Tamarack Valley Energy Ltd. Announces 67% Increase to Reserves and
Exceeds 2013 Production Guidance with Record Production and Cash
Flow
CALGARY, ALBERTA--(Marketwired - Mar 13, 2014) - Tamarack Valley
Energy Ltd. (TSX-VENTURE:TVE) ("Tamarack" or the "Company") is
pleased to announce the results of its independent reserve
evaluation as of December 31, 2013, which include a 67% increase in
proved plus probable reserves to 18.684 mmboe, a proved plus
probable finding and development cost of $17.57/boe and a recycle
ratio of 2.3. The Company is also pleased to announce a record
quarter production average of 4,336 boe/d for the fourth quarter of
2013, which was an increase of 37% from the previous quarter.
Tamarack filed its
Annual Information Form ("AIF") today, which included information
pursuant to the requirements of National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities ("NI
51-101") of the Canadian Securities Administrators relating to
reserves data and other oil and gas information on SEDAR. The AIF
can be accessed either on Tamarack's website at
www.tamarackvalley.ca or on SEDAR at www.sedar.com.
The Company has also
filed its audited consolidated financial statements for the year
ended December 31, 2013 ("Financial Statements") and management's
discussion and analysis ("MD&A") on SEDAR. Selected financial
and operational information is outlined below and should be read in
conjunction with the Financial Statements, which were prepared in
accordance with International Financial Reporting Standards
("IFRS"), and the related MD&A. These documents are also
accessible on Tamarack's website at www.tamarackvalley.ca or on
SEDAR at www.sedar.com.
2013 HIGHLIGHTS
Reserve Report
- Increased proved plus probable reserves by 67% to 18.684
million boe with 61% oil and natural gas liquids ("NGLs") weighted
and proved reserves by 51% to 9.992 million boe (59% oil and
NGLs).
- Increased proved plus probable reserves by 27% and proved
reserves by 17% on a per weighted average share basis.
- Achieved proved plus probable finding and development
("F&D") costs of $17.57/boe for the year ended December 31,
2013 (including the change in future development capital or "FDC").
The Company also achieved proved plus probable finding, development
and acquisition ("FD&A") costs of $21.68/boe during the same
period, including the change in FDC.
- Organic proved plus probable reserve additions replaced 399% of
production and on a proved basis 269% of production was
replaced.
- Including acquisitions, the Company replaced 827% of production
on a proved plus probable basis, calculated by dividing total
reserve additions by total average 2013 production of 3,276 boe/d.
On a proved reserve basis 483% of production was replaced.
- Tamarack's proved plus probable reserve value is estimated at
$6.13/share based on a net present value of proved plus probable
reserves at December 31, 2013, at a 10% discount before taxes,
divided by issued and outstanding shares at December 31, 2013.
Proved value is $3.77/share.
- Achieved a recycle ratio of 2.25 with F&D costs of
$17.57/boe, including the change in FDC, and field operating
netback of $39.45/boe for the year ended December 31, 2013.
- Achieved a proved plus probable reserve life index ("RLI") of
11.8 years based on the fourth quarter 2013 average production of
4,336 boe/d.
- Tamarack's Cardium farm-in accounted for proved plus probable
reserves of 2.805 mboe, based on fourth quarter 2013 drilling
results. Comprised of 2.08 mboe from earning wells drilled in the
fourth quarter (categorized as acquisitions in the reserve report)
and 0.725 mboe in discoveries.
Financial and
Operating
- Achieved record quarter production average of 4,336 boe/d, up
37% from previous quarter.
- Production increased by 51% to 3,276 boe/d in 2013 from 2,166
boe/d in 2012. Production results for 2013 exceeded Tamarack's
guidance of 3,150 to 3,250 boe/d.
- Funds from operations were $10.5 million for Q4/13 and $38.2
million ($36.6 million after deducting transaction costs from the
acquisition of Sure Energy Inc.) for the year ended 2013 compared
to $6.0 million and $16.7 for the same periods in 2012.
- During the fourth quarter of 2013, Tamarack drilled, completed
and equipped three (2.1 net) horizontal farm-in Cardium oil wells,
eight (5.8 net) horizontal Redwater Viking oil wells, completed and
equipped one (0.75 net) horizontal Buck Lake Cardium oil well and
drilled one (0.28 net) horizontal farm-in Cardium oil well.
- Completed acquisition of Sure Energy Inc. in October, 2013 and
entered into a 113 net section Cardium farm-in in August,
2013.
2013 YEAR-END
RESERVES
Tamarack is
executing its longer term strategy of entering into predictable and
repeatable resource plays at an early stage, when it can assemble a
large high quality land position. Tamarack had tremendous reserve
and production growth in 2013, both on an absolute basis and on a
per share basis. This growth was achieved through development
drilling and tuck-in acquisitions on its two de-risked resource
plays: Cardium oil in the Lochend, Garrington, Buck Lake and
greater Pembina areas of Alberta, and shallow Viking oil in the
Redwater area of Alberta. Reserve increases in 2013 were also
impacted by the acquisition of Sure Energy Inc. that closed on
October 9, 2013.
During 2013, the
Company drilled 17 (14.2 net) horizontal Viking oil wells in
Redwater and 11 (7.3 net) horizontal Cardium oil wells, of which 5
(4 net) were in Lochend/Garrington, 1 (0.75 net) in Buck Lake and 5
(2.6 net) were on farm-in lands in the greater Pembina area. Of the
11 Cardium wells drilled in 2013, 3 (1.73 net) were long reach
wells (1.5 to 2.0-mile horizontal lengths). Tamarack believes that,
although most competitors currently are not drilling long reach
wells to develop their Cardium lands, eventually long reach wells
will have a similar impact on drilling economics as did the
introduction of slick water fracture stimulations. As of December
31, 2013, Tamarack had drilled 5 net earning wells towards its
contracted farm-in commitment of 3.5, which was one full quarter
ahead of schedule.
The following tables
highlight the 2013 year-end reserves based on the GLJ Petroleum
Consultants Ltd. independent evaluation of the Company's reserves
dated effective December 31, 2013. The evaluation was conducted
pursuant to NI 51-101 and the Canadian Oil and Gas Evaluation
Handbook ("COGE Handbook") reserves definitions.
| Tamarack Valley Energy Ltd. |
| Summary of Oil and Gas Reserves |
| Forecast Prices and Costs - GLJ (2013-01) Prices |
| Effective December 31, 2013 |
|
|
|
Oil |
|
|
|
|
|
|
|
Volume In |
Light and |
|
|
|
|
Natural Gas |
|
|
|
Imperial Units |
Medium |
Heavy |
Natural Gas |
Liquids |
Total BOE |
|
|
Gross |
Net |
Gross |
Net |
Gross |
Net |
Gross |
Net |
Gross |
Net |
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
Category |
(MStb) |
(MStb) |
(MStb) |
(MStb) |
(MMcf) |
(MMcf) |
(MStb) |
(MStb) |
(Mboe) |
(Mboe) |
|
Proved Developed |
|
|
|
|
|
|
|
|
|
|
|
Producing |
2,495 |
2,204 |
16 |
15 |
17,035 |
14,220 |
312 |
226 |
5,662 |
4,814 |
|
Proved Developed |
|
|
|
|
|
|
|
|
|
|
|
Non-Producing |
79 |
71 |
3 |
3 |
2,892 |
2,639 |
107 |
81 |
671 |
595 |
|
Proved |
|
|
|
|
|
|
|
|
|
|
|
Undeveloped |
2,624 |
2,300 |
- |
- |
4,748 |
4,292 |
243 |
195 |
3,658 |
3,210 |
|
Total Proved |
5,198 |
4,575 |
19 |
18 |
24,676 |
21,151 |
663 |
501 |
9,992 |
8,619 |
|
Probable |
4,722 |
4,143 |
41 |
37 |
19,207 |
16,842 |
728 |
544 |
8,693 |
7,531 |
|
Total Proved + |
|
|
|
|
|
|
|
|
|
|
|
Probable |
9,920 |
8,718 |
60 |
55 |
43,883 |
37,993 |
1,391 |
1,045 |
18,684 |
16,150 |
| (Note: Columns may not add due to rounding.) |
| Tamarack Valley Energy Ltd. |
| Summary of Net Present Values of Future Net
Revenue |
| Forecast Prices and Costs - GLJ (2013-01) Prices |
| Effective December 31, 2013 |
|
|
|
Before Income Taxes |
After Income Taxes |
|
|
Discounted at ( %/year) |
Discounted at (%/year) |
|
|
0% |
5% |
10% |
15% |
20% |
0% |
5% |
10% |
15% |
20% |
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
Category |
($M) |
($M) |
($M) |
($M) |
($M) |
($M) |
($M) |
($M) |
($M) |
($M) |
|
Proved |
|
|
|
|
|
|
|
|
|
|
|
Developed |
|
|
|
|
|
|
|
|
|
|
|
Producing |
163,987 |
139,087 |
120,860 |
107,369 |
97,079 |
163,987 |
139,087 |
120,860 |
107,369 |
97,079 |
|
Proved |
|
|
|
|
|
|
|
|
|
|
|
Developed |
|
|
|
|
|
|
|
|
|
|
|
Non-Producing |
15,795 |
10,916 |
8,372 |
6,840 |
5,813 |
15,795 |
10,916 |
8,372 |
6,840 |
5,813 |
|
Proved |
|
|
|
|
|
|
|
|
|
|
|
Undeveloped |
92,400 |
59,267 |
39,027 |
25,833 |
16,785 |
92,400 |
59,267 |
39,027 |
25,833 |
16,785 |
|
Total Proved |
272,181 |
209,270 |
168,259 |
140,041 |
119,678 |
272,181 |
209,270 |
168,259 |
140,041 |
119,678 |
|
Probable |
265,724 |
159,593 |
104,923 |
73,182 |
53,052 |
201,254 |
123,350 |
82,513 |
58,365 |
42,765 |
|
Total Proved+ Probable |
537,905 |
368,863 |
273,182 |
213,223 |
172,729 |
473,435 |
332,620 |
250,772 |
198,406 |
162,443 |
| (Note: Columns may not add due to rounding. Estimates
of net present value do not represent fair market value.) |
RECONCILIATION OF COMPANY GROSS
RESERVES Based on Forecast Prices and Cost
|
|
BOE |
|
|
|
|
Proved |
|
|
Proved |
Probable |
+
Probable |
|
FACTORS |
(Mboe) |
(Mboe) |
(Mboe) |
|
December 31, 2012 |
6,602 |
4,583 |
11,185 |
|
Discoveries |
0 |
0 |
0 |
|
Extensions and Improved Recovery |
1,046 |
509 |
1,553 |
|
Infill Drilling |
110 |
(110) |
0 |
|
Technical Revisions |
107 |
(169) |
(62) |
|
Acquisitions* |
3,327 |
3,881 |
7,209 |
|
Dispositions |
(4) |
(1) |
(6) |
|
Economic Factors |
0 |
0 |
0 |
|
Production |
(1,194) |
0 |
(1,194) |
|
December 31, 2013 |
9,992 |
8,693 |
18,684 |
| (*Note: Includes reserve additions from earning wells
that were drilled on the Company's Cardium farm-in) |
2013 YEAR-END
FINANCIAL RESULTS
During the fourth
quarter of 2013, Tamarack recorded record production of 4,336
boe/d, which was 37% higher than the previous quarter. The record
production rate resulted in a record quarter of funds from
operations of $10.5 million despite a 21% decrease in realized oil
and natural gas liquids prices during the quarter. For the year
ended December 31, 2013 funds from operations was $38.2 million
($36.6 million after deducting transaction costs from the
acquisition of Sure Energy Inc.). Although the Company exited 2013
with net debt of $81.8 million, the $60.2 million equity financing
that closed on February 19, 2014, has reduced current net debt to
2013 cash flow to less than 1.0 times.
Farm-in
On August 19, 2013,
the Company entered into a farm-in agreement with an industry major
("Farm-in") to earn 70% working interest in up to 113 net sections
of prospective Cardium lands directly offsetting proven ongoing
development projects in the greater Pembina area. The Farm-in
increased Tamarack's Cardium inventory by approximately 350%,
adding another 183 gross (128 net) potential Cardium locations.
Sure Energy Inc.
Acquisition
On October 9, 2013,
the Company acquired all of the issued and outstanding shares of
Sure Energy Inc. ("Sure"), a public Canadian oil and gas company.
As consideration, Sure Energy shareholders received 16,461,966
Tamarack common shares.
The Company will
benefit from the combination of the complementary Redwater Viking
acreage and Tamarack's proven operational efficiencies and further
synergies, including scalability of drilling programs to help
continue to reduce Viking well capital costs. Through the doubling
of Tamarack's land position in the Redwater Viking area, the
Company has increased inventory to approximately 200 net low risk
drilling locations.
Financial & Operating Results
|
Three months ended |
Year ended |
|
December 31, |
December 31, |
|
|
|
% |
|
|
% |
|
2013 |
2012 |
change |
2013 |
2012 |
change |
| ($, except share numbers) |
|
|
|
|
|
|
| Total Revenue |
22,224,185 |
11,444,879 |
94 |
70,059,021 |
34,413,170 |
104 |
| Funds from operations 1 |
10,505,372 |
6,029,731 |
74 |
36,594,096 |
16,666,872 |
120 |
|
Per share - basic 1 |
$
0.24 |
$
0.20 |
20 |
$
1.09 |
$
0.65 |
68 |
|
Per share - diluted 1 |
$
0.23 |
$
0.20 |
15 |
$
1.09 |
$
0.65 |
68 |
| Net income (loss) |
10,854,769 |
(2,455,973) |
542 |
14,813,126 |
(4,140,275) |
458 |
|
Per share - basic |
$
0.24 |
$
(0.08) |
400 |
$
0.44 |
$
(0.16) |
375 |
|
Per share - diluted |
$
0.24 |
$
(0.08) |
400 |
$
0.44 |
$
(0.16) |
375 |
| Net debt 2 |
(81,764,155) |
(47,543,639) |
72 |
(81,764,155) |
(47,543,639) |
72 |
| Capital Expenditures 3 |
22,009,901 |
7,193,687 |
206 |
57,541,055 |
23,856,939 |
141 |
| Weighted average shares outstanding |
|
|
|
|
|
|
|
Basic |
44,558,308 |
29,706,752 |
50 |
33,450,158 |
25,815,366 |
30 |
|
Diluted |
45,109,305 |
29,706,752 |
52 |
33,568,017 |
25,815,366 |
30 |
| Share Trading |
|
|
|
|
|
|
| High |
$
3.97 |
$
3.15 |
26 |
$
3.97 |
$
4.44 |
(11) |
| Low |
$
2.80 |
$
2.36 |
19 |
$
1.74 |
$
1.77 |
(2) |
| Trading volume |
27,734,011 |
1,741,091 |
1,493 |
40,778,592 |
3,938,707 |
935 |
| Average daily production |
|
|
|
|
|
|
|
Crude oil and NGLs (bbls/d) |
2,611 |
1,310 |
99 |
1,911 |
986 |
94 |
|
Natural gas (mcf/d) |
10,349 |
7,505 |
38 |
8,191 |
7,078 |
16 |
|
Total (boe/d) |
4,336 |
2,561 |
69 |
3,276 |
2,166 |
51 |
| Average sale prices |
|
|
|
|
|
|
|
Crude oil and NGLs ($/bbl) |
77.78 |
76.29 |
2 |
85.80 |
77.76 |
10 |
|
Natural gas ($/mcf) |
3.72 |
3.26 |
14 |
3.42 |
2.45 |
39 |
|
Total ($/boe) |
55.72 |
48.57 |
15 |
58.59 |
43.42 |
35 |
| Operating netbacks ($/boe) 4 |
|
|
|
|
|
|
|
Average realized sales |
55.72 |
48.57 |
15 |
58.59 |
43.42 |
35 |
|
Royalty expenses |
(4.30) |
(4.43) |
(3) |
(6.00) |
(3.39) |
77 |
|
Production expenses |
(13.65) |
(13.32) |
2 |
(13.14) |
(12.10) |
9 |
|
Operating field netback |
37.77 |
30.82 |
23 |
39.45 |
27.93 |
41 |
|
Realized commodity hedging gain (loss) |
(2.15) |
1.01 |
(313) |
(2.11) |
(0.17) |
1,135 |
|
Operating netback |
35.62 |
31.83 |
12 |
37.34 |
27.76 |
35 |
| Funds flow from operations netback |
|
|
|
|
|
|
| ($/Boe) 1 |
26.34 |
25.59 |
3 |
30.60 |
21.08 |
45 |
| Notes: |
| 1) Funds from operations is calculated as cash flow
from operating activities before the change in non-cash working
capital and abandonment. |
| 2) Net debt includes accounts receivable, prepaid
expenses and deposits, bank debt and accounts payable and accrued
liabilities, but exclude the fair value of financial
instruments. |
| 3) Capital expenditures include property acquisitions
and are presented net of disposals, but exclude corporate
acquisitions. |
| 4) "Operating netback" does not have any standardized
meaning prescribed by IFRS and therefore may not be comparable with
the calculation of similar measures for other entities. Operating
netback equals total petroleum and natural gas sales including
realized gains and losses on commodity derivative contracts less
royalties and operating costs calculated on a boe basis. Tamarack
considers operating netback an important measure to evaluate its
operational performance as it demonstrates its field level
profitability relative to current commodity prices. |
About Tamarack
Valley Energy Ltd.
Tamarack is an oil
and gas exploration and production company committed to long-term
growth and the increased identification, evaluation and operation
of resource plays in the Western Canadian sedimentary basin.
Tamarack's strategic direction is focused on two key principles -
ensuring resource plays provide long-life reserves, and using a
rigorous, proven modeling process to carefully manage risk and
identify opportunities. The Company recently expanded its inventory
of low-risk development oil locations in the Redwater Viking play
through the acquisition of Sure Energy Inc. Continuing to build on
its sustainable growth platform, Tamarack also increased its
low-risk development locations within the Cardium fairway through a
farm-in agreement with an industry major. These endeavors add to
Tamarack's strong resource portfolio, including Cardium properties
at Lochend, Garrington and Buck Lake and heavy oil properties in
Saskatchewan. With a balanced portfolio, and an experienced and
committed management team, Tamarack intends to continue to deliver
on its promise to increase its production and maximize shareholder
return.
Abbreviations
|
bbl |
barrel |
|
bbls/d |
barrels per day |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrels of oil equivalent per day |
|
mcf |
thousand cubic feet |
|
mcf/d |
thousand cubic feet per day |
|
Mboe |
thousand barrels of oil equivalent |
|
MMcf |
million cubic feet |
|
MStb |
thousand stock tank barrels |
|
NGL |
natural gas liquids |
|
$M |
thousands of dollars |
Unit Cost
Calculation
For the purpose of
calculating unit costs, natural gas volumes have been converted to
a barrel of oil equivalent ("boe") using six thousand cubic feet
equal to one barrel unless otherwise stated. A boe conversion ratio
of 6:1 is based upon an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. This conversion conforms with
Canadian Securities Regulators' National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities. Boe's may be
misleading, particularly if used in isolation.
F&D cost
calculations have been conducted in compliance with the
requirements of NI 51-101. Specifically, F&D costs relating to
Proved reserves were calculated by adding the cost of exploration,
the cost of development and the annual change in estimated future
reserves development costs and dividing that sum by annual
additions to Proved reserves. Finding and development costs for
Proved plus Probable reserves were similarly calculated, but used
the Proved plus Probable reserves figure rather than the Proved
reserves figure. The aggregate of the exploration and development
costs incurred in the most recent financial year and the change
during that year in estimated future development costs generally
will not reflect total finding and development costs related to
reserves additions for that year. Tamarack also calculates FD&A
costs using the same method, but without eliminating the effects of
acquisitions and dispositions. The following is a summary of
Tamarack's F&D and FD&A costs for the most recent three
financial years.
|
|
F&D ($/boe) |
FD&A ($/boe) |
|
|
|
Proved plus |
|
Proved Plus |
|
|
Proved |
Probable |
Proved |
Probable |
|
2011 |
40.30 |
27.01 |
40.30 |
27.01 |
|
2012 |
26.17 |
20.68 |
28.87 |
23.56 |
|
2013 |
19.98 |
17.57 |
25.82 |
21.68 |
|
Three Year Average |
27.14 |
21.96 |
28.82 |
23.13 |
Operating netbacks are calculated in compliance with the
requirements of NI 51-101 by subtracting royalties and operating
costs from revenue.
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
"anticipate", "believe", "plan", "potential", "intend",
"objective", "continuous", "ongoing", "encouraging", "estimate",
"expect", "may", "will", "project", "should", or similar words
suggesting future outcomes. More particularly, this press release
contains statements concerning Tamarack's future acquisitions and
future drilling plans, operations and strategy. The forward-looking
statements contained in this document are based on certain key
expectations and assumptions made by Tamarack relating to
prevailing commodity prices, the availability of drilling rigs 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, 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. Although management
considers these assumptions to be reasonable based on information
currently available to it, 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 (e.g. operational risks in
development, exploration and production; 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 AIF for
additional risk factors relating to Tamarack. The AIF is available
for viewing 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.
Neither TSX Venture
Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Tamarack Valley Energy Ltd.Brian SchmidtPresident &
CEO403.263.4440Tamarack Valley Energy Ltd.Ron HozjanVP Finance
& CFO403.263.4440www.tamarackvalley.ca