Tamarack Valley Energy Ltd. (TVE) Earnings Call Transcript & Summary

Good morning. Welcome, everyone, to the Tamarack Valley Energy Limited Conference Call and Webcast on Wednesday, October 28, 2026, discussing the recent Q3 2026 results press release. I would like to introduce today's speakers, Mr. Brian Schmidt, Founder and CEO; Mr. Steve Buytels, President; and Mr. Kevin Johnston, CFO. [Operator Instructions] Thank you. Mr. Schmidt, you may begin your conference.

Good morning, and welcome to everyone joining our call to discuss the operating and financial results for the third quarter 2026. My name is Brian Schmidt. I'm the CEO and Founder of Tamarack Valley Energy. And today, I'm joined by our President, Steve Buytels; and our CFO, Kevin Johnston. We are excited to report our Q3 results, which reflect the company's first full quarter as a Clearwater-focused producer following the successful disposition of our Charlie Lake assets in June. With strong operational execution and elevated commodity prices in 2026, we have generated substantial free cash flows year-to-date, which has allowed us to drive higher growth through the drill bit and accelerate our waterflood expansion and importantly, return more capital to shareholders through higher base dividends and share buybacks. Tamarack's third quarter results were also highlighted by the previously announced deal to acquire Headwater Exploration in an all-stock transaction that will result in a combined value of $10 billion market cap. The strategic acquisition creates a premier North American oil company with top-tier profitability and an unmatched position as the only publicly traded pure-play Clearwater producer. The combined company will have a run rate production of greater than 80,000 barrels per day. Kevin will now discuss our Q3 financial highlights.

Thank you, Brian. Tamarack delivered Clearwater production over 55,000 BOE per day in Q3, a 16% increase over prior year. Tamarack generated Q3 funds flow of $214 million and free funds flow of $92 million. Year-to-date, the company has generated $375 million of free cash flow or $0.78 per share. Tamarack's Q3 capital investments were $120 million for the quarter, and we're heavily focused on waterflood expansion. Our 2026 capital program is trending towards the higher end of our guidance range of $470 million, reflecting the acceleration of development capital into 2026 in response to higher commodity prices and the consolidation of Headwater's capital investments from mid-November to the end of the year. We continue to drive per share returns through our share buyback program. Year-to-date, we allocated $190 million to repurchase nearly 16 million common shares. Tamarack has now reduced its common share float by more than 15% since the commencement of the NCIB in 2024 at a weighted average share price of $5.80 per share. On the heels of the Charlie Lake divestiture, we declared a 25% increase to our quarterly dividend to $0.05 per share. In conjunction with the closing of the Headwater acquisition, we intend to raise the quarterly dividend a second time by another 20% to $0.06 per share or $0.24 per share annualized. Tamarack is entering the fourth quarter with an undrawn credit capacity of $875 million and cash on hand of $540 million, providing substantial balance sheet strength to fund accelerated Clearwater development, return capital to shareholders or pursue strategic initiatives. Following the acquisition of Headwater, we expect to exit the year with net cash of more than $50 million and available funding of $1.2 billion. Steve will now provide an update on our Clearwater assets, the Headwater transaction and an outlook for the remainder of the year.

Thank you, Kevin. With respect to the quarter, I'd like to highlight a few key themes. First theme here is the waterflood outperformance continues. Reservoir response from our waterflood expansion continues to exceed expectations. Oil uplift from water injection is now estimated to be 10,000 barrels per day or 18% of our total production. This advancing oil recovery continues to drive lower finding and development costs, lower sustaining capital requirements and lower breakeven prices, resulting in stronger margins. The strong response has led to an increase in the overall stand-alone Tamarack production guidance for 2026, which offsets some of the production with respect to the delayed -- slightly delayed timing of the close into mid-November. We exited the third quarter injecting 60,000 barrels per day across our assets and are reaffirming our 2026 exit guidance of over 70,000 barrels per day on legacy Tamarack assets. Following the Headwater acquisition, we expect to exit the year injecting over 100,000 barrels per day. 2026 injection becomes 2027 oil production. Second, the South Clearwater waterflood pilot. This pilot has illustrated a greater than 100% increase in oil uplift, which is a positive outcome in terms of potential upside for this area and represents potential upside to our 5-year plan that we do not currently model. Given this response, we have identified other specific more optimally located well patterns for further waterflood development in the area. We expect to add an additional waterflood pilot here later in the fourth quarter. Third, the Headwater acquisition. We're excited to complete the business combination. This transaction reflects an exceptional opportunity for the shareholders of both companies to gain exposure to a unique and differentiated value proposition through enhanced efficiency, profitability and durability of an integrated Clearwater asset base. The combined company will benefit from decades of Clearwater drilling and waterflood inventory, meaningful operating capital synergies and greater scale across the play. As we are designing our budget for next year and laying out a revised 5-year plan, we continue to identify additional synergies from the integration of the 2 companies. We plan to release our 2027 budget in conjunction with the closing of the Headwater acquisition, which is currently expected to occur shortly after the November 18 shareholder vote. At that time, we'll also provide an update on our integration activities and expected synergies moving forward. Brian will now deliver some closing comments.

Thanks, Steve. Our share price performance over the last 3 months has continued to reaffirm our decision to transform the business into a Clearwater-focused company. During this time, we have maintained strict discipline in the pursuit of maximizing total shareholder returns through profitable production growth, share buybacks, base dividends and balance sheet measurement. With our vast drilling inventory and waterflood expansions, the company is well positioned to continue to drive long-term sustainable value for our shareholders. As I've said before, and we'll say it again, I'm extremely excited for the future of this company. I will now turn it back to the moderator for questions.

[Operator Instructions] And the first question will be from Sam Burwell at Jefferies.

On the South Clearwater pilot, was that simply just a new injector placed in between 2 producers? And just curious if anything different from that standpoint might be planned for the next pilot and if it might be in a different area of the Southern Clearwater acreage?