Tamarack Valley Energy Ltd. · TSX:TVE
Tamarack Valley Energy — Investor Presentation (August 2013)
39 slides from Tamarack Valley Energy's investor presentation, August 2013
Slide 1: Establishing Top Tier Sustainable Growth
Establishing Top Tier Sustainable Growth TVE: TSX-V August 2013 www.tamarackvalley.ca 1
Slide 2: Transaction at a Glance
Transaction at a Glance Based on Tamarack’s ongoing success in the Viking and Cardium, Tamarack has entered into the following Transactions: 1. Corporate Acquisition of Sure Energy Inc. (TSX: SHR) – Expands inventory of low risk (85% COS) development locations in the Redwater Viking trend – Redwater
Slide 3: The Tamarack Team
The Tamarack Team Management Board of Directors • Brian Schmidt, President & CEO • Floyd Price, Chairman • Ron Hozjan, VP Finance & CFO • Dean Setoguchi • Niels Gundesen, VP Engineering • David Mackenzie • Ken Cruikshank, VP Land • Sheldon Steeves • Kevin Screen, VP Production & Operations • Brian S
Slide 4: Premier Oil Areas – Repeatable, Sustainable, Scalable
Premier Oil Areas – Repeatable, Sustainable, Scalable Existing TVE Core Areas Farm-in Areas Existing SHR Core Areas ... Viking and Cardium are Western Canada’s most active light oil plays and Tamarack is participating in both. 4
Slide 5: Rationale for Acquisition and Farm-in
Rationale for Acquisition and Farm-in 1. Aligned with current business plan / core areas • Expand Redwater Viking inventory and capitalize on proven operational efficiencies • Efficient exposure to low risk Cardium development resource • Additional heavy oil assets provide supplemental upside 2. Pro
Slide 6: Where We Were, Where We Are Going
Where We Were, Where We Are Going Proven Sustainability Low Risk ‘Manufacturing’/ Future Fuel 2012 / 2013 Results Inventory • Industry leading per well • 365 net 85% COS drill • Ability to double or triple capital costs locations ‘Manufacturing’ inventory • Viking: <$1 million • 98,000+ acres of Vik
Slide 7: Strong History of Organic and Acquisition Success
Strong History of Organic and Acquisition Success Organic Development at Lochend Echoex Corporate Acquisition 100 100 As at December 31, 2012 As at December 31, 2012 Incremental value added since acquisition $90.1 million 75 75 Possible Possible 3P value risked risked reserves created: reserves $34.
Slide 8: Transaction Summary – Sure Energy Ltd.
Transaction Summary – Sure Energy Ltd. Total consideration paid - $52.5 million (including transaction costs for TVE and Sure) • Sure shareholders receive 100% Tamarack shares • Tamarack pays 101% (plus accrued interest) to payout outstanding $10.0 million debenture • Tamarack assume $32.0 million o
Slide 9: Terms of the Arrangement
Terms of the Arrangement • Combination of Tamarack Valley Energy Ltd. and Sure Energy Inc. through Plan of Arrangement Transaction Structure • No change of control for Tamarack • $52.5 million comprised of $17 million via the issuance of Tamarack shares, the assumption by Tamarack of $32 million of
Slide 10: West Central Cardium Farm-In Summary
West Central Cardium Farm-In Summary Farm-in Details / Terms • 180 gross (110 net) section farm-in with an industry major within the West Pembina Cardium fairway • 84 gross (60 net) prospective sections Sunchild/O’Chiese • 100 Identified locations: • 78 net 1-mile Hz oil wells Wilson • 22 net 2-mile
Slide 11: Pro-Forma Summary
Pro-Forma Summary TVE Pre- Sure Cardium Pro-forma % Increase Transactions Farm-in Production 2,890 938 – 3,828 32% Liquids weighting 59% 47% – 56% (5%) Operating netback 39.27 25.55 – 35.90 (8%) Undeveloped land (acres) 155,880 73,250 – 229,130 47% Low risk drilling inventory (wells) 166 77 122*** 3
Slide 12: Pro-Forma Inventory… 600 net locations
Pro-Forma Inventory… 600 net locations Low Risk “Manufacturing Inventory” Locations CAPEX / well NPV / Well ROR Payback Period Viking 200 $1.0 mm $0.9 mm to $1.74 mm 80% to 150%+ 1.2 yrs or less Cardium 165 Full cycle 37 $2.9 mm to $3.2 mm $0.5 mm to $1.8 mm 18% to 50% 1.5 to 3 yrs Half cycle 128 $2
Slide 13: Pro-Forma Forecasts
Pro-Forma Forecasts • Pro-forma production at close 3,828 boe/d, 56% liquids • 2013 Production average 3,150 to 3,250 boe/d, 57% liquids • 2013 Exit production 4,200 to 4,300 boe/d, 58% liquids • 2013 CAPEX $53 million • 2013 Cash flow $38 million • 2013 YE debt/cash flow 1.7 times (Q4/13 annualized
Slide 14: Area Summaries
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Slide 15: Viking Oil Trend: 2013 Catalysts
Viking Oil Trend: 2013 Catalysts • Trend is characterized by: • High OOIP/sec Foley Lake • TVE operated vertical re-entry - Q4/12 • Shallow depth • Industry major drilled & completed 3 offsets • Low GORs Virginia Hills TVE • 200 net locations - current 100% low risk development Westlock JV with a ma
Slide 16: Redwater
Redwater Oil netbacks: Actual Field Price Estimated Field Price $79.09 $75.66 $12.23 $12.86 The 9.0 (8.55 net) 2012 drilled $12.51 $12.58 Viking wells IP30 average per well rate was 76 bbls/d versus the $54.35 $50.22 acquisition forecast of 60 bbls/d Royalties Opex Netback 2012 2013b GLJ Pricing – D
Slide 17: North Redwater / Westlock
North Redwater / Westlock • Sure lands compliment existing TVE lands • 100% operated with synergistic infrastructure • 11 producing Viking oil wells • 28 net locations - current low risk development drilling inventory (>85% COS) • Potential to add an additional 35 locations with 60% COS • Industry d
Slide 18: Summary
Summary • Combined transactions establishes a ‘Manufacturing’ platform for TVE • Inventory portfolio provides flexibility across oil and liquids rich gas locations as well as half cycle and full cycle development • Full cycle costs/ risk is managed by ‘pay as you go’ farm-in versus sinking capital i
Slide 19: Appendix
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Slide 20: Tamarack Profile (Pre-Transaction)
Tamarack Profile (Pre-Transaction) Shares outstanding - Basic 29.7 million - Fully diluted 33.0 million Share price $2.50 Available bank lines $72.5 million Market cap $74 million Enterprise value $131 million Net debt at June 30, 2013 $56.6 million EV / Q2/13 flowing barrel $43,329/boepd Q2/13 prod
Slide 21: Tamarack Advantage
Tamarack Advantage 1. Industry leading CAPEX • Payback between 8 to 14 months management on Cardium and Viking wells – Drilling Cardium wells for less than $3 million and Viking wells for $1 million “all in” • Drill program netbacks of over – Adding $300,000 to $1,000,000 $50/boe NPV per well 2. Pro
Slide 22: Consistent Production Growth
Consistent Production Growth 1,500 Oil prod'n per 62.5k shares Liquids production 1,250 1,000 Production (bbls/d) 750 500 250 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2011 2012 2013 ... Tamarack has continued to add oil production on a per share and on an absolute basis. 22
Slide 23: Capital Cost Reductions – Major Impact
Capital Cost Reductions – Major Impact Garrington Cardium Oil Capital Costs Redwater Viking Oil Capital Costs 5,000 1,400 Equip 1,305 Reduced capital 4,500 4,321 Reduced costs by 26% Completions 1,190 4,087 capital costs 1,200 160 since acquisition 321 Drilling 4,000 200 by 34% since drilling first
Slide 24: Reducing Capital Costs and Effect on Payouts
Reducing Capital Costs and Effect on Payouts 45.0 Cardium 40.0 Viking 35.0 Payout period (months) 30.0 Viking Cutting $300k Cardium 25.0 shortens payout Cutting $1.2 mm to 12 months shortens payout to 8 months 20.0 Previous operator 2011 15.0 2011 2012 10.0 2012 5.0 0.0 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Slide 25: Drilling Program Review
Drilling Program Review Production to Feb 28/13 (bbls) Lochend 2-29 46,500 133,000 bbls production after payout 10 mo. IP 60 378 bopd 45,000 bbls to payout 178,000 bbls reserves 10 month – paid out Garrington 2-20 42,700 100,000 bbls production after payout 8 mo. IP 60 391 bopd 41,000 bbls to payout
Slide 26: Peak IP30 Oil Rate Well Performance (Lochend & Garrington)
Peak IP30 Oil Rate Well Performance (Lochend & Garrington) Cardium oil rates – 30 day IP Rate (bbls/d) 400 120 TVE ROR – 120% Peak 30-day Production Rate (bbl/d) NAV – $3.60 mm Well Count 350 100 300 Peak 30-day Productive Rate (bbls/d) $3.3 mm DCT needs 120 bbls/d – 25% ROR 80 250 $4 mm DCT needs 1
Slide 27: Operational Efficiency – Spud to On-stream
Operational Efficiency – Spud to On-stream 250 120 Spud-to-On-Production Time Well Count 100 200 Spud-to-On-Production Time (days) 80 150 Well Count 60 100 40 50 20 0 0 Data compiled by National Bank Financial research ... Tamarack’s payout period enhanced by execution in the field. 27
Slide 28: Redwater Performance
Redwater Performance 1,000 100 Added an 2012 Fall drills Acquisition forecast additional 900 2012 Spring drills Producing day average 6.85 net Echoex base wells Calendar day average 800 80 Daily oil production using field estimates Oil Production (bbls/d) 700 Added 3.7 Wells came on production 600 6
Slide 29: Building Credibility - Six Month Review
Building Credibility - Six Month Review What we said we’d do for Q4/12 to Q1/13… What we did Q4/12 to Q1/13 … Focused drilling on wells with <14 month payouts to “Live within means” – keep debt at acceptable levels given reduce debt to cash flow levels to approx. 2.0 times Q4/12 current commodity pr
Slide 30: TVE Current Hedges as at August 2013
TVE Current Hedges as at August 19 2013 Term Hedge type Counterparty Volume Pricing July 1, 2013 to December 31, 2013 WTI fixed price Macquarie Bank 400 bbls/d Cdn $93.25/bbl July 1, 2013 to September 30, 2014 WTI fixed price Macquarie Bank 300 bbls/d Cdn $87.55/bbl January 1, 2014 to September 30,
Slide 31: TVE Contact Information
TVE Contact Information Tamarack Valley Energy 3100, 250 – 6th Avenue SW Calgary AB T2P 3Y7 Tel: 403.263.4440 www.tamarackvalley.ca info@tamarackvalley.ca 31
Slide 32: Disclaimers & Advisories
Disclaimers & Advisories This presentation of Tamarack Valley Energy Ltd. (“the “Company”) contains certain statements and information that are forward looking statements or information within the meaning of applicable securities law, and which are collectively referred to herein as “forward looking
Slide 33: Disclaimers & Advisories con’t
Disclaimers & Advisories con’t Furthermore, the forward looking statements contained in this document are made as at the date of this presentation or the dates specifically referenced herein and unless expressly required by law the Company disclaims any intention or obligation to update or revise an
Slide 34: Purchaser’s Rights of Action
Purchaser’s Rights of Action CERTAIN STATUTORY RIGHTS OF ACTION IN ONTARIO Part 5 of Ontario Securities Commission Rule 45-501 – Ontario Prospectus and Registration Exemption (“Rule 45-501”) provides that the right of action for damages and right of rescission referred to in section 130.1 of the Sec
Slide 35: Purchaser’s Rights of Action
Purchaser’s Rights of Action CERTAIN STATUTORY RIGHTS OF ACTION IN SASKATCHEWAN Where an "offering memorandum" (as defined in The Securities Act, 1988 (Saskatchewan)), together with any amendment to the offering memorandum, sent or delivered to a purchaser who is subject to the securities laws of th
Slide 36: Purchaser’s Rights of Action
Purchaser’s Rights of Action CERTAIN STATUTORY RIGHTS OF ACTION IN SASKATCHEWAN (continued) If the purchaser purchased the security from the issuer, the purchaser may elect to exercise a right of rescission against the issuer and, when the purchaser so elects, the purchaser shall have no right of ac
Slide 37: Purchaser’s Rights of Action
Purchaser’s Rights of Action CERTAIN STATUTORY RIGHTS OF ACTION IN SASKATCHEWAN (continued) A purchaser of a security who is subject to the securities laws of the Province of Saskatchewan from a vendor who is trading in Saskatchewan in contravention of The Securities Act, 1988 (Saskatchewan), the re
Slide 38: Purchaser’s Rights of Action
Purchaser’s Rights of Action CERTAIN STATUTORY RIGHTS OF ACTION IN MANITOBA In the event that an offering memorandum, together with any amendment thereto delivered to purchasers of the common shares resident in Manitoba, contains a misrepresentation and it is a misrepresentation at the time of purch
Slide 39: Purchaser’s Rights of Action
Purchaser’s Rights of Action CERTAIN STATUTORY RIGHTS OF ACTION IN MANITOBA (continued) (c) if, with respect to any part of the offering memorandum purporting to be made on the authority of an expert or to be a copy of, or an extract from, a report, opinion or statement of an expert ("Expert Opinion
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