Tamarack Valley Energy (TVE-T) July 25, '16 is pleased to announce that it has closed the second of its two strategic asset acquisitions, details for which were previously announced on June 20, 2016.
This second acquisition strategically consolidates assets located in Tamarack's core operating areas of Redwater and Wilson Creek in Alberta (the "Redwater Acquisition") and includes current production of 850 boe/d (71% light oil and NGLs) with a decline rate of approximately 20-22%, as well as 95 (60 net) total sections of land contiguous with Tamarack's existing Viking and Cardium interests. The Redwater Acquisition adds significant infrastructure, including an 82% ownership in a central oil battery at Redwater which has capacity to handle 8,000 bbl/d of oil and 1.5 mmcf/d of natural gas, and is expected to further improve Tamarack's industry-leading, low cost operations in both areas.
Total aggregate cash consideration for the Redwater Acquisition was $25.8 million and was financed with part of the proceeds from the $81.6 million bought deal equity financing that was led by National Bank Financial Inc. and included Dundee Securities Ltd., Macquarie Capital Markets Canada Ltd., CIBC World Markets Inc., FirstEnergy Capital Corp., Peters & Co. Limited, Desjardins Securities Inc., Acumen Capital Finance Partners Limited and AltaCorp Capital Inc., which closed on July 12, 2016.
New Credit Facility
Concurrent with the closing of the Redwater Acquisition, Tamarack's new bank line was put into place with a total credit capacity of $120,000,000. The new bank line is comprised of a revolving credit facility in the amount of $110,000,000 and a $10,000,000 operating facility (collectively the "Facility"). The previous borrowing base of $165,000,000 has been reduced to $120,000,000 to reflect an appropriate amount of liquidity for the Company given the current commodity price environment and to save on general and administrative costs. Tamarack is currently drawn less than $59 million on the Facility and its 2016 exit debt to annualized fourth quarter of 2016 funds from operations ratio is expected to be less than 0.8 times. The Facility covenants did not change and Tamarack continues to be compliant. The Facility lasts for a 364 day period and will be subject to its next 364 day extension by May 26, 2017. If not extended, the Facility will cease to revolve and all outstanding balances will become repayable one year from that extension date being May 26, 2018.
Production & Operations Update
Tamarack is pleased to announce that based on field estimates its average daily production through the second quarter 2016 was approximately 9,536 boe/d (52% oil & NGL's), representing a 36% increase in production from the same period in 2015. First half 2016 production of approximately 9,560 boe/d (54% oil & NGL's) was at the upper end of Tamarack's guidance range of 9,100 to 9,600 boe/d and 27% higher than the first half of 2015.
During the second quarter, the Company successfully drilled its first two-mile lateral Cardium oil wells at Wilson Creek, with on-budget capital costs and timing. This achievement will enable Tamarack to implement longer horizontal wells across more of its Wilson Creek area, and potentially across other parts of the asset base to improve capital efficiencies while reducing the environmental footprint. These two wells came on production very late in the second quarter and are expected to positively impact production volumes in the last half of 2016.
2016 Guidance Confirmed
The closing of the Redwater Acquisition contributes to Tamarack's ability to enhance assets and improve returns by employing a technical approach combined with a strict cost-reduction focus. The Company anticipates a reduction in corporate operating costs of approximately $0.40-0.60/boe by the end of 2016 due to the integration of the acquired infrastructure and ongoing cost-reduction initiatives, which is also expected to improve operating netbacks in 2017.
As previously announced on July 12, 2016, Tamarack elected to increase its 2016 capital program and guidance ranges, which remain as follows:
Capital expenditure budget of between $45-$53 million (excluding acquisitions) which enables Tamarack to continue investing within cash flow;
Average estimated 2016 annual production guidance of between 9,700-10,000 boe/d (approximately 53-57% oil & NGLs);
2016 exit production rate of approximately 11,000 boe/d (approximately 53-57% oil & NGLs);
2016 exit debt to annualized fourth quarter of 2016 funds from operations ratio of less than 0.8 times; and
Assumes: 2016 WTI average $44/bbl - $47/bbl USD, 2016 Edmonton par price average $52/bbl - $56/bbl, 2016 AECO average $1.80/GJ to $2.00/GJ, Canadian/US dollar exchange rate range of $0.77 to $0.78.
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 at a variety 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 return while managing its balance sheet.
Brian Schmidt
President & CEO
Tamarack Valley Energy Ltd.
403.263.4440
www.tamarackvalley.ca
Ron Hozjan
VP Finance & CFO
Tamarack Valley Energy Ltd.
403.263.4440 |
