Tamarack Valley Energy announces year-end 2023 financial & reserve results, Clearwater resource evaluation and provides operational and guidance updateincluding executive appointment – Canadian Energy News, Top Headlines, Commentaries, Features & Events – EnergyNow

2023 Financial and Operational Highlights

• Improved Balance Sheet Strength – YoY net debt⁽¹⁾ reduction of $373MM (equal to approximately $0.67 per share) to exit the year with net debt of $984MM.
• Improved Operating Costs – Production expense of $8.89/boe in Q4/23 reflected a 16% QoQ improvement demonstrating the benefits of core area production growth, program efficiencies and disposition of assets with higher costs.
• Low-Cost Organic Reserves Growth – Increased proved developed producing (“PDP”) reserves by 15% (representing 137% of production) at a finding and development (“F&D”) cost of $16.49/boe and total proved plus probable (“TPP”) reserves by 13% (representing 214% of production) at a F&D cost of $20.86/boe, net of dispositions⁽²⁾.
• Achieved Enhanced Return of Capital Threshold – Delivered on Tamarack’s commitment to achieve the first threshold of our enhanced return of capital framework. As a result, subsequent to year-end, the Company was able to accelerate enhanced returns through the buyback of shares as part of our Normal Course Issuer Bid (“NCIB”).
• Increased Oil Production Weighting – Delivered annual production of 67,034 boe/d⁽³⁾, inline with guidance. Fourth quarter production of 64,881 boe/d⁽⁴⁾, reflected ~4,500 boe/d⁽⁵⁾ from non-core asset sales and unplanned third party restrictions in the Charlie Lake. Tamarack’s oil and liquids weighting as a percent of total production increased to 85% in Q4 2023 compared to 82% in Q4 2022.
• Optimized Capital Spending – Total capital expenditures in 2023 of $516MM included: $21MM of gas conservation projects sanctioned with the Clearwater Infrastructure Limited Partnership (the “CIP”), $20MM accelerated from the 2024 capital budget and $475MM allocated to Tamarack’s development program. Development spending was inline with the upper end of the $425 – $475MM guidance. Accelerated capital of $20MM into 2023 from 2024 represented an opportunity to take advantage of favorable field conditions and services pricing which will result in an equal reduction to 2024 spending.
• Free Funds Flow⁽¹⁾ Generation – Delivered $248MM of free funds flow⁽¹⁾ during the year which was directed to dividends and debt repayment.
• Strategic Infrastructure Partnership – Entered into a series of agreements with 12 First Nation and Metis communities (the “Indigenous Communities”) to establish the CIP, enhancing the long-term relationships between Tamarack and the Indigenous Communities. As part of this transaction, Tamarack received gross proceeds of $146MM and a 15% working interest in the CIP while retaining operatorship and full access to 100% of Tamarack’s existing mid-stream capacity.

2023 Financial & Operating Results

Brian Schmidt, President and CEO of Tamarack stated

“Tamarack completed its strategic transformation in 2023, integrating the three corporate Clearwater acquisitions that closed in 2022 and divesting our non-core west central Alberta Cardium assets, affording our team the ability to focus on our core Clearwater, Charlie Lake and EOR assets. Most importantly, we delivered on a key commitment to our shareholders to reduce our net debt⁽¹⁾ and achieved the first threshold of our enhanced return of capital framework with share buybacks commencing in January 2024.

In addition, we continued to realize significant value generation from the assets acquired pursuant to the acquisition of Deltastream Energy Corp. Since close of the acquisition in October 2022, Tamarack has grown production on the Deltastream assets by 29%. Reflecting the highly economic nature of the Clearwater, the assets delivered ~230MM of free NOI⁽⁶⁾ in 2023. Incremental to that, the 2023 year-end BTAX TPP NPV10⁽⁷⁾ of the assets increased to over $1.8 billion. Overall this transaction continues to exceed our expectations while providing long term development visibility.”

Tamarack’s drilling program combined with continued development of Clearwater waterflood contributed significantly to the 2023 reserves, further enhancing the long-term resiliency and sustainability of free funds flow for the Company moving forward. Key highlights of the Company’s PDP, total proved (“TP”) and TPP reserves from the Reserves Report are highlighted below:

• Strong Development Program Results – Excluding reserves and production associated with the dispositions⁽²⁾, Tamarack’s capital program delivered strong results in 2023:
  • PDP reserves increased by 15% to 64 MMboe⁽⁸⁾ and replaced 137% of production
  • TP reserves increased by 18% to 128 MMboe⁽⁹⁾ and replaced 189% of production
  • TPP reserves increased by 13% to 224 MMboe⁽¹⁰⁾ and replaced 214% of production
• Attractive Finding and Development (“F&D”) Costs – Focused execution in the Charlie Lake and Clearwater achieved the following F&D costs, including changes in Future Development Capital (“FDC”):
  • PDP reserves: $16.49/boe
  • TP reserves: $20.90/boe
  • TPP reserves: $20.86/boe
• Strong Recycle Ratios – Tamarack’s highly economic oil plays delivered an annual operating netback⁽¹⁾ of $42.47/boe. Coupled with low-cost reserve additions the Company delivered the following recycle ratios⁽¹⁾:
  • PDP: 2.6x
  • TP: 2.0x
  • TPP: 2.0x
• Increased Oil Weighting – Overall liquids-weighting increased YoY by 7%, with 2023 TPP reserves comprised of 85% oil and NGLs and 15% natural gas.
• Significant Intrinsic Value – Realized before-tax net present value of booked reserves⁽⁷⁾
  • PDP NPV10: $1.6 billion
  • TP NPV10: $2.6 billion
  • TPP NPV10: $4.5 billion
• Charlie Lake Pool Extensions – The Company’s Charlie Lake assets continued to add material pool extensions in 2023, contributing to reserves growth in the play of 4% and 147% production replacement on a TPP basis. Through ongoing optimization and additions to the Company’s land position the percentage of booked TPP locations exceeding 2.5 miles of lateral length increased from 35% to 46% YoY.
• Clearwater Assets & Waterflood Value Contribution – The Company’s Clearwater assets realized significant reserves growth in 2023, delivering increased bookings of 43% and 28% for TP and TPP reserves respectively. The TPP increase replaced 279% of 2023 Clearwater production. At year-end 2023, 12% of total Clearwater TPP reserves were associated with waterflood (3% at 2022 year-end), indicating the continued opportunity for reserves growth as waterflood development continues. In support of converting our resource to booked reserves and realized funds flow Tamarack has allocated capital within the 2024 budget to materially increase water injection rates from ~4,000 bbl/d at year-end 2023 to over 15,000 bbl/d by the end of 2024.
• Contingent and Prospective Resource Evaluation – With the integration of the three Clearwater consolidating transactions complete, Tamarack retained McDaniel to evaluate and prepare a report (the “Resource Report”) on the heavy oil contingent and prospective resources of the Company’s Clearwater assets as at December 31, 2023.
  • The Resource Report indicates Tamarack’s Clearwater heavy oil assets have a “best estimate” of Company gross Contingent Resources (unrisked) of 89.5 MMbbl⁽¹²⁾ and Company gross Prospective Resources (unrisked) of 118.4 MMbbl⁽¹³⁾.
  • Inventory attributed to the Company’s Clearwater assets within the Report totals 592 net Contingent and 1,182 net Prospective drilling locations. When combined with the Company’s 381 net TPP locations included in the year-end evaluation, the identified Clearwater inventory exceeds 2,100 locations.
  • With Clearwater assets producing approximately 13 MMbbl of heavy oil in 2023, TPP reserves represent eight years of equivalent production. Unrisked best estimate contingent and prospective resources equate to approximately seven and nine years of equivalent production, respectively.
  • See “Reader Advisories – Resource Disclosure” below and our supplementary filing titled “Statement of Contingent and Prospective Resources” dated February 28, 2024 which has been filed on SEDAR+ at www.sedarplus.ca for additional details with respect to Tamarack’s contingent and prospective resources, including the risks and uncertainties related thereto.

2023 Reserves Snapshot by Category

During 2023 Tamarack was successful in divesting certain of its non-core assets, including the west central Cardium assets, which were weighted ~60% to natural gas. This change is reflected in the YoY table below.

Year-Over-Year Reserves Data (Forecast Prices and Costs)

Exiting 2023, Alberta saw favorable weather for ongoing field activity through to the end of December. As a result, Tamarack was able to leverage the availability of service providers to accelerate $20MM of the dedicated H1 2024 budget into 2023. Owing to this acceleration the Company has updated its 2024 capital spending guidance associated with the previously disclosed Base Budget to a range of $390 – $440MM. In addition, 2024 carbon tax expense guidance has been reduced. In total, the acceleration of capital and adjustment to the carbon tax treatment serve to increase free funds flow⁽¹⁾ by approximately $35MM in 2024.

Within Tamarack’s 2024 program the Company continues to retain significant capital flexibility enabling the adjustment to plans should it see further downside oil price volatility while not expecting to impact 2024 production guidance which is maintained at the 61,000 to 63,000 boe/d⁽¹⁶⁾ range. Tamarack will continue to monitor timing of the CSV Albright sour gas plant where the Company proactively secured firm processing capacity in support of its ongoing Charlie Lake development program. Any decision to commence drilling associated with project will be subject to prevailing commodity prices and expected CSV on-stream timing. The Company does have the ability to swing production from existing wells to this facility to utilize its capacity ahead of implementing any additional drilling.

Updated 2024 Annual Base Budget Guidance Summary at 2024 Budget Pricing⁽¹⁷⁾

Charlie Lake

Tamarack continues to see strong results from its drilling and development program in the Charlie Lake. In Q1/24 the Company commenced flowback operations on the 11-11-074-08W6 pad with initial 30-day production rates per well exceeding 1,000 bbl/d oil and 1,400 boe/d⁽²²⁾. Initial oil production rates from the 11-11-074-08W6 pad are 60% higher than 2023 wells drilled at Wembley reflecting strong reservoir quality, benefits of extended lateral length and reduced facility constraints. Expansion of Tamarack’s 16-35-073-08W6 battery at Wembley is on track for later in Q1/24 and is expected to result in an incremental 1,600 boe/d⁽²³⁾ of liquids and gas handling capacity for Tamarack operated and controlled volumes. Some associated downtime at the battery is expected during the first quarter to accommodate the expansion work.

In 2023, the Company added 11.0 net sections of land through acquisition at crown sales, further increasing the inventory depth of Tamarack’s Charlie Lake asset.

Clearwater

West Marten Hills and Nipisi

At year-end 2023, Tamarack had brought 39 wells on production through the 15-15-076-05W5 battery, with December 2023 throughput at ~7,000 bbl/d (including nine C sand producers and 30 B sand producers). The success demonstrated by Tamarack’s development in the ‘B’ and ‘C’ sands provides the ability to generate further capital efficiencies given the stacked nature of the play. Oil production from the north Clearwater assets averaged ~19,000 bbl/d exiting 2023, representing a YoY increase of ~40%.

• West Marten C Sand Success – At the Company’s 02-22-076-05W5 and 12-22-076-05W5 pads the eight C sand wells had average peak monthly rates of 212 bbl/d per well. Based on this success, Tamarack drilled four additional C sand wells off the 08-15-076-05W5 pad which are currently cleaning up. As part of the 2024 program the Company expects to drill additional ‘C’ sand wells, building further on the results demonstrated to date.
• West Marten B Sand Performance Strength – Results from Tamarack’s 30 ‘B’ sand wells demonstrated peak monthly average rates of 270 bbl/d per well. These well results further emphasize the significant upside in the area, with the ability to leverage shared infrastructure to improve economic returns. In 2024, Tamarack is following up this success with seven additional ‘B’ sand wells at the 05-15-076-05W5 and 12-15-076-05W5 pads.
• Advancing Key Infrastructure – Tamarack’s 10-02-077-05W5 Marten Creek Gas Plant came online in January 2024, flowing in excess of 3 MMcf/d at the inlet, delivering on the Company’s gas conservation initiatives.

Marten Hills

As development is ongoing at Marten Hills, Tamarack is leveraging primary well cost efficiency improvements in conjunction with progressing waterflood. Tamarack brought 12 wells on-stream in August 2023 from the 09-06-075-25W4 pad. In aggregate these wells were drilled at a cost of under $100/metre representing an improvement of 12-15% relative to 2023 average budgeted cost.

Waterflood – Increasing Injection at Nipisi and Marten Hills

Four additional Nipisi injectors have been brought on-stream increasing Tamarack’s total area water injection to >3,000 bbl/d, with plans to further ramp to >7,500 bbl/d by year-end 2024. At Marten Hills, Tamarack converted one additional injector bringing area water injection to >2,000 bbl/d. This area is also expected to ramp to >7,500 bbl/d by year-end 2024. Tamarack currently has 2,200 bopd, or 6% of Clearwater oil production under waterflood.

Delineation and Exploration

• West Nipisi – Since the beginning of 2023, Tamarack has drilled or participated in nine gross (4.7 net) wells in the West Nipisi area with greater than 30 days of production data. This includes five gross ‘B’ sand wells with average peak monthly rates of ~200 bbl/d per well, and four gross ‘C’ sand wells with average peak monthly rates of ~270 bbl/d per well, including the most recent 102/4-35-76-9W5 well which delivered an IP30 oil rate of 330 bbl/d. Based on this success, the Company plans to be active on its joint venture lands in the area in 2024.
• Seal – In Q1/23 Tamarack successfully drilled and tested three separate Clearwater equivalent sands off one pad (upper, middle, and lower). The combined IP30 from the three wells was approximately 380 bopd. The lowermost sand was drilled with only three legs, with the objective being to test commerciality of the sand. The middle and upper sands were developed with 6-leg lateral legs per sand, each extending approximately 1.25 miles in length. Based on the results of the Seal program Tamarack was able to derisk 950 MMbbl of OOIP on its existing lands. Given the stacked nature of the multiple zones, management expects development at Seal to drive strong capital efficiencies and economics with large-scale multi-well pads pushing lateral lengths to 1.5 miles.

Risk Management

The Company takes a systematic approach to manage commodity price risk and volatility to ensure sustaining capital, debt servicing requirements and the base dividend are protected through a prudent hedging management program. For 2024, approximately ~50% of net after royalty oil production is hedged against WTI with an average floor price of ~US$68/bbl with structures that allow for upside price participation averaging ~US$89/bbl. Our strategy provides protection to the downside while maximizing upside exposure. Additional details of the current hedges in place can be found in the corporate presentation on the Company website (www.tamarackvalley.ca).

We would like to thank our employees, shareholders and other stakeholders for all of their support over the past year. Tamarack materially advanced our multi-year transformation and would not have been able to achieve this without the dedication and hard work of our employees. We look forward to continuing to develop our high-quality assets to create shareholder value in a sustainable and responsible way.

Executive Update

Tamarack is pleased to announce the promotion of Rocky Baker to Vice President, Marketing. Since joining the Company in January 2022 Rocky has been instrumental in establishing a strong internal marketing team and executing on key initiatives to enhance both market access and product realizations. Rocky brings over 17 years of oil and gas marketing experience, and prior to joining Tamarack she was Manager of the Commercial Services Group at Inter Pipeline. Rocky holds a Chartered Professional Accounting (CPA) Designation and a Bachelor of Commerce degree from the University of Calgary.

2023 Independent Qualified Reserve Evaluations

The following tables highlight the findings of the Reserve Reports, which have been prepared in accordance with definitions, standards and procedures contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101“) and the most recent publication of the Canadian Oil and Gas Evaluation Handbook (“COGEH“) by McDaniel and GLJ, qualified independent reserves evaluators, each with an effective date of December 31, 2023 and preparation dates of February 9, 2024 and January 29, 2024, respectively. All evaluations and summaries of future net revenue are stated prior to the provision for interest, debt service charges or general and administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs and estimated future capital expenditures. The information included in the “Net Present Values of Future Net Revenue Before Income Taxes Discounted” table below is based on an average of pricing assumptions prepared by the following three independent external reserves evaluators: GLJ, Sproule Associates Limited and McDaniel (the “3-Consultant Average Forecast Pricing“). It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. All per share reserves metrics below are based on basic shares outstanding as of December 31, 2023. Note that columns may not add due to rounding.

Company Reserves Data (Forecast Prices and Costs)⁽¹¹⁾

Net Present Values of Future Net Revenue before Income Taxes Discounted at (% per year)⁽¹⁴⁾

Reconciliation of Company Gross Reserves Based on Forecast Prices and Costs⁽¹⁴⁾

Future Development Capital Costs⁽²⁸⁾

The following is a summary of estimated FDC required to bring TP and TPP undeveloped reserves on production.

Finding, Development & Acquisition Costs

Tamarack is an oil and gas exploration and production company committed to creating long-term value for its shareholders through sustainable free funds flow generation, financial stability and the return of capital. The Company has an extensive inventory of low-risk, oil development drilling locations focused primarily on Charlie Lake and Clearwater plays in Alberta while also pursuing EOR upside in these core areas. Operating as a responsible corporate citizen is a key focus to ensure we deliver on our environmental, social and governance (ESG) commitments and goals. For more information, please visit the Company’s website at www.tamarackvalley.ca.

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