrocarbons, however, such
rates are not determinative of the rates at which such wells will
continue production and decline thereafter. While encouraging,
readers are cautioned not to place reliance on such rates in
calculating the aggregate production for Tamarack.
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 "guidance", "outlook",
"anticipate", "target", "plan", "continue", "intend", "consider",
"estimate", "expect", "may", "will", "should", "could" 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; commodity prices; market conditions impacting
realized prices; the Company's ability to withstand commodity price
volatility; risk management activities, including hedging; drilling
plans including the timing of drilling; 2019 waterflood
projects; Tamarack's intent to generate free cash flow and
growth; the payout of wells and the timing thereof; oil and
natural gas production levels, including annual average production
and exit production in 2019 and the impact of oil curtailment
thereon; decline rates; oil and liquids weighting and changes
thereto; the 2019 drilling program and capital budget, including
the Company's expectations to be self-sustaining in 2019; liquidity
on existing credit facilities; timing of 2018 year-end filings; and
shareholder returns.
The forward-looking statements contained in this document are
based on certain key expectations and assumptions made by Tamarack,
including relating to: prevailing commodity prices, price
volatility, price differentials and the actual prices received for
the Company's products; the availability and performance of
drilling rigs, facilities, pipelines and other 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;
prevailing weather and break-up conditions; royalty regimes and
exchange rates; the application of regulatory and licensing
requirements; 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, including the ability of seismic
activity to enhance such interpretation.
Although management considers these assumptions to be reasonable
based on information currently available, 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 in general (e.g. operational risks in development,
exploration and production; and 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") and management's discussion and
analysis for the three and nine months ended September 30, 2018 (the "MD&A") for
additional risk factors relating to Tamarack. The AIF and 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.
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, net debt, cash flow, debt-adjusted production per
share, debt to Q4 annualized adjusted operating field
netback and components thereof, all of which are subject to
the same assumptions, risk factors, limitations, and qualifications
as set forth in the above paragraphs. FOFI contained in this
document was made as of the date of this document and was provided
for the purpose of providing further information about Tamarack's
future business operations. Tamarack disclaims any intention or
obligation to update or revise any FOFI contained in this document,
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 document 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, debt-adjusted production per share, adjusted
operating field netbacks, net debt to annualized adjusted operating
field netback, cash flow and 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.
"Debt-adjusted production per
share" is a measure of changes in production on a per share basis,
with the number of shares adjusted based on net debt outstanding.
Debt-adjusted share count is calculated as total shares outstanding
plus incremental shares issued at current market price to eliminate
net debt (i.e., full equitization of net debt). Management of
Tamarack believes that debt adjusted production per share is useful
in determining the production growth on a per share basis as if all
debt was extinguished by the issuance of shares. The presentation
of production growth on a per share basis is skewed for oil and gas
companies that have more debt on their balance sheet and in their
capital structure. Such companies will show better results because
more of their growth is financed through debt than equity (as
opposed to generating growth through realizing a rate of return on
capital employed). The debt adjusted production per share measure
provides a means of putting oil and gas companies on an equal,
enterprise-based footing with respect to debt when calculating per
share numbers. This measure is relevant to investors to
appreciate the impact the debt on a company's balance sheet has on
per share growth disclosure and the strength of one company's
balance sheet relative to an over-leveraged peer, particularly in
volatile commodity price environments where a company's
indebtedness may increase as a result of lower cash flows and
higher debt financing costs.
"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.
"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.
"Free cash flow" is calculated by
subtracting cash flow in a period by the capital expenditures spent
during that same period.
"Cash flow" is determined as gross
oil, natural gas and natural gas liquids revenues including
realized gains on commodity risk management contracts, less the
following: royalties, operating costs, transportation costs,
general and administrative costs and interest expense.
Please refer to the 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