TSX: TVE
CALGARY, AB, July 9, 2020 /CNW/ - Tamarack Valley Energy
("Tamarack" or the "Company") (TSX: TVE) is pleased to announce it
has entered into a purchase agreement to acquire assets located in
West Central, Alberta (the
"Assets"). The Assets include approximately 2,500 boe/d (52% oil
and natural gas liquids, "NGLs") of low-decline production
supported by a high-quality, multi-zone light oil and liquids rich
gas drilling inventory and approximately 105,000 net acres of land,
acquired for total cash consideration of $4.25 million (the "Acquisition"). The
Acquisition continues to advance Tamarack's strategy of enhancing
its overall sustainability and free adjusted funds flow profile
under current commodity prices and features attractive acquisition
metrics.
Highlights
The Acquisition is consistent with Tamarack's strategy to
develop a portfolio focused on enhancing full cycle profitability,
while maintaining a healthy balance sheet even at low commodity
prices. Based on the Company's proven ability to improve
efficiencies, reduce operating costs and increase netbacks across
its existing asset base, Tamarack plans to apply the same
principles to the Assets with the view to achieving similar
results. Highlights of the Assets and Acquisition include:
- Stable current production volumes of approximately 2,500 boe/d
(52% oil and NGLs)1 with a low decline rate estimated at
approximately 13%;
- Approximately 105,000 net acres of land concentrated in key
development plays within Tamarack's West Central core area
featuring approximately 50 high-quality, multi-zone light oil and
liquids rich natural gas drilling locations;
- Opportunity to synergistically reduce operating expenditures on
the Assets by integrating production from the Acquisition into
Tamarack's operated infrastructure network in the greater West
Central core fairway;
- Based on internally estimated reserves with respect to the
Assets based on GLJ July
1st 2020 Pricing, the Acquisition provides the
following:
-
- 6.6 MMboe of proved developed producing ("PDP")
reserves2;
- 7.5 MMboe of total proved reserves2;
- 10.7 MMboe of total proved plus probable ("TPP")
reserves2;
- TPP reserve life index ("RLI") of 11 years2; and
- Commitment to further enhancing the Company's asset retirement
obligation ("ARO") investment with an estimated increase of
$1.5 million in 2020.
______________________________
|
1 Comprised of 560 bbls/d of light
and medium crude oil, 739 bbls/d of NGLs and 7.2 MMcf/d of natural
gas.
|
2 PDP
reserves, total proved reserves, TPP reserves and RLI are derived
from the Company's internal Qualified Reserve Evaluators ("QRE")
and prepared in accordance with National Instrument 51-101 ("NI
51-101") and the Canadian Oil and Gas Evaluations Handbook
("COGEH"). "Internally estimated" means an estimate that is derived
by the Company's internal QRE and prepared in accordance with NI
51-101. All internal estimates contained in this new release have
been prepared effective as of June 1st, 2020.
|
Acquisition Metrics
Estimated Production
(at closing)
|
2,500
boe/d
|
Flowing
Multiple
|
$1,700 per
boe/d
|
PDP
Reserves(1)
|
$0.64/boe
|
Total Proved
Reserves(1)
|
$0.57/boe
|
Total Proved +
Probable Reserves(1)
|
$0.40/boe
|
Annual Net Operating
Income Multiple(2)(3)
|
1.4x
|
|
Notes:
|
(1)
PDP Reserves, Total Proved Reserves, Total Proved + Probable
Reserves are derived from the Company's internal QRE and prepared
in accordance with NI 51-101 and the COGEH.
|
(2) Based on 12 month
strip from July 3rd 2020.
|
(3) See Non-IFRS
Measures.
|
Pro-Forma 2020 Updated Guidance
Tamarack's revised 2020 guidance is set out below and reflects
the inclusion of the Assets effective June
1st.
|
|
July 9, 2020
Updated Guidance
|
Full Year Capital
Budget (including Acquisitions & ARO spend) ($MM)
|
|
$101
|
Annual Average
Production (boe/d)
|
|
20,850 -
21,250
|
Annual Average Oil
& Natural Gas Liquids Weighting (%)
|
|
~60-62%
|
Free Adjusted Funds
Flow(1) ($MM)
|
|
$15-20
|
Net Debt to Trailing
Annual Adjusted Funds Flow Ratio(1) (times)
|
|
~1.5x
|
2021 Estimated
Corporate Decline Rate(2)
|
|
22-24%
|
2021 Estimated
Corporate Sustaining Capital Breakeven Price
($/Bbl)(1)
|
|
~US$37.00
|
|
(1)
See Non-IFRS Measures
|
(2)
Based on December 2020 to December 2021 estimates
|
This guidance is based on average 2020 commodity price
assumptions of WTI US$39.00/bbl,
MSW/WTI differential of US$6.00/bbl
and AECO at $2.00/GJ as well as a
Canadian/US dollar exchange rate of $1.3625.
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
AECO
|
the natural gas
storage facility located at Suffield, Alberta connected to TC
Energy's Alberta System
|
bbls/d
|
barrels per
day
|
boe
|
barrels of oil
equivalent
|
boe/d
|
barrels of oil
equivalent per day
|
GJ
|
gigajoule
|
IFRS
|
International
Financial Reporting Standards as issued by the International
Accounting Standards Board
|
MMboe
|
million barrels of
oil equivalent
|
MMcf/d
|
million cubic feet
per day
|
MSW
|
Mixed sweet blend,
the benchmark for conventionally produced light sweet crude oil in
Western Canada
|
WTI
|
West Texas
Intermediate, the reference price paid in U.S. dollars at Cushing,
Oklahoma for the crude oil standard grade
|
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.
Oil and Gas Metrics. This press release contains
metrics commonly used in the oil and natural gas industry, such as
reserve life index. "Reserve life index" is calculated as total
Assets interest reserves divided by annual production.
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 Acquisition, the
Assets, Tamarack's plan with respect to the Assets and expectations
relating thereto and the impact thereof on Tamarack's operations,
financial position and business strategies, including without
limitation, Tamarack's strategy of enhancing its overall
sustainability and free adjusted funds flow profile and developing
a portfolio focused on enhancing full cycle profitability while
maintaining a healthy balance sheet; and the Company's revised
2020 guidance.
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;
the accuracy of Tamarack's geological interpretation of its
drilling and land opportunities, including the ability of seismic
activity to enhance such interpretation; Tamarack's ability to
execute its plans and strategies, including with respect to the
Assets; and the completion of the Acquisition.
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 Acquisition and
the Assets; 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; access to capital; and the COVID-19 pandemic.
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, 2019 (the
"AIF") and management's discussion and analysis for the year ended
December 31, 2019 (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 and
production, corporate decline rates, capital expenditures, net debt
to trailing annual adjusted funds flow ratio, free adjusted funds
flow, estimated corporate sustaining capital breakeven price 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 adjusted funds flow, annual net operating income, annual
net operating income multiple, estimated corporate sustaining
capital breakeven price, free adjusted funds flow; net debt; and
net debt to trailing annual adjusted funds flow 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.
"Adjusted funds flow" is calculated by taking net income or loss
before taxes and adding back items, including transaction costs,
and certain non-cash items including stock-based compensation;
accretion expense on decommissioning obligations; depletion,
depreciation and amortization; impairment; unrealized gain or loss
on financial instruments; unrealized gain or loss on foreign
exchange; unrealized gain or loss on cross-currency swap; and gain
or loss on dispositions. Tamarack uses adjusted funds flow as a key
measure to demonstrate the Company's ability to generate funds to
repay debt and fund future capital investment. Adjusted funds flow
per share is calculated using the same weighted average basic and
diluted shares that are used in calculating income (loss) per
share.
"Annual net operating income" is calculated as total petroleum
and natural gas sales prior to hedging, less royalties, and net
production and transportation costs. Management also expresses this
as operating field netback within other disclosures.
"Annual net operating income multiple" is calculated as the
total purchase price of the Asset divided by the annual net
operating income expressed as a ratio or multiple.
"Estimated corporate sustaining capital breakeven price" is
calculated as the WTI crude oil benchmark price needed to generate
sufficient adjusted funds flow in order to cover the level
sustaining capital needed in order to hold current production
volumes stable.
"Free adjusted funds flow" is calculated by taking adjusted
funds flow and subtracting capital expenditures, excluding
acquisitions and dispositions, Management believes that free
adjusted funds flow provides a useful measure to determine
Tamarack's ability to improve returns and to manage the long-term
value of the business.
"Net debt" is calculated as bank debt plus working capital
surplus or deficit, including the fair value of cross-currency
swaps and excluding the fair value of financial instruments and
lease liabilities.
"Net debt to trailing annual adjusted funds flow ratio" is
calculated as net debt divided by adjusted funds flow for the four
preceding quarters.
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