Tamarack Valley Energy Ltd. (ticker: TVE) has announced its 2018 capital budget and full year guidance, along with an operational update, including record Q4 production volumes.
TVE Core Areas
2018 CapEx
Tamarack’s $195 million – $205 million capital budget for 2018 reflects the company’s asset base, its higher oil and liquids weighting in 2018 relative to 2017, and a continued focus on efficiencies and cost control. Tamarack expects its increased oil and liquids weighting is expected to improve netbacks and provide support for cash flows through periods of prolonged weakness in natural gas prices.
2018 exit production targets 24 MBOEPD, two-thirds oil and NGLs
- Annual average production between 22,500 – 23,500 BOEPD (64-66% oil and liquids), with 2018 exit production estimated between 24,000 – 24,500 BOEPD (65-67% oil and liquids)
- Estimated year end 2018 debt to fourth quarter annualized cash flow ratio of less than 1.0 times with an estimated $100 million of liquidity on the company’s existing credit facilities
Drilling 116 net wells in 2018 with Viking and Cardium light oil emphasis
Tamarack’s 2018 budget anticipates the drilling of 120 (116.4 net) wells in 2018, including 68 (66.7 net) Alberta Viking light oil wells, 23 (20.7 net) Saskatchewan Viking light oil wells, 20 (17.3 net) Cardium light oil wells, six (5.7 net) wells at Redwater, three net wells at Penny and three net heavy oil wells. The capital program is expected to be evenly spent in the first half and second half of 2018.
During the first quarter of 2018, Tamarack expects to have four to five rigs in operation. The company anticipates drilling nine (8.5 net) Cardium wells at Wilson Creek, 27 (26.0 net) Alberta Viking wells at Veteran and six (5.7 net) wells at Redwater, which are expected to be drilled toward the end of March and have little to no impact on Q1 2018 production, but should positively impact Q2 2018 volumes.
In addition, the company is undertaking a second expansion of its Veteran oil battery to increase capacity to 10,000 to 12,000 bbls/d of oil from its current 5,000 bbls/d capacity.
Operational update
Based on Dec. field numbers, the company estimates its Q4 2017 production averaged over 22,600 BOEPD with an oil and liquids weighting of 62%. This is higher than the previously forecast exit rate of 22,000 BOEPD (59% oil and liquids).
In response to the prevailing weakness in Canadian natural gas pricing, Tamarack made a conscious decision through most of 2017 to allocate capital to drilling locations and other projects that have a higher oil and liquids weighting, which positively impacted its production profile and operating netbacks.
This is expected to continue through 2018, driving a 12-17% increase in oil weighting for 2018 over 2017 based on the budget and capital program outlined above. Tamarack expects to increase its operating netback by approximately 12-15% in 2018 compared to 2017, when applying forecasted 2018 prices to 2017 actual production.
In response to favorable rates for completions crews and to avoid challenges accessing service crews in Q1 2018, the company accelerated approximately $10 to $15 million of its Q1 2018 capital into 2017. The base and accelerated Q4 2017 program resulted in the drilling of 20 (18.7 net) horizontal wells, 15 of which were drilled in Veteran and not yet on production as of Dec. 31, 2017.
Tamarack elected to proceed with completing nine of the 15 wells in Dec., including four wells on the company’s 8-25 pad and five wells on the 12-29 pad. These wells are expected to come on stream later in Jan. and contribute to first quarter 2018 production.
