Tamarack Valley Energy’s accelerated development of its acquired Viking assets is already moving the needle—acquisition immediately added 6,250 BOEPD; TVE production 19,750 BOEPD exiting Q1
Tamarack Valley (ticker: TVE) released its fourth quarter and year-end results for 2016 on March 23, achieving a record quarterly production of 11.5 MBOEPD. The company also reported a 5% increase per fully diluted share in proved developed producing (PDP) reserves. Management believes its legacy Cardium assets will continue to outperform in 2017.
But there’s a new twist to the Tamarack Valley story in 2017.
Transformational acquisition: TVE already reaping rewards from the Viking—and just getting started
In January 2017, Tamarack Valley closed its acquisition of Spur Resources’ and its assets and operations in the Viking play in Saskatchewan and Alberta.
“The combination is transformational for Tamarack and will add concentrated, high netback, light oil-weighted Viking-focused assets to Tamarack with operations in southwestern Saskatchewan and southeastern Alberta (the Spur assets),” the company said in a press release announcing the acquisition.
Tamarack reported that the Viking oil assets immediately added 6,600 BOEPD (57% light oil and NGLs) of low cost production and an extensive drilling inventory of 720 (695 net) total identified low-risk drilling locations with an average light oil and NGL weighting of approximately 70%.
Viking development hits the accelerator: most active quarter in TVE’s history
As of March 23, 2017, Tamarack had drilled 35 (32.1 net) horizontal Viking light oil wells, 8 (7.3 net) extended reach horizontal Cardium light oil wells, 3 (3.0 net) heavy oil wells in Hatton and one net Notikewin liquids-rich natural gas well. It was the most active quarter for drilling and capital activity in the company’s history.
Of the wells, a total of 27 (25.1 net) new wells are currently on production, which includes 22 (20.5 net) horizontal Viking light oil wells, 3 (2.6 net) extended reach horizontal Cardium light oil wells, one net heavy oil well in Hatton and one net Notikewin liquids-rich natural gas well.
Production has already climbed to 19,750 BOEPD
Production from the new assets has already moved TVE’s current production up to approximately 19,750 BOEPD, and Tamarack reported that it is on target to meet its average first half production guidance range of 18,500 to 19,000 BOEPD.
Tamarack looks to complete its first half drilling program early in the second quarter, pending surface access, by fracture stimulating and equipping for production the remaining 20 (18.3 net) wells.
Much larger program coming this summer: 90-100 additional Viking wells
TVE Vice President Finance and CFO Ron Hozjan spoke to Oil & Gas 360 about the company’s plans. Hozjan told Oil & Gas 360® that Tamarack Valley’s record Q1 activity barely set the table for a much more active summer drilling program. “We’ll be taking lessons from the wells we’ve drilled in the Viking already and carrying those into a 90 to 100 well drilling program in the summer,” he explained.
“We’re currently testing a few concepts in the Viking from testing reduced well spacing to re-orientating the direction of our wells,” Hozjan said. Tamarack believes that by reducing its well spacing to 100-150 meters from its current 200 meters, the company will be able to add 100-200 well locations to its drilling inventory.
TVE is concentrating on locations that offer payout in 1.5 years or less. The company calculates it has 759 such wells across all of its acreage, according to the company’s investor presentation.
“There has been some pressure communication between the lower zone and the Viking, and we’re seeing quite a few pockets in the Viking that are over pressured from the waterflood below. Because of that, we expect those wells to outperform type-curves once we re-orientate the wells.”
“We own our own infrastructure so we can control the timing of bringing the wells online as well as their production,” Hozjan continued. “We are not going to fully understand that upside until maybe June of this year.”
Use of capital in 2017
Hozjan said the 2017 capital spend will be split roughly 60/40 between the Viking and TVE’s legacy Cardium assets. “Originally, our budget was split 50/50, but based on the fact that we were able to get on the Viking assets earlier than expected, we will spend a little bit more on those assets this year.”
