Tamarack Valley Energy Ltd reported strong financial performance for the first quarter of 2025, with significant year-over-year increases in key financial metrics. The company’s adjusted funds flow rose 33%, and free funds flow doubled compared to the previous year. With a perfect Piotroski Score of 9 according to InvestingPro, indicating excellent financial health, the company’s stock showed a modest increase of 2.2% in pre-market trading. InvestingPro analysis reveals 8 additional key insights about the company’s financial strength and growth potential.
Key Takeaways
- Adjusted funds flow increased by 33% year-over-year to $226 million.
- Free funds flow doubled, reaching $91 million.
- Production expenses decreased by 23% compared to Q1 2024.
- Tamarack Valley Energy returned $246 million to shareholders through dividends and buybacks.
- The company reported a record production of 57,594 barrels of oil equivalent per day for oil and liquids.
Company Performance
Tamarack Valley Energy demonstrated strong operational performance in Q1 2025, marked by a 9% increase in production to an average of 67,697 barrels of oil equivalent (BOE) per day. The company achieved record production levels for oil and liquids, driven by growth in its Clearwater and Charlie Lake plays. The strategic focus on increasing water injection rates and enhancing drilling efficiency has contributed to these gains.
Financial Highlights
- Revenue: $444.29 million, reflecting strong operational performance.
- Adjusted funds flow: $226 million, up 33% year-over-year.
- Free funds flow: $91 million, a 100% increase from the previous year.
- Operating netback: $47.37 per BOE, a 13% increase year-over-year.
- Production expenses: $776 per BOE, 23% lower than Q1 2024.
Market Reaction
Following the earnings announcement, Tamarack Valley Energy’s stock price increased by 2.2%, reflecting investor confidence in the company’s strategic initiatives and financial health. Currently trading at $23.33, the stock remains within its 52-week range, with a high of $5.05 and a low of $3.10. The market’s reaction indicates a positive sentiment towards the company’s strong quarterly performance and shareholder returns, supported by three consecutive years of dividend increases and aggressive share buybacks, as highlighted by InvestingPro analysis.
Outlook & Guidance
For the remainder of 2025, Tamarack Valley Energy has set a production guidance of 65,000 to 67,000 BOE per day. The company plans to invest between $430 million and $450 million in total annual capital, with the potential to reduce this without impacting production levels. The company anticipates the start of its CSV facility in July and will provide an update on its five-year plan during an Investor Day scheduled for June 25th.
Executive Commentary
Steve Bytels, CFO, noted, "We’re trending above our five-year plan growth rate this year," highlighting the company’s strong performance and growth trajectory. CEO Brian Schmidt emphasized the long-term potential, stating, "Less than 1% of the oil in place that we’ll be producing in our five-year plan." These statements underscore the company’s strategic focus on sustainable growth and efficient resource management.
Risks and Challenges
- Potential fluctuations in oil prices could impact revenue and profitability.
- Execution risks associated with increasing water injection rates and expanding production capacity.
- Regulatory changes could affect operational strategies and cost structures.
- Market competition in the energy sector may pressure margins and growth opportunities.
Q&A
During the earnings call, analysts inquired about Tamarack Valley Energy’s capital allocation strategy, which involves returning 60% to shareholders through buybacks and dividends. The company also addressed questions regarding its low decline rates in conventional reservoirs and potential merger and acquisition opportunities. Additionally, the waterflood design strategies were discussed, highlighting the company’s innovative approach to enhancing production efficiency.
Full transcript - Tamarack Valley Energy Ltd (TVE) Q1 2025:
Sergio, Conference Call Moderator: Good morning. Welcome everyone to the Tarmarek Valley Energy Limited Conference Call on Thursday, 05/07/2025, discussing the recent Q1 twenty twenty five results press release. I would like to introduce today’s speakers, mister Ryan Smith, president and chief executive officer, and mister Steve Vitals, chief financial officer. If you would like to ask a question, please press star, then the number one on your telephone keypad to join the queue. If you would like to withdraw your question, please press star too.
Thank you. Mr. Schmidt, you may begin your conference.
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Good morning and thank you, Sergio. Welcome to everyone on the call to discuss our first quarter operating and financial results. My name is Brian Schmidt. I’m President and CEO of Tamarac Valley. And I’m joined here today with Steve Bytells, our CFO.
This morning, there are five key Q1 result areas which I’d like to highlight. Number one, the success we are seeing in the Clearwater, including in the strength in our base volumes and Charlie Lake production. Number two, the advancement of our waterflood development and planned expansion of the program. Number three, a highly efficient and nimble 2025 capital program, which is delivering higher production while observing material cost savings. Number four, our continued operating efficiencies and lowering of costs that are generating further value in our business.
And number five, the progress on our shareholder returns, which with increased share buyback activity. Operationally, we had many successes in the first quarter. Production averaged 67,697 BOEs a day, up 9% from Q1 twenty twenty four. Our total oil and liquids of 57,594 BOE per day represented the highest in the company’s history in terms of liquids production. Thirdly, our Tamarac achieved production growth year over year of 15% in the Clearwater and 9% in the Charti Lake.
The Charti Lake production results reflect acceleration within the 2025 plan, with 10 wells coming on stream in Q1 twenty twenty five. In the Clearwater, we increased water injection rates to over 15,000 barrels a day during the quarter. Looking ahead, we expect to double that rate to approximately 30,000 barrels a day of water injection exiting 2025. With incremental oil rates being correlated to the rate of injection, we expect this will support further decline mitigation, which is resulting in lower sustaining capital requirements year on year as our programs continue to gain efficiencies. We are excited by the strength of our waterflood response and the prospects which exist across our asset base.
In Martin Hills and Nipsey, we’ve observed multiple patterns where production after the initiation of water injection is exceeding the primary baseline rates. This performance supports our expectation for incremental well recoveries in the two to three times primary recovery, where water flow capital will pay out more than seven times. These results are driving growth in free funds flow and reductions in our sustaining capital requirements. I’ll turn it over to Steve to expand on the financial results and the outlook as we move through 2025.
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Thanks, Brian. Overall, Tamarac has now delivered seven consecutive quarters of funds flow per share and production outperformance relative to consensus estimates. In Q1 twenty twenty five, we generated adjusted funds flow of $226,000,000 or $0.44 per share. This represents a 33% year over year increase. Free funds flow of $91,000,000 or $0.18 per share, representing a 100% year over year increase and our operating netback of $47.37 per BOE, representing a 13% increase year over year, driven by our continued cost structure improvements highlighting the production expense of $776 per BOE during the quarter, which was 23% lower versus Q1 twenty twenty four.
Strong operational performance, capital discipline and continuous cost improvements remain key contributing factors to the execution of our strategic plan. This has enabled the company to return over $246,000,000 to our shareholders in the form of dividends and enhanced returns through buybacks over the last twelve months. We have initiated buybacks in January 2024, and since then, and including the April 2025 buybacks of 3,900,000.0 shares, we have repurchased approximately 9% of the twenty twenty three year end shares outstanding. At the same time, our balance sheet has remained strong and continues to strengthen, with our net debt to EBITDA falling to 0.7 times on a trailing twelve month basis, while retaining over $400,000,000 of undrawn credit capacity exiting Q1. Our active buybacks and concurrent production and funds flow growth continues to drive a compounding effect on our per share value creation for investors.
We remain disciplined in our deployment of capital. We expect to see a total annual capital trend toward the lower end of our prior guidance range of $430,000,000 to $450,000,000 which is inclusive of incremental waterflood investment that will build on momentum and results achieved to date. The company delivered strong first quarter results, and we see full year production trending towards the higher end of our range of 65,000 to 67,000 BOE per day. This range includes larger turnaround projects that are planned for Q3 twenty twenty five, but again demonstrates Tamarac’s capacity to deliver more for less. While oil prices have contracted, Tamarack retains a strong outlook for funds flow in 2025, which is driven by the higher production, favorable heavy oil differentials and our success in continuing to lower our costs and enhance margins.
Our sub US40 dollars per barrel WTI corporate breakeven, strong balance sheet and operational performance are key to ensuring our business remains resilient to commodity price market volatility. Our 2025 guidance is unchanged, however, our capital program remains scalable with the ability to respond to market volatility if needed, and we have identified certain projects which could further be deferred while having minimal impacts to 2025, if need be. I will now turn it back to Brian for additional commentary on our field operations and capital program before we open up the call to questions.
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Thank you, Steve. Building on Steve’s prior comments regarding cost structure and demonstrated efficiencies, Tamarac is uniquely positioned as the largest public company producer of the Clearwater, having amassed a significant land base with an estimated 11,000,000,000 barrels of OOIP original oil in place. We see significant potential in leveraging through three key actions. Number one, further scale in our operations. Tamarac continues to optimize its program design.
In 2025, our plan includes pad occupation increasing to seven wells per pad versus four wells per pad over the prior three years. This will be deployed in West Martin, where we are targeting B and C sand development concurrently with the associated waterflood implementation. In addition, activity will continue at the West Martin 14 to 14 pad, whereas of today we have drilled 17 of a planned 23 wells. This pad is an example of how we’re deploying larger scale development within our operations to drive further efficiencies through our business. Number two, the expansion of our water flood.
As noted, we plan to increase water injection through the remainder of the year to over 30,000 barrels of water per day into the Clearwater. This will include ramping up volumes in Martin Hills with an additional 10 injectors, essentially doubling the program in that area without increasing our capital program. These injectors are included as part of the 23 wells being drilled in the 14 of 14 pad. By year end, we expect to be injecting about two thirds of our total volumes at Martin Hills and the remaining one third in North Clearwater And Canal. The third strategy is the further decline mitigation.
With response we are seeing from the waterflood, combined with our strong base performance, our corporate decline is tracking lower than forecast. Tamarac continues to observe annual sustaining capital savings of approximately $15,000,000 for each 1% of decline reduction, and as such are trending to lower sustaining capital, which in turn drives incremental free funds flow in the business. In addition to the Clearwater, Tamarac’s Charlie Lake program continues to perform above expectations. Tamarac brought 10 Charlie Lake wells on stream during Q1. IP30 rates for the group of 10 averaged eight sixty BOEs per day per well, with five wells in Wembley coming on at over nine eighty BOEs per day per well.
The Charlie Lake continues to provide optionality for growth given demonstrated results and Tamarac established access to processing and takeaway. Furthermore, we continue to test both different drilling and completion techniques and are piloting waterflood potential in the play, which could potentially drive further economic enhancement. Looking forward, I’d like to remind investors that on June 25, we will be hosting our Investor Day. A link providing virtual access will be made available on the Events page of our website to enable all interested investors to participate. We look forward to providing further detail on the progress of Tamarac’s waterflood program, while also provide an update to our five year plan at the event.
I would like to thank our employees, Board of Directors, shareholders, and stakeholders for all your continued support. I’ll pass it back to the moderator for questions.
Sergio, Conference Call Moderator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two.
If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Patrick O’Rourke from ATB. Please go ahead.
Patrick O’Rourke, Analyst, ATB: Hey, guys. Good morning. Congratulations on another solid quarter. And just a couple of quick questions here. First with respect to the potential to reduce 2025 capital without an impact to production.
Maybe if you could unpack what some of those initiatives would be? Then as we bridge the gap towards 2026, how this would potentially impact the capital program and growth profile in the forward year here.
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Hey Patrick, it’s Yves here. I’ll start here and then if Brian wants to add anything. I think what’s important to look at here with the capital is, let’s start with where we’re trending, and we’re trending at that low end of the guidance that we talked about. That’s really a function of two things. It’s the efficiencies that we’re seeing that Brian talked about on these bigger stack pads, continued drilling savings of about $5 a meter that continues to build on the momentum from $24 that we talked about.
And then the waterflood, really the outperformance there driving lower corporate decline and ultimately lower sustaining capital. So I think it’s important to note that’s really managing the trend. Then as we look the commodity volatility, there are some defensive things we could do if we needed to pull that capital back further that we alluded to in the press release there. But at this time, we feel that the combination of the lower capital trend that’s going on, coupled with the better margin that we’re seeing in our netback through the reduction in costs and so forth, really insulated our free cash flow from the drop in commodity price. And your second part of the question there on the trend moving into 2016 and growth, I think ultimately that water flood and that lower decline in subsequent sustaining capital is going to result in the ability for us to either grow more, just given for a fixed amount of capital that you’re going to have more free cash available to allocate to either buybacks or growth, etc.
Or you’re going to be able to ultimately do more for less. So if we decide that from a per share basis, it still makes sense to drive more buybacks with that incremental free cash, we could look at that. It really would be dependent on the market at the time. And if we’re in a lower commodity price environment here, does it make sense to grow that as hard? Probably not.
But we are trending, what I would say is above our five year plan growth rate this year. So we’ll update you guys here in June with a better sense of where that sustaining capital is and then probably some of the outputs around growth moving forward.
Patrick O’Rourke, Analyst, ATB: Okay, great. And then just with respect to sort of cost pressures, you talked to the efficiencies that you’re seeing on the things that are maybe less controllable with lower activity out there in the basin, how you’re seeing service cost trends. Then, on the other side of that equation, with tariffs coming into play here, what sort of key inflationary pressures and how are those sort of puts and takes balancing out?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Yeah, so Patrick, let me just comment on a couple of things here. We find that the best way to reduce cost is in that rig efficiency and how you deploy a good constant rig program, how you drill more wells per pad, and driving down the dollar per meter cost on drilling side. And that planning and organization really helps drive those efficiencies. Last year, you may recall, we saved probably around $7 a meter drilling, and that resulted in about a $10,000,000 uplift for savings for capital. And then we rerouted that into the waterflood.
When you reroute capital into waterflood, it drops the number of wells that you need to keep production flat, and that’s where the real efficiency comes in the business itself using drilling efficiency. I wouldn’t say, Patrick, that we’re on a day rate for rigs, that we’re pulling day rates down and that kind of thing. Day rates are staying relatively flat, which means you’re staying consistent rig operators and consistent program, and that’s where we’re getting our savings.
Patrick O’Rourke, Analyst, ATB: Okay, and any key sort of tariff related inflationary issues that you’re seeing right now, or have identified?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: No, no, we don’t see any. You’ll recall the equipment that we actually put on the lease, there’s not that much casing because we just drill the depth and then we’re open hole. You might see a little bit on bits, that sort of thing, but we’re not seeing anything come through on the lease on there.
Patrick O’Rourke, Analyst, ATB: Okay, great, thank you very much for that color.
Sergio, Conference Call Moderator: Thank you. Your next question comes from Jamie Kubik from CIBC Capital Markets. Please go ahead.
Jamie Kubik, Analyst, CIBC Capital Markets: Yeah. Good morning. Thanks for taking my question. Maybe just a quick one on capital allocation. Tamarac generated $91,000,000 of free cash flow in the quarter and returned $76,000,000 to shareholders or roughly 85%.
Should we expect the pace of buybacks to moderate in the coming quarters or how should we think about allocation between debt reduction and shareholder returns based on framework? Thanks.
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Thanks, Jamie. Yeah, we’re going to stay consistent and disciplined with that framework. The key in Q1 there is we did have some carry in from twenty twenty four Q4 that was unused in terms of what we owed for buybacks to shareholders. So you were truing that up with respect to that, and that’s why that percentage would have been a little bit higher. But I think as you look at the quarters and our forecast moving forward, we’re going to stick to that framework where we’re returning 60% through buybacks and dividend.
I think it is really important to continue to pay down debt, strengthen that balance sheet while being opportunistic with our buybacks here. So there are quarters where we may pull a little bit of that buyback ahead, but on the whole and on balance, we’re going to make sure that we’re adhering to what that framework is, you just might have some noise quarter on quarter through the year to take advantage of
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: where our share price is.
Jamie Kubik, Analyst, CIBC Capital Markets: Noted, okay. And then with respect to your guidance being unchanged for 2025, you know, indicating production coming into the top end of the range. Can you talk a little bit about how you expect that to profile through the remainder of 2025? Should we expect some downdraft in volumes for Q1 or Q2, sorry. And can you talk a little bit as well about where the CSV facility might be coming into the profile for 2025 also?
Thanks.
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Yeah, for sure. I’ll talk to the profile and then where we have CSV budgeted internally coming on, Brian can maybe give you a little bit more color on CSV in general, just as he monitors and is speaking weekly with the company. But in terms of profile of production, I would say Q2 is going to be similar to Q1. Q1 we had a bunch of those Charlie Lake wells come on. Q2 benefits from the Clearwater program drilling sort of ramping through April.
So Q2 likely is similar to Q1, and then if you recall Q3, we do have two major turnarounds, one at a third party facility in the Charlie Lake, and then we’re taking our Martin Hills facility down to add some more capacity, free water knockout and things like that, water plant to handle more of this waterflood growth that we’re forecasting through the year. So you’re going to see Q3 be a little bit lower, and then Q4 should see a little bit of growth from Q3 again, in all pointing, like we said, to the higher end of that 65,000 to 67,000 a day range. On CSV, we internally have always budgeted that coming on early in Q3, so depending on timing, that could be something here if that slips that may impact Q3 a little bit, but the team has done a great job being able to utilize our current infrastructure footprint and optimize our flows around that to manage the delays so far that have come through. But I’ll turn it over to Brian here, maybe if he has any more color on what he’s hearing in terms of timing there.
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Yeah, so, and like Steve said, we’ve been very fortunate in picking up some processing capacity that we didn’t think was available before, moving volumes around through our Tamarac own plant, and so I would tell you that in Q1 there was no production really behind pipe because of CSV on Tamarac’s end. Things could change, you could lose that processing here in the interim, and we have dialed back our expectation here in June for it. Everything is pointing to a July start for the plant, maybe even earlier. Looking at the activities in the plant, drying out catalyst is kind of full steam ahead on commissioning, systems commissioning right now. And the trip hazards that we had in the reactor and that could have delayed the project further seem to be behind us at this point.
I think there might be some delays on the pipe. We’ll learn a little bit more about to the plant, or a little bit more about that will probably come out. But I think July is a realistic time for that start.
Jamie Kubik, Analyst, CIBC Capital Markets: Okay, that’s great color. Thank you. And then maybe just last one for me, just on unit costs. You know operating expenses still well below the guidance range second quarter in a row for Tamarac with production not really expected to come off until Q3. Like why should these trend back into that range I guess?
Like does does the new facility add some additional unit cost there or why should Tamarac get back into that range I suppose?
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Yeah, Jamie, we’ve left that there for now. Here’s the thing with Q1, that higher production from a per unit basis helped obviously, and then we had a relatively minor winter when it came to workovers and dealing with heavy oil. We skated through that probably better than we would have had budgeted and forecast. I think we got to look at it that way. Do continue, I think that the teams have done a great job being on top of our operations, specifically on the heavy oil side.
As we look at Q2, I think there are a few things still here through Q2 that could help that cost trend lower, but at the same time, we’ve just decided it’s been only one quarter, let’s leave things where they are. And remember, Q3, you’ve got some major turnarounds that are going to add cost to that annual guidance, and it’s going bring your production down through that quarter a little bit, which is from a per unit perspective going to grind that up. I think for now until we have a better sense of where things sit through Q3, we felt just more comfortable leaving that guidance as is.
Jamie Kubik, Analyst, CIBC Capital Markets: Okay, I’ll turn it back. Thank you for the answers. Thank
Sergio, Conference Call Moderator: you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one. There are no further questions at this time. I will now turn the call over to the Tamarac team. Please go ahead.
Online Q&A Moderator: Thank you. We have a few more questions on the online Q and A. Our first question will be for Mr. Steve Beitelz. Could you provide details on the transaction between Tamarac and Baytex in the Clearwater, and what land has been exchanged with Baytex for the Peavine acreage?
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Yeah, we don’t really get into too many specifics here, but high level what we did is we swapped that pea vine acreage for some acreage in and around our seal area where we’re seeing some really good multi stacked Clearwater and Blue Sky success. And then we also swapped some acreage into and added some extra acreage into our Charlie Lake core area. But that’s all we’re really going to comment on with respect to that. Thank you.
Online Q&A Moderator: Our next question is for Mr. Brian Schmidt. We have seen high declines in the companies that have reported, especially in the Permian Basin. Can you explain our decline rate and the effectiveness of the water flooding to mitigate it at a low CapEx?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Yeah, so the first thing to realize is this is a conventional play and a lot of plays that, like the Permian, are unconventional. Unconventional, you typically have high declines, 60 to seventy percent first year decline, maybe a corporation that is built on that is maybe in around the 37 to 38%. In this particular case, being conventional and not fracking, we’re not getting the high decline rates. Corporate declines are, even if you’re building production, are somewhere in around the 28% corporate decline, and that would be on building a company on primary. Once you get into secondary where you’re injecting water, you can expect those declines to moderate quite a bit.
It’s not unusual for conventional reservoirs to be in the high teens for declines, and when we talk about lower sustaining capital, it really is a reflection of water flood and this reservoir being conventional, that is the real benefit. And so there is some very discrete positives by being in the conventional reservoir.
Online Q&A Moderator: Thank you. Our next question is for Mr. Brian Schmidt again. What is the total meterage being drilled on the Clearwater Super Pad?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Well, let’s see, you got 17 wells, 17 wells times about 18,000, maybe about 11,000 meters per well, time you incorporate the injectors. So yeah, there’s the math there, it’s incredible. And just for those listeners, last year I know we did the math on this, I think you could get yourself from Calgary to Seattle with the meterage we drilled last year, it was that 1,400,000 meters, wasn’t it, Steve? One point four million meters we drilled last year. So you can see the KPI that the drilling department has on that dollars per meter, is really an important number.
And on that pad, Steve just ground the number out, it’s 187,000 meters on that 14 to 14 pad so far.
Online Q&A Moderator: Thank you. Our next question is for Mr. Steve Beitelz. Could you provide the effective date of the 900 BOE a day asset disposition earlier this year?
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Yeah, well, we’re not going to get into specifics. What I would say there is that transaction is expected to close in the second quarter here, and we’ll hopefully be able to provide an update for sure with our second quarter results, but maybe even at our Investor Day there in June.
Online Q&A Moderator: Thank you. Our next question is for Mr. Branchment. With such a large land base, how are you pursuing exploration on your undrilled acreage?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Yeah, this is so, obviously, you know, I think as many of the listeners are aware, there’s in our inventory somewhere around 2,100 wells, and then we’ve got waterflood capital on top of it, so our ability to get in and do a lot on exploration acreage, it’s just really hard to allocate much to that. So what’s been happening is we’ve had a strategy of building a land base and then allowing other operators to drill around us, and that’s surprisingly, that’s actually been very useful in increasing our inventory without the need to deploy capital on de risking. And so any of the listeners who look around our areas will see that both, for example, the two primary areas are Pelican and Seal, there’s been quite a bit of drilling around there, some of it right next to our, right adjacent to our acreage, and we’ll be booking inventory based on that those results.
Online Q&A Moderator: Thank you. Our next question is for Mr. Brian Schmidt again. Tamarac has 11,000,000,000 barrels of original oil in place, how much is going to be produced in your five year plan, and how do you see expansion going forward?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Yeah, so I think it’s really important for listeners to comprehend, we’re going to be raising the expectation and type curves on our waterflood quite substantially here going forward. You will see that in our Investor Day that we’ll have an updated five year plan. To answer your question specifically, it’s less than 1% of the oil in place that we’ll be producing in our five year plan. Obviously there’s a lot of room for uplift there, and so we’re quite excited to rebuild that plan for Investor Day.
Online Q&A Moderator: Thank you. Our next question is for Mr. Steve Bytels. With oil prices being lower, will Tamarac be active on M and A? Will you look to sell your Viking and Sparky IHill?
Steve Bytels, Chief Financial Officer, Tamarac Valley Energy Limited: Yeah. So the first question there on being active in M and A, low prices and being opportunistic is really what we were able to build our foundation and the company you see today on through 2020 and the momentum coming out of those COVID years. So I think Brian and I would both share the same view that this is when you would look at M and A. That being said, I think you need to be really disciplined in how you look at it. The way we would look at M and A corporately for us right now is it’s probably more strategic tuck in type activity, similar to what we did on that Baytex deal, where we’re adding lands that offer synergies to our waterflood program and infrastructure and so forth.
And it would be pretty small in nature. I think the other thing to be aware of there is our buyback effectively is some of the most accretive M and A we can do. And intrinsically, we see the valuation of the company currently, all this waterflood upside that wouldn’t be coming through and being valued and all that inventory, on the development side, but what Brian just talked about, even on the exploration side with some of the success our competitors are having at Pelican and Seal, you’re effectively buying back all that inventory yourself. So any M and A is going to have to compete with our buyback economics from that standpoint. So I think just being very disciplined there and being true to what we’ve done with the company and understanding that it’s got enhanced profitability and margin and not drive up breakeven is going to be key.
With respect to potentially selling the Viking and iHill Sparky, Again, there, I think the way we’d look at it is we are always ensuring that we’re optimizing our portfolio, and if certain properties don’t compete for capital, we would look to move off them and bring those proceeds in and reinvest those proceeds. So I think we’re working through that right now. Those assets are unique in their water floods and they have very good economics tied to them, specifically the I Hill Sparky property. Trying to sell assets at $55 or sub $60 oil would go against what I just talked about in terms of being opportunistic earlier in the conversation. So we’re going to look at it, we’re going to be patient with it, and then we’ll see here at the right time in terms of moving those assets out and reinvesting those proceeds into the core Clearwater and Charlie Lake portfolio.
Portfolio.
Online Q&A Moderator: Thank you. Our next question is for Mr. Brian Schmidt. What is the best waterflood design in the Clearwater, and how does the company decide on the design?
Brian Schmidt, President and CEO, Tamarac Valley Energy Limited: Yeah, that’s a really good question, and you’ll note that our competitors, Headwater and Spur, we’re all trying different well configurations, and it must be confusing to kind of look and see all the different things that are happening. So the designs that we’re choosing are based on the thickness and OOIP in the section, and whether you decide to inject early or whether you do conversions later. And the one thing that I’m really pleased about, and I think the other operators would say the same, is that this is a very robust, forgiving reservoir in terms of waterflood. They all seem to work, and I think about 50, I think there’s something like 52 patterns in total, and we’re injecting I think cumulatively between the three companies somewhere around 100,000 barrels a day, and been doing that for a while and haven’t seen a wreck in the whole thing. So from my experience in waterflood, this has been the most robust waterflood that I’ve seen.
Just to talk a little bit about risk and uncertainty, a lot of these patterns are past the risk phase, in that you’ve already achieved one or two paybacks already, and so you know, you’re trying to determine the magnitude of the benefit at this point, that you’re past a really good point.
Online Q&A Moderator: Thank you. We have no more questions on the online Q and A, so we’ll pass it back to the moderator to close
Sergio, Conference Call Moderator: Thank you. Ladies and gentlemen, this concludes your conference call for today. Thank you for your participation. You may now disconnect.
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