Tamarack to Sell Non-Core Alberta Assets, Reduce Debt

Alberta-based Tamarack Valley Energy Ltd. is selling its non-core west central Alberta assets for $89.67 million (CAD 123.0) million in cash, plus the assumption of $28 million (CAD 38.4 million) and $ 58.76 million (CAD 80.6 million) gross operated inactive and active asset retirement obligation, respectively, to an undisclosed private operator.

The production from the assets is largely focused on the Cardium and Leduc formations with a natural gas weighting of approximately 60 percent, Tamarack said in a recent news release. The assets being sold are currently undercapitalized within the Company’s portfolio, Tamarack noted, as its development remains focused on core Charlie Lake and Clearwater prospects within its long-term development plan. The closing of the transaction is expected to occur on or about November 3, subject to customary closing considerations.

The transaction accelerates debt reduction, further strengthening Tamarack’s balance sheet and enabling the company to focus on program execution within its highly economic oil weighted plays, it said.

Tamarack said the proceeds from the transaction “bring forward over four years of future excess funds flow that the assets would have generated within Tamarack’s plan for redeployment to the Charlie Lake and Clearwater plays”. The current production of the assets is approximately 7,000 barrels of oil equivalent per day (boepd). Tamarack said its material positions across the Charlie Lake and Clearwater plays” afford growth of higher netback production to offset divested production volumes within the five-year plan”.

Tamarack said its fourth-quarter and full-year 2023 average production is expected to be reduced by approximately 4,500 boepd and 1,200 boepd, respectively, due to the transaction. For 2024, the sale of the assets will reduce Tamarack’s production outlook by approximately 6,000 boepd, it said.

For September, Tamarack said it posted a record corporate production of approximately 70,000 boepd, which includes production from the assets being sold. The company said the output demonstrates the successful execution of its development program year to date.

Meanwhile, Tamarack has appointed Kevin Johnston as its vice president for finance. Johnston will join the company’s finance team, which is led by CFO Steve Buytels. Johnston brings 20 years of industry experience in accounting and finance. Most recently, he held the role of controller and vice president for finance at ATCO’s Energy Infrastructure business unit and was previously the controller and vice president for finance at Seven Generations Energy.

Second Quarter Results

Tamarack posted a net income of $18.74 million (CAD 25.7 million) for the second quarter, an 82 percent decrease compared to $104.62 million (CAD 143.5 million) in the same period in 2022. Cash flow from operating activities was reported at $113.95 million (CAD 156.3 million), down 27 percent from $156.53 million (CAD 214.7 million) in the prior-year quarter.

The company achieved quarterly volumes of 66,738 boepd, representing a 52 percent year-over-year increase. Tamarack’s successful second-quarter development program was partially offset by its loss of around 1,500 boepd of production due to the direct and indirect impacts of the Alberta wildfires and unplanned third-party outages. Production impacts were largely restored prior to June 30, with second-half production levels forecasted to average between 68,000 to 70,000 boepd, the company said in an earlier earnings release.

“Tamarack’s dominant position in the Clearwater and Charlie Lake plays are the foundation of our long-term strategic plan which is underpinned by a leading low sustaining free funds flow breakeven in North America’s most economic oil plays”, Tamarack President and CEO Brian Schmidt said. “Recent results at West Marten Hills, where the company produced ~3,750 bopd [barrels of oil per day] from 13 wells on two pads in June, highlight the prolific nature of our Clearwater program. At the same time, we are drilling top-tier Charlie Lake wells and flowing into our owned and operated infrastructure, driving long-term value creation. Our business is focused on delivering the most economic barrels to enhance returns and free funds flow for shareholders”.

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