Tamarack Valley presents at the EnerCom conference Tuesday, Aug. 21
Oil & Gas 360 did an interview with Brian Schmidt, CEO of Tamarack Valley Energy (ticker: TVE), in advance of the upcoming EnerCom The Oil & Gas Conference.
OAG360: What do you want the conference attendees to know about your company that they may not already know?
Tamarack Valley Energy President and CEO Brian Schmidt: Since last year, I would tell you that the debt-adjusted cash flow per share, has gone up significantly. Just so you have some perspective, for the first three quarters of last year cash flow was 45 cents a share. The last three quarters we were the 25, 26 and 27 cents respectively. So it’s a big change.
I don’t think that the market has caught up with the significant cash flow growth; the share price has gone up, but it hasn’t gone up near as fast as the cash flow per share. We’re still trading well below our peers.
OAG360: So what led to that increase?
Brian Schmidt: It all centers around netback improvement.
We’ve cut our cash costs in the last three years 23%. So, number one is that the costs are down.
Number two, the price we’re fetching– it’s premium-grade light oil. So even though our liquid weighting is about 65% oil and liquids we are realizing cash flow netbacks that are better than some of our peers with 80+% liquid weighting with lower quality crudes and higher cost structure. So out of our peers, out of ten peers, we’re number two on netbacks.
Number three, “With respect to operations what catalysts and milestones,” we are hitting production records every quarter now, because we’re developing the key asset we bought last year at Veteran, AB the Viking oil play.
Everybody knows we’ve done a really good job drilling primary wells in the new asset we bought. But our company has a lot of secondary waterflood. So we’ve commenced spending capital on a waterflood that’s going to double our reserves in that field.
It’s one of the things that we’ve not really talked about the potential to the market. So for the EnerCom conference we’ll be revamping our entire presentation to talk about the waterflood upside.
There is another catalyst – a field we bought called “Penny.” It’s a low decline waterflood field. We’ve drilled horizontal wells in that pool that has previously been developed with vertical wells, so we are excited about these drilling results as well..
OAG 360: What’s your vision for the company for the next two to five years?
Brian Schmidt: We are a light-oil, growth company. We don’t see any reason to change, so we’ll be continuing on that path. In the next two to five years, we’d like to be 40,000 to 50,000 barrels a day. So double the size, with a focus on building debt-adjusted cash flow per share growth.
OAG360: Just wrapping it up, is there something that you like to tell the investors coming to the EnerCom conference?
Brian Schmidt: The one thing I always worry about when I come down to your conference is that Canada on the macro side gets a bit of a rap. Because it’s seen as a higher cost basin. It’s seen as having political difficulties with the pipeline access.
I would counteract that. For instance, on the royalty side, compared to the U.S. model, we’re paying a lot less royalty. That more than compensates for pipeline deducts or higher costs. So when you compare apples to apples – the cash flow multiple that U.S. companies are being valued at is almost twice what the cash flow multiple here in Canada.
We’re generally under-valued. American investors who pulled out a couple of years ago, now we’re hearing them say, “Canada should always have lower valuations, but not half.” So we’re seeing people step back into the Canadian market.
The thing to remember is that even during the downturn, we’ve built this company to be a very sustainable company. Looking at our balance sheet – we’re only 0.8 times debt-to-cash flow. Even with prices low, we really have a strong balance sheet and we really have grown this company on a per-share basis up to something significant. I believe the best comparison is: “Look at three years ago and look at us now.”
