Tamarack Announces Operational Update, Production Guidance Increase and Inclusion in TSX Composite Index
Press Release
Calgary, Alberta – September 20, 2018 – 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 injection in early 2019 and drilling 16 Viking wells in veteran that will be completed in early Q1 2019.
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