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

Good afternoon, everyone. I think we're ready to kick this off. I'd like to thank you very much for joining us today. I'd like to welcome you to the Tamarack Valley Energy 2024 Investor Day. I'm Christine Ezinga, Vice President of Business Development and Sustainability at Tamarack. Today, I am joined by our full executive team. And throughout this presentation, each of them will speak to key aspects of Tamarack's business model in addressing the company's capacity for long-term per share value creation. Our presentation this afternoon will start off with Brian Schmidt, our President and Chief Executive Officer, who will provide an overview of Tamarack's strategic transformation, reflecting on the significant changes to the company over the past several years. From there, Lynne Chrumka, and -- our Vice President of Exploration; and Ben Stoodley, our Vice President of Engineering, will walk us through the Clearwater and Charlie Lake assets, highlighting the significant resource currently reflected in Tamarack's portfolio. This will include a discussion of the application of waterflood and the positive implications of deploying enhanced oil recovery on our assets as part of the long-term development plan. This will lead into our operational efficiencies, where Scott Shimek, our Vice President of Production and Operations, will address our execution and the successes we are seeing through a disciplined capital program along with the cost savings being realized through continuous improvement initiatives in the field. Infrastructure control and ownership has been key to facilitating growth in both Clearwater and Charlie Lake plays since Tamarack stepped into each of those, respectively. Kevin Screen, our Chief rating Officer, will provide an overview of how Tamarack has been able to leverage increased scale to ensure we are optimizing our asset portfolio. Rocky Baker, our Vice President of Marketing, is here today to speak to the significant improvements Tamarack has demonstrated with respect to increasing price realizations, which leverage our heavy oil exposure and contribute directly to our expanding free funds flow per share. Kevin Johnston, our Vice President of Finance, will address Tamarack's capital structure including significant reductions in debt realized over the past 18 months and the resulting simplification to our return of capital framework. To close out the afternoon, Steve Buytels, our Chief Financial Officer, will walk you through the 5-year plan outlining how the development of our highly economic inventory translates into a compounding effect based on organic production and free funds flow growth to demonstrate increasing returns to shareholders on a per share basis. Following this presentation, we'll open the floor to questions. For those joining virtually, you can submit your questions to the team online via the webcast portal. We have brought with us today some samples of Clearwater core that are available at the back of the room, if anybody would like to take a look. I would note that within the materials being presented today, we will be making forward-looking statements. And as such, I would direct those participating and those reviewing the materials to the disclaimers, which are included at the end of our slots. Also included with the disclaimers at the back, our definitions and explanations with respect to specific financial information, including non-IFRS financial measures, reserves and resource details and a glossary of abbreviations used throughout the slides. With that, I will turn it over to Brian Schmidt, our President and CEO.

Welcome, everybody. Thanks for coming out today. And thanks, Christine, for the introduction to staff here. This particular slide, today, we invite you to delve deeper into Tamarack's strategic journey examining the pivotal decisions made, our effective execution and the promising results to date. Back in 2020, our focus was consolidating assets in the Clearwater, the Charlie Lake and enhanced recovery, aligning perfectly with our strategic map you see here before you today. As we move into 2024, our corporate overview and general guidance emphasize a clear path forward. Our commitment to reducing debt stands out prominently by prioritizing debt paydown. We aim to lower interest costs and expedite the increase in shareholder returns with our return of capital structure. Where do we stand in this transformational journey? With transactions now concluded, our focus is shifting to optimizing asset performance. Today, we pledged to deliver consistent, predictable returns to our shareholders leveraging debt-adjusted free cash flow share as a key metric to guide our decisions. What makes us reliable and predictable? With over 2 decades worth of inventory in North America's most economically viable plays, including the largest public Clearwater asset with high liquid weighting, we maintain low sustaining capital expenditures, our rarity in our industry. This ensures sustainable shareholder returns without the need to replenish inventory consistently. We're already seeing these improvements reflected in our financial performance with significant debt reduction over the past year and increasing shareholder returns. Before I proceed, I urge you to take note of our distinguished presenters today. Their exceptional talent has been instrumental in reshaping Tamarack. By attracting top talent, we've strategically positioned ourselves to acquire and develop our core assets as well as proficiently market our products. My sincere thanks to our team, whose capabilities inspire confidence in Tamarack's future success. This map illustrates our operational focus. Despite nearly tripling production, our efforts remain concentrated on highly profitable core assets. Over 90% of our production originates from the Charlie Lake and Clearwater new assets and when you include that with high hill waterflood, that figure rises to about 94%. This represents a profound transformation of Tamarack, one significantly bolstered in returns. This slide underscores the rationale behind Tamarack's strategic pivot. As we assess top-performing companies, it became evident that return on investment and payback periods were not the sole metrics of success. The number of paybacks of an investment that investment returns emerge as a critical factor in long-term success of the company. Today, you will learn from our speakers about the prominence of multi paybacks from our investments and how that drives superior corporate performance. Our Clearwater asset, with its high resource base, multi-pay back promises to extend reserve life making it a standout in North America. Moreover, you will learn how important waterflood is to reducing sustaining capital going forward. Similarly, Charlie Lake's break and low breakeven point and respectable paybacks underscores its strategic importance. Over the 5-year plan, these attributes drive superior debt adjusted free cash flow per share. Notably, while unconventional plays typically offer fewer paybacks our conventional plays excel in this regard. What does this transformation mean for investors? We successfully executed a well-planned transformation, securing 2 decades' worth of inventory in premier plays. Rate of change momentum is as evident in growing netbacks, a streamlined cost structure owned infrastructure, reduced asset retirement obligations, along with reduced carbon tax and interest rates as well as adding superior product marketing will enhance our returns going forward. With debt repayment well underway, shareholders can expect enhanced returns to increase. Moving forward, capital allocation will be prioritized on maximizing debt adjusted free cash flow per share balancing strategic share buybacks with sustainable growth metrics. Tamarack is poised as a company that doesn't rely on costly expiration or extensive M&A transactions to replenish inventory, ensuring consistency and predictability for our investors. Just one note on Bill C-59, you guys -- over the last week, there's been a lot of change with respect to that. A lot of companies have pulled off their websites certain ESG materials. We've removed some materials from the presentation today that -- where we felt that we had risk. My hope is that we'll find ways to speak about our environmental performance here going forward. But we're going to take a bit of a pause on that until we figure all that out. I'd now like you to introduce you to Lynne Chrumka, our VP Exploration; and Ben Stoodley, VP Engineering, who will give you an overview of the assets.

Thank you, Brian. Good afternoon, everyone. As Brian said, my name is Lynne Chrumka, and I'm Vice President of Exploration. And I'm going to walk you through some of the technical aspects of our Clearwater. So as a geologist, I have to tell you, the Clearwater is an amazing reservoir with significant resource. With our land base of 680 net sections, we have over 8.7 billion barrels of oil in place. I mean, that's unbelievable. And with that, we have over 2,100 building locations with an average of 100 locations a year, we have over 20 years of inventory. Our wells are low cost and with their strong productivity and shallow declines, they have multiple payouts, adding up to significant prefunds flow generation. Having stacked multi-zone development over much of our land base enhances our capital efficiencies. In addition to our primary production, we have demonstrated successfully secondary recovery. through our waterflood results across our core assets. This can increase our ultimate recovery to over 2x our primary. Across this map sheet, which is about 276 townships and extending to the south of this map, a multitude of shoreline sand trends were deposited in an east-west direction. Hydrocarbons have been structurally and stratigraphically trapped in these reservoirs, all of which are Clearwater equivalent sands. The largest Clearwater deposit extends across Nipisi and Marten Hills area, on the southeast part of the large map, coinciding with our large land base. In addition, a large shoreface deposit exists in Clearwater South, shown on the smaller map on the inset. As previously mentioned, the oil in place on Tamarack lands is significant, adding up to 8.7 billion barrels in place with ranges of 8 million barrels to 60 million barrels per section. Beyond our core areas at Nipisi, Marten Hills and Clearwater, several pools have been discovered and are being derisked, some with stack sand such as at Seal with over 50 million barrels per section. Peavine and Dawson have 12 million barrels per section and West Nipisi extension ranges from 8 million to 37 million barrels per section and Pelican with over 40 million barrels per section, lots of resource. On the next slide, I'm going to show you a schematic cross-section going from the Northwest at Seal through Dawson, Peavine, Gift Lake, Utikuma, Nipisi, McMullen, Marten Hills and extending to Clearwater South, which depicts the stack shoreline sands. So remembering the map I just showed you, the schematic cross-section runs from the Seal pool in the Northwest towards the Southeast through Marten Hills and ending further south at South Clearwater. The Clearwater or equivalent [indiscernible] sands are deposit adjacent to marine siltstones and shales, that's shown in brown on the cross-section. These shales act as stratigraphic steels trapping the oil. The Mnvl Group sand, shown in yellow on the section, ranged from older at the base, the Mnvl A and progressively become younger as they move up the section to the Mnvl E to I. A number of these areas, where Tamarack has lands, have stack potential, namely Seal with 3 stack sands, Nipisi has 2 stacked sands and potentially upside in younger sands as well as at Marten Hills. On the next slide, I can show you a map of stack sands in the Nipisi and Marten Hills area specifically. So stacked reservoirs are extensive across West Nipisi, Nipisi and Marten Hills area. The older sand is the Clearwater B and its pool outlined is shown in green shading on the map and the green wells are producing from Clearwater B. This pool dominates West Marten Hills and Westward to West Nipisi. The younger Clearwater sea pool is shown in orange shading on the map. The orange wells are producing from this zone. This pool exists in Nipisi and eastward over Marten Hills. In addition, there are younger sands in Marten Hills, West Marten Hills and West Nipisi, shaded in light purple that have potential development upside. These zones are being tested by offsetting operators and we're going to be watching those results and testing some of these zones in 2025. The yellow stars on the map represent areas that we have plans to derisk. The oil in place across this asset ranges from 8 million to 60 million barrels per section, as I mentioned before. And specifically, West Nipisi is anywhere from 8 million to 37 million barrels per section if stacked with the C&B, upside in the D&G sands exist there as well. Nipisi itself has 10 million barrels per section conservatively and can see 20 million to 37 million barrels in its stack zones. West Marten Hills has over 25 million barrels per section, and it can get up to 50 million barrels per section. Marten Hills is the thickest zone and it ends up having about 60 million barrels per section. With such a big resource, we have significant inventory, with 545 locations in the B and over 900 C locations. I will now pass the presentation over to Ben to go through these areas in more detail.

All right. Good afternoon, everyone. Thank you, Lynne. I'm Ben Stoodley, VP Engineering here at Tamarack Valley. I'm going to walk you through the significant resource we have built in the Clearwater. And what it brings to investors through a deep inventory of drilling locations and waterflood opportunities and substantial return on investment driven by multiple payouts. Brian touched on it. And throughout the presentation, I'll refer to the number of payouts often as it's a key differentiator for the Clearwater. Many plays that are being actively developed across North America are achieving payout of the capital spent in a modest return, whereas low-cost structure and attractive recoveries allow the Clearwater to achieve full return of the capital invested multiple times. The first area we're going to highlight is Nipisi and West Marten. The area represents our original entry into the Clearwater and has consistently outperformed our expectations as we have grown our position in the area. The area includes many characteristics that contribute to our strategy of continuous free funds flow growth. We have been actively increasing asset duration through successful waterflood development in Nipisi and delineation of multiple sands in the West Nipisi area. Since the Deltastream acquisition in Q4 2022, we've grown the West Marten area on the east side of the map from a couple of hundred barrels a day to over 9,000 BOE a day, by leveraging strong results and capital efficiencies associated with the simultaneous development of stacked zones. As Lynne shared, many areas in the Clearwater provide the opportunity to exploit mobile zones concurrently. This results in reduced surface requirements, shared infrastructure, and significant efficiencies for drilling and production operations and ultimately achieves half cycle economics for development of the additional zones. We see these opportunities across our asset base in West Marten, West Nipisi and in one of our emerging areas in Seal where 3 Clearwater zones and a Blue Sky zone have been gaining momentum. This slide highlights what the benefits of stacked pay are providing in the West Marten area. There are a number of economic metrics in the table, but I'm going to continue to focus on the number and the pace of payouts. In the area, both the B and C sands are achieving strong production rates and the stacked pay capital efficiencies are driving 2 and 3 payouts within the first 2 years of production. Ultimately, we see the area delivering 4 to 5 payouts per well, which compounded free funds flow generation over time. I'm going to elaborate further on the benefits of stack pay through a case study at our recently developed 11-10 Pad at West Martin. Shortly after the Deltastream acquisition, we began development of this pad. Initial development consisted of the drilling of 10 B sand wells, which tied into our main battery at 15 to 15. Approximately $20 million was invested and remarkably, the capital has been paid out over 2x in about 12 months. Production remains at over 1,600 barrels of oil a day and is generating run rate operating income of about $2 million a month. The kicker here is we still have over 10 C-sand locations identified to drill off the pad and the pad will ultimately be developed for waterflood in both zones. It's a great example of the value that can be extracted in a relatively small area where the stack pay exists. This pad is accessing only about 2.5 sections of land and you can see on the map, the overlapping contours indicated the running room of stacked pay opportunities we have at West Marten. Now we're going to move into waterflood at Nipisi, where we've been advancing the technology and following up on the success of our pilot. Our main waterflood development to date is on the west side of the play, where we're actively waterflooding the B sand. As we move east, we'll be deploying waterflood in both the B&C sands and West Marten where we have our first C-sand injector scheduled for this year, following up unsuccessful C-sand waterflood activity by offsetting operators. Our Nipisi 1319 pilot was our initial waterflood pattern in the play, and it turned out to give us incredible confidence in secondary recovery in the clear water. A number of different designs are deployed throughout the area, depending on thickness, heterogeneity and configuration of the land base. Typically, there's some combination of tighter space legs and clusters of 2, 3 or 4 to retain lateral length for primary production with wider spacing between clusters to accommodate an injection well. On the plot on the top left, you can see the quick response in the waterflood supported well in green, clearly outperforming the offsetting primary producer in black within a couple of months of starting injection. The well has already produced more than 300,000 barrels of oil, is still producing over 300 barrels a day and is trending toward greater than 2x the primary recovery estimated for the well. We see our waterflood patterns capable of delivering 6 payouts of invested capital. You can see why this well has us very excited about waterflood in the Clearwater. On this slide, you can see the consistent success in the waterflood. Overlaid on our length normalized primary production wells in gray, you can see the repeated quick response and shallow decline of the waterflood supported wells consistently outpacing primary production. This furthers our confidence that the waterflood is going to considerably enhance asset duration and enable free funds flow growth with minimal sustaining capital as more of the production base is supported. Now I'm going to shift our focus to the Marten Hills area, which is located to the east of Nipisi and West Marten. This area is differentiated by its resource density, which is unmatched across the Clearwater. In the area, pay thicknesses reach upwards of 30 meters and contain up to 60 million barrels of oil per section. Development of such a massive resource requires wells in multiple layers or benches within the same zone. The asset has more than 450 remaining drilling locations and additional inventory continues to be delineated to the west, where multiple younger Clearwater sands exist. What has us particularly excited in the area is the ultimate recovery potential of the asset through what has been very successful waterflood activity to date. I'll elaborate on our results and approach in the coming slides. With the large-scale resource in Marten Hills, increasing recovery is essential to unlocking the value of the asset. This starts with our pilot waterflood at [indiscernible]. The producer and injector wells were drilled in 2018 with one well drilled near the top of the pipe and a second well drilled 10 to 12 meters lower. Both wells produced under primary production until the lower bench well was converted to injection in 2021. Early injection stabilized production and mitigated the decline, but we wanted more from the flood. In waterfloods that are conforming well, increased injection correlates very well with an improved oil response. Across the board, Clearwater waterfloods are conforming well. This gave us the confidence to get quite a bit more aggressive with injection. In early 2023, we ramped up injection to the well and the corresponding oil response was excellent. A well that was producing about 125 barrels of oil per day more than doubled its oil rate. This well has now produced over 480,000 barrels of oil, which represents the highest recovery of any Clearwater well in the play to date, and it's still producing about 330 barrels of oil per day and inclining as we continue to increase injection. Given great conformance and response to injection rates, injectivity is a key consideration when contemplating well designs across the quarter. Ultimately, it accelerates response, which in turn brings forward cash flow. I'm going to elaborate a little on well design, much like Nipisi, there are a number of designs being deployed in the waterflood in Marten Hills. The designs are fit for purpose and in Marten Hills Tamarack predominantly utilizes 2 designs, depending on the thickness and variability of the reservoir. On the slide, you can see 2 different logs with considerable thickness lending to significant resource in place but the 2 logs look quite different, and our well-designed approach could also differ between the 2 examples. Starting with the left log, you can see a relatively consistent log signature with porosity getting slightly lower near the bottom of the zone. We want to be mindful of that slight degradation in porosity when considering well placement, ensuring we put ourselves in a position to inject at high rates. Also, there are no significant barriers vertically. In this situation, we would deploy the stack configuration at a bottoms-up waterflood. On the right log, you can see quite a bit more vertical variability. The variability -- this variability could complicate the efficiency of a bottoms-up flood when the injected water encounters the potential flow barriers. In this instance, we would utilize a W-pattern where you develop multiple benches or elevations within each well. Under this configuration, you're not flooding bottoms up, you're flooding laterally from injector to producer. This design allows us to overcome the vertical variability and also places legs in the higher porosity elevations, ensuring we can maximize injectivity and optimize our cash flow forecast. Now I'm going to introduce you to the South Clearwater. It's located about 10 townships South of Marten Hills. We hold a dominant land position across the play and the inventory is very well delineated with 420 remaining locations identified. Pay thickness is here are typically 3 to 7 meters in the oil quality and the area is 13 to 14 degrees API, which is heavier than the 15 to 20 API oil we typically encounter in Nipisi and Marten Hills. We've been implementing a new well design we call the Fan design broadly across the area. The new design exploits a larger drainage area to improve recovery per well. mitigates production declines and reduces surface and infrastructure requirements, providing an overall improvement in returns. Our most mature well with the Fan design is in green on the plot overlaid on a distribution of historical multilateral well results. It's apparent that the initial fan well has been successful in improving per well recovery and decline mitigation. Also on the chart is the average of our 2024 program fan wells to date that are showing strong initial rates, and we are excited to monitor production over the coming months as we expect similarly shallow declines. On the map on the right side of the slide, you can see what the wells look like. The lateral legs pan out towards the toes of the wells, allowing us to access more reservoir contact from a single surface location. The obvious advantage of this is reduced surface locations driving lower infrastructure costs but the designer also achieves improved reservoir contact nearer heels, reduced well density and expanded drainage are per well driving up per well recoveries and efficient and low resonation near the pool ages. This design change allows us to pull a lot of levers at once to markedly shift direct economics, all contribute to reducing capital enhancing returns. In this case, the number of payouts increased from 2 to 3. All right. On economics, here, I've gathered a number of type curves from across our core operating areas in the Clearwater. What we'd like you to come away with is the speed at which you pay out your capital. Across the areas, initial payout occurs between 4 and 10 months at $75 WTI pricing. And once you've paid out the capital, it's all gravy from there. In the Northern Clearwater assets, we're seeing the large resource supporting 4 to 5.5 payouts and very attractive rates of return. In the South Clearwater, where the pay is thinner, innovative well designs are realizing 3 payouts. In the waterflood, we're seeing consistent success across the asset and mature patterns are indicating significant asset duration with the potential for 2x primary recovery. As for the economics, presented here is our West Marten waterflood type curve run at $75 WTI flat pricing. The combined primary and waterflood development pays out over 6x at an attractive rate of return. At 2023 year-end, we had only 6% of our Clearwater production under waterflood and only 12% of our proved plus probable reserves associated with waterflood, indicating considerable upside yet to be realized. Okay. This slide sums up what the Clearwater is doing for us. In 2023, the asset produced about 37,500 BOE a day. The effects of compound multiple payouts across the asset generated net operating income of $684 million. And at the same time, a stable production base in shallow decline provided a platform for 15% production growth while investing just over half of the operating income generated. This resulted in the Clearwater assets kicking out over $300 million of free net operating income. When I say free net operating income, or NOI, I'm referring to asset level net income less asset level capital. With the asset duration of deep inventory and waterflood provides, we can continue to couple growth and free funds flow well into the future. Okay. When you've got an asset performing as well as the Clearwater, you want to be able to emphasize how much you have and the reserve book will lag your resource capture as you delineate new areas and technologies. That's where the resource study comes in. We enlisted McDaniel & Associates to evaluate the Clearwater lands and this is what they came up with. Approved plus probable oil reserves totaled 104 million barrels. And as I said previously, at 2023 year end, waterflood made up only 12% of the TPP reserves. There's lots of room to grow as waterflood development moves through the asset. For contingent prospective resources, estimates of 90 million and 118 million barrels were provided, respectively. These resource volumes are equivalent to 7 and 9x the volume we produced from the Clearwater in 2023. Within our 5-year plan, we currently produce less than 1% of the OIP we've identified across the assets. The asset duration here provides lots of running room and takes us well beyond our 5-year plan. Okay. I want to walk you through what this booking typically looks like. What Tamarack's Clearwater assets provide is unconventional scale from a conventional reservoir. Here's an example of what you might see from the bookings of a conventional asset. Drilled wells can be seen in black on the page. Adjacent to a developed well you would typically be booked one proved and one probable location on either side of the producing well. Those are represented in green. As you get further away from production, you move into contingent locations and then prospective locations. Also on the map, we put an illustrated wider radius for what you might expect from unconventional resource play reserves. Unconventional resource plays often benefit from the ability for probable reserve bookings to extend to 10 years on the back of project-based economics tied to large-scale infrastructure investment. We don't have the same treatment in conventional assets with minimal upfront infrastructure and the booking window is typically limited to around 5 years. This results in a large amount of our upside sitting outside the reserve book and is the main driver for evaluating our contingent prospective resources. Here's another example, more specifically on how we expect to see our resources progress into the reserve book. On this map, we're showing only the West Marten B sand development. You can see the producing wells in green, our proved plus probable reserves footprint in green polygons and our contingent and prospective resources footprints in orange and gray respectively. First thing to note is the reserves bookings remain in close proximity to historical development activity. What we are doing is striking a balance between development efficiency by drilling close to existing infrastructure and delineation. Our 2024 planned activity is represented by the red wells and strikes that balance. In this area, we are typically drilling 2-mile, 4-leg wells in a line drive waterflood configuration. The extended lateral length provides us the ability to delineate effectively while utilizing existing infrastructure. The red wells on the east side of the map will derisk large areas of contingent prospective resources and move a lot of that resource into reserves this year. All right. So we've gone through a lot of information. In summary of the Clearwater, there are a number of aspects that differentiated for us. Firstly, Tamarack is the largest public Clearwater producer. Our assets contain 8.7 billion barrels of original oil in place, and we are averaging 41,000 barrels a day in 2024. Next, the runway here is substantial. We've identified over 2,100 drilling locations, of which we're drilling approximately 100 per year. Waterflood response has been strong, with patterns forecasted to achieve greater than 2x their primary recovery estimates, lending to significant expansion of asset duration. Finally, the play offers superior economics with multiple payouts contributing to long-term shareholder returns. With that, I'm going to pass it back to Lynne to discuss our Charlie Lake asset.

Okay. I know the Charlie Lake play is often misunderstood. So over the next few slides, I will show you how Tamarack's high-quality Charlie Lake oil play differentiates itself from other parts of the fairway. First of all, we are in the best part of the Charlie Lake fairway with Tier 1 geology resulting in top well performance. We have significant inventory in this light oil play, which supports 16,000 BOE per day for over 10 years. We have continued to consolidate our land base since we acquired the asset in 2021, now netting 247 sections. Our extended reach horizontals reach on average 2.5 miles and with multi-well pad development, we achieved strong economics. This asset has a low breakeven cost of less than $35 a barrel and payouts of less than 1 year. Furthermore, we have expanded our infrastructure capacity. And by controlling this infrastructure, we continue to enhance our reliability and operating costs. With strong economics and operational reliability, this asset contributes to Tamarack's free funds flow. The Charlie Lake play is comprised of top-tier reservoir with multiple zones to develop, and we have a dominant position in the sweet spot of this fairway. The multiple zones provide high deliverability of light oil with an average of 38-degree API and IP rates of 650 barrels per day to over 1,100 barrels of oil per day. They have lower water cuts than other parts of the fairway. Our wells are primarily suite throughout our land base. The multiple zones include the upper Charlie Lake in the Northeast, shown in green on the map sheet. The Charlie Lake Braeburn extends across the entire land base in pale red on the map. And the lower Charlie Lake A members, which have been delineated more recently are in gray shading. We optimize our well placement in the reservoir and design our completions to maximize access to the resource. Furthermore, we operate 5 of the top 10 horizontal producers in the fairway, which further underscores the top-tier quality reservoir that exists on Tamarack lands. This cross-section runs from the Northeast of the fairway through the center of Tamarack at Valley lands at North Valhalla, Saddle Hills, Valhalla, Wembley towards the south in Pipestone. The Charlie Lake fairway is comprised of multiple successions of stacked dolomite and anhydrite sequences. The combination of cyclic high-quality reservoir development, along with structure and erosional features creates a unique and prolific stacked oil play. The main zones are being developed with horizontal drilling. The Lower Charlie Lake, which is shown on purple on the cross section, is being developed on the east side of the map as well as some recent delineation on the west side of the map. You can see the black outline on the map. The Braeburn is being developed across most of the map, and the upper is being developed primarily in the Northeast. Tamarack and other operators have been testing and developing all 3 productive zones with horizontal wells extending between 1 to 3 miles in lateral length. The high permeability of the Charlie Lake allows for modest completion scope. Having said that, we do focus on landing our wells to maximize frac growth, increasing the stimulated rock volume in an aim to access all of the resource. On the west side, the reservoir is up to 40 meters thick. So we land in the middle of the stratigraphic section and place higher tonnage to ensure we prompt the entire vertical section. On the east side with thinner zones, we can land the wells at the base, placing smaller fracs to access the reservoir. With this approach to our well placement and completion design, we can maintain good capital efficiencies through our development program. I will now pass the presentation back over to Ben to talk about our Charlie Lake performance.

All right. In the Charlie Lake, we entered the area anchored in the heart of the play and we got to work. With the economics enhanced by extended reach horizontal wells, the land base was well situated to optimize through small-scale consolidation. The area has offered us continuous opportunities to expand and optimize our inventory. Since our entry into the play in Q2 2021, we transformed the asset materially. Production is up over 40%, proved plus probable reserves have grown 68%, significantly replacing and growing reserves every year. And our inventory of extended reach wells has grown substantially as we've added 3x as many extended reach wells as we've drilled. We continue to view our land base as ripe for ongoing optimization through small-scale consolidation. Lynne spoke of the quality of our land and our enviable position in the heart of the play. This is demonstrated through our results where we're outpacing industry results in the area. Our 2024 wells are turning out to be some of the best wells drilled in this date -- drilled to date in the play. Through this outperformance of even our robust type curves, we are showing that we continue to see improvement in optimization in the play as we optimize frac designs, landing depths and reservoir access and continue to add high-quality lands across the fairway. As you can see from the economic metrics in the table, the Charlie Lake provides production additions at low cost, resulting in short payout periods and strong rates of return. So why the Charlie Lake? One, there's lots of runway here. We've been able to increase and optimize the inventory in the play since we entered it and could sustain current production levels for over 10 years. Two, it's generating great funds flow. Over the first 18 months in the play, we grew production to the levels we're at now. In 2023, we kept the asset flat as the growth capital shifted to the Clearwater assets. Only $96 million was invested to sustain production, representing only 44% of the net operating generated. This asset's depth and quality of inventory, infrastructure ownership and control provides us the optionality to either grow or kick out free cash in a flat production scenario. With that, I'll pass it off to Scott to discuss the operational efficiencies we're seeing across the asset base.

Good afternoon. Good afternoon, everyone. My name is Scott Shimek, Vice President and Operations here at Tamarack. Thanks to Lynne and Ben, who walked you through some details on these exceptional assets. I'm here to discuss some of the operational elements and efficiencies that we've been driving into the business to continue to enhance free funds flow. And as we look into the future operations excellence, we'll continue to be a focus. So specific to the Clearwater drilling capital and performance, I'm going to walk you through Nipisi and Marten Hills trends that continue to drive capital costs down. The chart here on the left displays our drill meters per day and our average total lateral length per well over the past few years. Our contiguous land position, enhanced well design and development planning has resulted in our total lateral length per well increasing. Since 2022, we've seen an increase 25%. Specific to our meterage per day, the technology and the continuous improvement of our teams, have continued to drive performance in our operations with an increase of 12% since 2022. So what does this mean? If we shift to the bar chart on the right, you'll have seen we've been able to reduce our drilling costs on a dollar per horizontal meter by 3% since 2022, notwithstanding the significant inflationary pressures that industry has observed over this time. For reference, specific to the Clearwater drilling scope, as an example, we've seen our drilling costs on a day rate per unit increased 30% over this time and our casing up 70%. So again, average total lateral length per well increasing drilling meters per day increasing have been able to offset this inflationary pressure, and we'll continue to focus on enhancements. So continuing with the Clearwater, I'm going to shift to some details on operating and transportation expenses where scale and efficiency continue to drive improvements. The chart on the left highlights Tamarack's total Clearwater assets since 2021. The stack bar is operating expense in green and transportation expense in TAM, where the black line is total production in BOEs a day. We observed the growth in production since 2021. Along the way, consolidation, the scale to support efficient infrastructure investment and improvements to the operations have yielded overall improvements to the expense structure. 2023, we observed an 8% improvement relative to 2022. And in 2024, we're forecasting an additional 10% improvement. Our 3 major Clearwater assets are of varying sizes and have unique attributes. The bar chart on the right, we display South Clearwater, North Clearwater or Greater Nipisi and Marten Hills separately in the same pan and green color scheme. As we strive for best-in-class operations, we benchmark to our peers, which are displayed in great. Comparing the expense structures of our largest Clearwater assets at Greater Nipisi and Marten Hills, you'll note that we offer comparable and competitive expense structure to our peers. Lastly, I'm going to shift over to the Charlie Lake and highlight some capital performance. We're well designed and enhancements continue to improve efficiencies on our Trilling program. The chart here highlights drill capital per meter drilled in green bars and drill length per day in the time line. The chart focuses on 2023 and 2024 on a quarterly basis. The focus of the teams continue to yield efficiency gains here where you observe our meters per day improving 18% over this period and capital per meter improving or decreasing 4%. Even with the smaller well count relative to the Clearwater program, this area continues to be a big focus on all capital and operating expenses, and we continue to look at all aspects to find additional opportunities to drive into the business. I'm going to now pass it over to Kevin Screen, who will walk you through some infrastructure details.

Thank you, Scott, and welcome, everybody. My name is Kevin Screen. I'm the Chief Operating Officer for Tamarack. I'd like to take the next few minutes to highlight some of our results of our business transformation as it relates to our key infrastructure in both Charlie Lake and the Clearwater play. In the Clearwater, since first entering this play in December of 2020, we've developed a solid backbone of oil and gas infrastructure. On the map on the left-hand side, in the Nipisi and Marten Hills areas, we now have combined ownership in and operational control of approximately 40,000 barrels a day and 20 million cubic feet per day of processing capacity. We're lack connected to Seals well pipeline systems at both our Nipisi battery and our Marten Hills batteries, and we operate 2 gas plants connected to the TC system. On the right map, in our South Clearwater area, we own and operate several heavy oil batteries with the processing capacity of which is easily scalable based on our needs. We recently acquired and then expanded to 5 million cubic feet a day capacity, a gas plant in Rochester and then connected it to a newly constructed gas gathering network in our Perivale field. Over the last 2 years, we have completed much of the heavy lifting with respect to infrastructure spending in these areas and can now enjoy the benefits of low costs, improve reliability, lower emissions and reduce carbon tax. Charlie Lake area, which we first entered in June of 2021, we've made dramatic improvements in our available gas processing capacity. Historically, a lack of reliable access to processing capacity has been a throttle on both oil volume growth and our operational reliability. In 2023, Tamarack constructed a 15 million a day gas processing plant at Wembley and cured additional firm service at several processing plants to expand our reliable access to service and lower our operating expenditures. Going forward, the optionality exists to further increase our processing capacity within our 5-year planning horizon. In summary, Scott showed how both scale and steady operations have enabled our teams to drive continuous improvement in both operational performance and cost efficiency. However, scale and stable operations can only be achieved with reliable and predictable access to infrastructure. Now with our existing infrastructure base, we can rely on our demonstrated execution performance to backstop the required long-term infrastructure commitments. So in combination, our operational performance, together with our infrastructure position will result in lower costs better reliability, enhance netbacks and importantly, increase prefunds flow. I'd like to now hand it over to Rocky Baker to speak to our marketing successes.

Thank you, Kevin. Good afternoon. My name is Rocky Baker. And I'm the VP of Marketing. In line with the transition -- or with the theme of transition and forward outlook, I'm going to walk you through the start-up and transition that the marketing team has gone through over the past couple of years. Starting up in 2022, Tamarack exclusively used external marketers to sell all of our production at a fixed fee cost. We have 3 small pipelines, and most of our volume was transported by truck. Moving into 2023 was the year that we started taking more control by doing our own trading. This will lead us of the fixed fees from our external marketers. Our pipeline throughput increased to 27,800 barrels per day and our truck volume dramatically dropped off. Another big step change for Tamarack was the startup of the secured Nipisi pipeline system in the fourth quarter. In order to facilitate this much change in one year, we had to beef up our marketing group in order to facilitate the front, middle and back-office duties. So here we are in 2024. And as you can see on the bar graph on the right, on heavy and light, our wellhead deducts have improved each year. But we're not done yet. My team is continuing to work on improving our trading, reducing our diluent requirements and also lowering our transportation fees. So how does Tamarack stack up against the other players in the Clearwater sandbox? These numbers are pretty clear. Quarter after quarter, year after year, Tamarack is consistently producing the best realized pricing compared to the WCS benchmark. The reason we can achieve these numbers is due to our strong trading, our reduced diluent requirements, our monthly optimization in a fiercely competitive heavy landscape as well as our 2 superior long-term transportation agreements. This will ensure that these realized pricings are basically here to stay and forward in years to come. So on the theme of sales, 90% of Tamarack's volume flows into Edmonton. Edmonton is considered the premier egress hub in Western Canada because every demand point is accessible from Edmonton. You have the local refineries, a large tank farm, Trans Mountain, TMX, Enbridge, Keystone and Express, all accessible from Edmonton. Tamarack is very well positioned to capture value propositions, both today and in the future. So the last message I wanted to leave you with is an update on heavy oil pricing. TMX is now fully operational and flowing at 375,000 barrels a day. This additional egress is beneficial for multiple reasons. For one, it has narrowed the WCS differential as well as all the heavy grades that trade as a subset to WCS. This new price is also forecasted to stay for years to come. Thirdly, the price volatility that has -- that WCS has been exposed to over the past many years, specifically in Q1 and Q4 when supply is high and demand is lower, is expected to narrow. So imagine more hills and valleys, less peaks and craters. And lastly, the double dish -- double digit, there we go, apportionment that we've dealt with for several years is going to be a thing of the past. So we won't have to resell our volume into distressed markets. So we've been waiting for this for a long time. And as a heavy oil producer, again, flowing into Edmonton, we're pretty excited for what the future has to offer. Next, I'm going to hand it over to Kevin Johnston, to speak next.

Thanks, Rocky. Good afternoon, everyone. So let's get to the reason why you invest your money for some returns. To discuss returns, though, we have to start with debt. So we utilize our balance sheet to complete the transformation you heard about today. At the end of 2022, we had $1.3 billion of debt, which was 2x annual fund flow. With that level, we allocated all of our excess funds flow, proceeds from dispositions in 2023 to reduce debt, which we did. $400 million paid off, $0.70 per share, and that brought our total debt down to $985 million or about 1.2x funds flow. With this more comfortable debt level, we started allocating funds to share buybacks. But what's the right debt level? So we always want to have some debt in our capital structure. Capital structure 101, that's your cheapest source of capital, so you want to have some of it. But we do see that reducing debt does generate value for shareholders. We have lower debt. So each share represents more net assets. It also lowers your interest expense, which lowers your corporate breakeven. So we do want to keep reducing debt. We are targeting a debt floor of $500 million to $600 million. So that is leverage of 1x at a 55 [indiscernible] conservative oil price. So we're at a comfortable debt level now. our debt flow was a bit lower. So how do we decide how we're going to allocate our funds between shareholder returns and debt reduction. Well, we have a framework for that. So many of you have seen this framework before. We have recently updated it. So in Q1 of this year, we paid off our term loan and our deferred acquisition payments, and so we decided to simplify our framework. So if you look at this framework right now, it's about how we annually allocate our free funds flow. So your free funds flow is your adjusted funds flow less your capital. And you can see right now, we're in that middle band where we're at $985 million of debt, so between $900 million and $1.1 billion. And so right now, we are allocating 40% of free funds flow to shareholders through dividends and share buybacks and 60% net debt reduction. In the second half of this year, we're going to get to the next level. I want to get less than $900 million of net debt. Once we hit that point, we're then going to allocate 60% of free funds flow to shareholders through base dividend and buybacks and 40% to net debt and strategic capital allocations. We do have line of sight in our 5-year plan, which Steve will go through where 80% of our funds flow will be allocated directly to shareholders. We do want to emphasize that our preferred return method right now is share buybacks at current valuations. We also really like buyback because they compound each year into greater growth. And so with that, I'm going to pass it over to Steve to discuss our 5-year plan.

All right. So thanks, Kevin, for that. And we'll get into now -- ultimately on why you all are here. What it means to you from a return and share price potential. So I think we'll start with -- the team did an excellent job highlighting one of the key messages we want to leave you with today is the excellent asset duration that we have in this company. The inventory quality that's going to drive a lot of these returns and enable us to do that for, obviously, this 5-year plan. I'm going to walk through here shortly, but most importantly, many years after that. The other element of it, too, is when we look at the rate of change in the business that Kevin and Scott and Rocky talked about the reduction in operating costs, transportation expense, capital efficiency enhancement and so forth. Again, that is all finally here. And through the transformation that Brian talked about that we've completed, Q2 really -- Q1 and Q2 are really the first clean quarters you're going to see out of this new repositioned company, and we're really excited for that and continue to deliver the results. So when we tie this all together, you're going to see in the next few slides here that, there is a significant amount of shareholder value, and we call it value because of the debt repayment element too, that's going to come back to shareholders. We're going to go through a few slides specifically that build up into this 5-year plan and really what it means. So let's start on the inventory here. And again, really what we want to leave you with on this slide is you can see there's a significant amount of inventory that sits here. We only use about 25% of our primary locations in this 5-year plan. You've seen previously we drill 100 locations in the Clearwater a year. And depending on the Clearwater, it's -- or in the Charlie Lake, sorry, it's probably between 12 and 17 locations, depending on what we're doing. So not a lot of activity really when you look at total well count on an inventory base that has over 2,100 Clearwater locations that we showed you and the better part of 200-plus locations in the Charlie Lake. You also got to look at this. What does it really mean? We have 8.7 billion barrels in the Clearwater here. We're going to produce less than 1% of that. On a primary basis, we expect to get 4% to 5% recoveries out of that Clearwater. And then as Ben showed you, the waterflood looks pretty encouraging here, where we'd model a doubling of recovery factors, which still is low on a relative basis when we think of waterfloods and specifically conventional waterfloods throughout time. But we do see a path to actually be more than doubling the primary recoveries there as well. So I think that's key. I think the other piece we'd want to leave you with here around inventory. This is a snapshot in time. This is today with the contingent and prospective report that McDaniels did plus what we see here in our we've had a pretty good history of replacing over 100% of our reserves annually in the past, both in the Charlie Lake and the Clearwater. So I think we have to think about 2 of these multiple sands and these younger sands that Lynne talked about that we'll be testing, that's going to add, obviously, to the duration here. And then continual new sands and different sands in the Charlie Lake that Lynne showed you, but we continue to do these small deals to enhance well length; two, that should drive further -- one further inventory growth, but two, you're probably enhancing your economics around that inventory. So the next slide, this one is probably my favorite one in here because really illustrates the fact of the uniqueness of having this waterflood plus primary development in the Clearwater ongoing at the same time. So we forecasting our waterflood production to grow by over 30% in the 5-year plan. It is still relatively immature. But again, the results speak for themselves are very, very encouraging here to start. We expect to see our corporate decline shallow by between 3% to 5% throughout this plan. And really, you can see on the bars there in the bar chart on the left, what that means to you guys as shareholders from a sustaining capital perspective, and ultimately, what that means to free cash growth. So just by having that waterflood come through and the reduction in sustaining capital, you can see where you're going to get $40 million to $50 million more of incremental free cash flow a year or north of $150 million of free cash flow over the 5 years, that's going to be available for either more debt repayment, more buybacks or growth optionality that we have in this company. You can see we have an opportunity to bring a lot of value forward through this asset duration. So I think it's important to understand that. So Slide 56. This is a culmination of the prior 2 slides and then everything we talked about around the rate of change in the business. So again, we have the inventory quality and the reduced sustaining capital here with a disciplined approach to debt repayment, share buybacks and then the profitable growth over the 5 years that ultimately drives home some pretty significant growth here. If you look at this, we highlight total free funds flow per share growth of 100% approximately over the 5 years and total debt adjusted production per share growth of 80%. So even though you're growing at 3% to 5%, the compounding of that buyback, the buybacks really, really, really come through as you look at it over the 5 years. The second thing here I want to leave you with, we get a lot of questions on well, what's the capital investment? So to get that 3% to 5% growth, what we did is we fixed our capital at roughly $450 million. And when you look at that and then you take into account the previous slide where you see the sustaining capital dropping significantly, you can see how you can ramp your growth, your organic growth up pretty substantially, but also with the way that our enhanced return framework works, you can see what the power of the compounding the buybacks do long term over the 5 years. Net debt through the plan. I think it's important too here. This kind of ties to what Kevin just said prior to me coming up. We will reach 0.5 turn through the plan. And I think that's important because ultimately there, we're going to be able to direct 80% of our free cash flow annually back to shareholders, and again, through long-term buybacks. The fourth thing here that I really want to drive home is this capital allocation optionality. So buybacks versus organic growth, that's always a big question that we look at and how to maximize that debt adjusted free cash flow per share growth back to shareholders. So we want to leave you with that option to be flexible between the buybacks and organic growth to achieve that ultimate per share growth moving forward. Whatever is most accretive at the time is really what we're going to look at. So when our share price is in a low valuation spot, we want to be procyclical and we want to be buying back a lot of stock. And the same thing goes as if the share price moves to where it's a higher valuation and you had a high commodity -- and you could be in a high commodity price environment, and maybe we peel back the buybacks a little bit and we put more to growth or more to just building a bunch of cash or net cash, call it against the debt on the balance sheet. So I think that's important, we want to leave -- important point I want to leave you guys with here is capital allocation, obviously, is an integral part of the business, and that's something that we're going to be -- we're going to look to optimize and be flexible with year-on-year. So what does this all mean to you in terms of shareholders and returns. So you can see here on this slide the total 5-year shareholder value, and this is assuming $75 WTI or mid-case and a $3.75 share price. So a little higher share price than where we are today. So some of these numbers may be a little conservative in here. You can get about $3.25 a share in total value coming back over the 5 years or $1.8 billion in after-tax free funds flow. And that's comprised of the following 3 pieces here. There's $0.90 per share in debt paydown that's going to accrue back to shareholders. There's $0.75 in base dividends. That's going to come back over the 5 years, and that assumes we don't increase of the dividend over that time, that stayed flat. And then there's $1.60 a share in buybacks, again, assuming that 3.75 share price. So again, here, when we look at this, the key takeaway is essentially between $75 and $85 WTI, if you believe that's where the oil price is going to be, you can essentially get your entire share price back today. Finally, as we look at the cadence of the buybacks over the plan, we do get questions on this. We see the ability to buy back between 20% and 60% of our entire float. And that's between an oil price of $65 WTI and $85 WTI. So pretty significant value creation. And again, that compounding effect that's going to continue to come by -- come through the share price over time. So before I hand it back to Brian here for some closing remarks, I think there are some key points we want to leave you with in this 5-year plan. One, we have the asset duration and the inventory quality to support significant returns, not only through the 5 years that we're showing you today, but decades is the way we look at it. And again, this asset is very immature. We're only -- we just started the waterflood. We continue to see multiple sands, and we continue to step out with success and through other operators' delineation. Two, that rate of change story continues to come through, and it's specifically around the margin enhancement in the business. So lower cost, better capital efficiencies. What does that mean? That's lower breakevens and ultimately more free cash available to go back to shareholders. And then three, we have a balanced and disciplined approach to optimizing our balance sheet, returning capital to shareholders through the base dividend and buybacks and then the optionality is profitable growth. And again, that profitable growth is the key here. We're not going to grow just to grow. It's got to be profitable, and it's got to be what is most accretive to you today and optionality around how we're going to do that. And ultimately, that's going to lead to what we believe is outsized and compounding returns for U.S. shareholders. So with that, I'm going to pass it back to Brian here for some closing remarks.

Thanks, everybody. And I hope that gives you a good flavor of kind of what we've been doing in the last few years and how things are going to change here going forward. First of all, look at that note on top there, how we're looking at things per share. And I think that really interests shareholders work significant shareholders. And so when you start to look at things that way, you kind of know that a company is going to be heading the right direction. First point I'd like to make is that the asset transformation is complete, a journey we embarked on in 2020 is now done. We ended up with focused, large-scale, highly economic asset portfolio. I've been in the business a long time. I haven't been involved in this kind of quality of play. It really is a different way of operating, very efficient way of operating. You're not chasing your tail, Interestingly enough, we're drilling fewer wells at 64,000 barrels a day than we were at 22,000. It's just that different of a play. There's no need for us to react quickly on large M&A transactions to shore up inventory. No need for us to go to big land sales and shore up inventory. The name of the game in this company now is going to be how do you take some of that decades of inventory and bring it back into so that you can into the near future, so shareholders can realize that. And that's a lot safer journey than the other avenues that I talked about. You're going to see a lot of rate of change here coming forward. You've heard a number of the speakers today talk about a number of aspects, improved marketing margin, improved netbacks, lower ARO, lower carbon tax, things coming through on the investments that we've made and the optimizations that you're going to see here going forward. You can also see the concept of multiyear paybacks, or multi-time paybacks on our investments and how that builds in our 5-year plan that Steve talked about waterfloods being probably the most number of paybacks that we have on the investments in our portfolio. So there's going to be a lot of rate of change that are going to drive higher margins and more shareholder return. Steve talked a bit about the options to a balanced capital approach that we have optionality depending on how the market reacts to our share price, how we dial in growth, how we pay down debt, and those decisions will be driven on debt adjusted free cash flow per share, which is directly aligned to what shareholders are looking for. Last, I think you can expect compound returns by being a predictable and reliable corporate numbers that you're going to see growth and buybacks leads to compounding returns to shareholders. And so I think the -- I think you would all agree now that the Tamarack of old is very different than Tamarack of new. And I hope today's presentation helped for that. There's a number of employees in the crowd today. I want to thank them for all their work that they've done and helping us through this transformation. These guys put it all in. And you can see how we react to adversity and how we do our planning. It's a very solid team, not just with the executives here upfront, but a number of them in the audience. Also want to thank the Board. There's a lot of decisions were made in the last 3 years. And now that we're in operations, I'm sure there'll be even a bit of sigh relief that we're not coming at them with stuff all the time. So I think it's a very different way of operating here going forward than what we have in the past. With that, I think the next piece of business is to open it up for questions. And so I don't know if we have some already, but why don't we turn it over?

We'll just start with the floor. If there are any questions that you guys would like to put forward and then we can move to online. Dan Payne, yes.

Just curious if there's any visibility on the CSV expansion and how we should be thinking about 2025 on an absolute production basis and what your plans on growth et cetera there? I think you've got some of the implications, but can you kind of just give us some sort of guidance towards that.

Yes. So what we're going to do is make that decision in July at the July board meeting. And I can tell you that we're monitoring the progress on the CSV plant. We're trying to determine what their reliability might be coming out of the gate. And then how much of that. I think we previously identified it could be up to $40 million. We're not going to -- we won't be that high. We'll probably spend -- I could see, Dan, spending a portion of that, just not -- I just can't tell you how much at this point. So far, we've learned that there are probably a month delay so far. So we'll see how that dials in. And then you got to figure out reliability after that.

Just on Slide 25, talking about your reserves and the prospective resources, contingent resources. So first off, in your 2P reserves, how much of this waterflood proportion is locations that haven't been converted to waterflood yet, if any? And then maybe just help us understand a bit more how waterflood comes into play here because if you're expecting potentially double your [ URs ] on a waterflood candidate. And I would expect maybe more than 12% of your book reserves would be associated with that. So a bit of color on that would be helpful.

Yes. Ben, can you take this one, please?

Yes. Exact number, I don't have in front of me, but we do have about 6% of our producing assets there at year-end were under waterflood. So somewhere kind of in the halfway of that 12% being developed versus undeveloped. How it plays out over the coming years. We'll be allocating user to $40 million to $50 million to waterflood development in the plans we have now. It provides us optionality as we reduce our sustaining capital to increase that number if we like what we're seeing versus another option in the portfolio. There is, yes. So in the contingent basis, about 40% of that is associated with waterflood volumes and in the perspective, more like 30%.

Okay. There's none from the floor. Go ahead.

It's probably a question for Steve. Steve, Slide 56. You're talking about per share growth of free funds flow per share. That doesn't include the share buybacks. That's at the current share per share numbers? Or does that incorporate the next slide on Page 57?

Yes. No, thanks, Dan. No, that would include everything. So we'll go through and that's the compounding effect that we'd look at it all. Again, the only thing I'd highlight there is we're using the $3.75 a share versus the current share price today. So we picked an 75 TI in terms of at all. So that's a CAGR of about 15% prefunds so per share a year is sort of the way we see that calculation working through. Yes.

So you had mentioned that there was no need to react quickly towards M&A. So how do you think about M&A kind of on a longer-term strategy? Is it still something you consider? And I guess, how would you evaluate that against your organic opportunities?

Yes. So the larger -- we kind of see this is that if you know what, if we had to run this way for a long time. We've got the asset base to do that. And as I mentioned, the trick becomes how do you accelerate what you already have. So when you look at M&A going forward, I suspect the deals won't be the magnitude that you had. We alluded to tuck-in deals in Charlie Lake. I still see those smaller type opportunities that -- in a typical land budget that you're going to see. If we did something in the larger, let's say, the $100 million to $200 million, you kind of have to have 1 plus 1 equal 3. You have to have -- because it has to compete with the option of actually accelerating inventory. So you need a strategic advantage for that to come in. Maybe it's shared infrastructure or something like that, where you've got a clear win. Jamie?

Maybe on Slide 55, just one back here. This slide, you've got just, I don't know, $410 million of sustaining and waterflood capital next year. And you mentioned in your pipeline, you're at about $450 million of CapEx each year. I guess, what is the growth wedges in those coming years? Like should we think about $100 million of growth capital in 2026? Or I mean, those spending parameters yet to be set and -- so a 2-part question, I guess, with that. And then is the -- what is driving the steep reduction year-on-year from '25 to '26 in sustaining waterflood capital there?

Steve, do you want to take that?

Yes. So -- and Ben will probably chime in a little bit here, too, as we run through this. But I think if you look at the big step change between '25 and '26. '25, there is some I'd call it sort of full cycle infrastructure capital that sets up the growth and the ongoing waterflood investment that we're going to see compound through the plan. So in '25, you still have -- you have a bit of that for sure. So I'll give you an example. In Marten Hills, those pilots are going really well, the stack and the wine rack. We're going to need a water plant and things like that moving forward to be able to handle enough water as we move to full development about waterflood there. So there are some of those things that sit in that plan in '25. Ultimately, when we spend that and we spend all of it or do we find other ways to do it. That's sort of what we see today. When we come out with our budget for '25, we'll be able to have a lot -- sort of clear sight on exactly what that is. But the team felt that, that was a pretty conservative look at it. And then ultimately, as you go through '26 through '29, you have a few things happening. We've got a couple of years now of that waterflood working and you've got a bunch more production under waterflood that starts to drive that decline down. So through '25, yes, you're still not going to fully realize that. So that starts to be. In terms of the $450 million, we fixed in capital. So yes, you could say if you look at that, you're roughly driving about $100 million of growth capital in there. That's probably a fair way to look at it. Again, we do want that optionality. That's why we use a range of 3% to 5% CAGR per year. If the valuation -- we want to be procyclical with the buybacks to. I think that's important here. So we may choose to do more buybacks and we want the per share growth outweigh than ultimate organic growth. So I think, again, we give you guys a bit of a range, but I think that's a fair way to look at it.

Then maybe a follow-up question to that in the framework that you have for allocations to shareholder returns. When in your 5-year plan, do you hit the sub-$500 million net debt mark? And I guess, how do you wait trying to accelerate that versus growth CapEx even dipping into the shareholder return bucket, like would you look to accelerate debt reduction faster, I suppose, rather than delay it towards the end of that 5-year plan. And yes, just anything around that would be good.

No, very fair question. So if you look at the 5-year plan, I mentioned we do reach that half a turn of $500 million, basically at the end of the plan with the way that we enhance the term framework is structured. But again, we've talked a lot about the optionality and the flexibility. So we want to be procyclical. If shares are low, we're going to buy back more shares and stick to the plan and balance that debt repayment that way, grow as to compete again ultimately for that accretion. But in a high commodity price environment, let's say, or a high share price environment, yes, we would look to just potentially slow down on the buybacks in that case, probably allocate more to growth and debt repayment for those circumstances where you might have more debt repayment and pulling that forward. But again, ultimately, that is our cheapest cost of capital. And I know when you look at where a lot of our peers are building cash and things like that, there's a lot that went to that. I think, ultimately, though, when we look at our plan, when you don't need a bunch of cash sitting there for optionality on big land sales or M&A that Brian talked about. We've got our assets in here that can sustain this business for many, many years. So we're okay levering our return by having a little bit of debt on -- in the company in terms of that cap stack, just given the cost of debt relative to where the cost of equity sits today.

Any other questions? Yes, go ahead.

Actually, just a follow-up to the previous question. Would you still consider some more noncore dispositions or selling more infrastructure just to accelerate that? Just another way of phrasing the same questions.

Yes. So now we've kind of got the assets that we want. If there were to be something to be moved, it would be the -- some of the waterflood assets that we've got in [indiscernible]. And we do get some offers in there, but they're pretty high cash generators. We don't put a lot of capital into them. So when you kind of pull them back on that and making decisions on debt adjusted free cash flow per share, you don't come out away ahead by pulling those off the table at this point.

And then, Dan, just your other question on infrastructure. We did, as you guys all know, we created that CIP Clearwater infrastructure partnership with 12 indigenous communities. We do see that as a vehicle to continue to grow that. So if we can do that accretively and drop down some of the specific infrastructure, some of this gas conservation pipeline or like you look at the water plants and things like that. We'll look at that as they kind of come up, but we do see the ability to put more into that vehicle moving forward.

Yes, that's probably the disposition that makes some more sense to our corporate performance. More questions from the floor? Yes, go ahead.

I spent a lot of time on capital allocation there seems a real emphasis on the share buyback here. You talked about potentially if the share price hit a certain level, reallocating the growth. I'm just wondering how dividend growth could come into play with that?

Yes. So I think the way we look at it, our base dividend is always going to be a small piece of our percentage of free cash, and we want that to work all the way down to very low prices. We ultimately don't ever want to have to cut that. So view the base dividend, something it's going to be a small piece of your total return. That being said, the one thing we would look at potentially is as you buy back stock, you could keep the absolute dividend amount the same while growing at just given the reduced share count. So I think that is something that we look at in terms of finding a way to being able to grow that dividend ultimately over time.

The other element just for thought exercise here, you see the big step down in sustaining capital in 2026. Does that come into play there?

With where the debt is still through it and back to Jamie's question, I think for us, we'd rather continue to see us put more than if you had a high share price onto the balance sheet to get it back to the spot quicker. So ultimately, we were comfortable with it long term.

Other questions from the floor?

Just wondering on your 3% to 5%. If your projects are paying out like twice in the first year, why don't you increase your growth rate when you get to your target or like now? Why is it stays low?

Yes. You know what, Brian, we went through this. Maybe I'll let Brian start with it. Ultimately, -- that's a great question, Mike, in terms of how we look at it. But we look in the short-term and long term in terms of just maximizing that debt adjusted free cash flow per share, and we sensitize that in many ways. I think to start, when you look at it, you can grow harder, but then your decline isn't going to come down as hard either and you lose some of that free cash with that that's associated with that lower decline. So it really is trying to balance that. That being said, if this waterflood works the way we can, yes, we could step on it. We do see more value today though in [indiscernible] stock than slam on the gold pedal down when we went through that and sensitize that. And we have different levels, Mike, I think, ultimately, where that would start to make sense. And it comes back from that optionality of more growth and debt repayment relative to buybacks. You definitely could toggle that faster, and it comes back to kind of what Brian talked about earlier, bringing more of that value forward today. But just where the valuation is, that still outweighed that quicker growth in the near term.

Would you think about growing faster? It would just seem like that would be a better use of your capital than in a dividend, but it's just -- I guess it's part of the plan, but would you ever think to increase that rate? Or is it kind of -- that's just kind of where it's at?

Yes. So on the base dividend, like Steve said, we don't -- we don't want to take that away. So we basically leave that thing the same that shareholders can rely on that base dividend. Now it becomes a question, should I allocate to debt share buybacks or growth. And when you actually look at -- and now that we've got a tool and internally, we actually look at 8-year debt adjusted free cash flow. So you can kind of see, we've sensitized what growth will do and what buying back your shares will do. And then the debt is kind of a way we look at debt as that's kind of a risk mitigating factor. Yes, it's like Steve said, it's the lowest cost of capital. It's the one that you could probably take on, but we also have to plan for downside. So the way we've designed this return of capital framework, let's take care of our debt, so we feel comfortable on the risk, and then we can start to buy back shares. So now it becomes a decision, okay, do I buy back shares or do I step on the growth? And on your debt adjusted free cash flow per share metric over that period with today's stock price, it clearly says you should be buying back your stock. More questions from the floor? Okay. Why don't we go to the...

Yes. To start with actual question. We'll direct to Kevin Screen here. You've had a few pieces come through online, people asking about water. And so that breaks down into water usage? And is there a risk to [indiscernible] regards to growth. And the second part of that is water source and how you source water for our waterflood program?

Okay. The vast majority of water that we're using today for all purposes is saline non-potable water. All of our clear waterfloods are sourced with both produced and separately drilled, saline water sources. The only place we're using material volumes of freshwater in our Charlie Lake for completions operations and a smaller amount in our Penny waterflood. At this point in time, we don't feel that we're that exposed from a water sourcing perspective, but we are continuing to look for opportunities. For example, in the Charlie Lake specifically, we are not and never have done slick water fracking. So our volumes of water consumption for our frac design there is much smaller than, say, our competitors who are using different techniques.

Okay. Kevin, I'm going back to you on the next question, which is, can you provide an update on the status of the third-party outage that occurred that you can see earlier this year?

I can. That's a very timely question. As a matter of fact, start-up is happening today. We're actually starting to line pack our sales line into that facility. So it's good news. Having said that, it is a bit anticlimactic because it was probably about 3 weeks after the outage. We were able to, through several creative means our teams were really working hard to find other sources to manage our solution gas volumes. And so really, after about 3 weeks, our production impact was really negligible. I think we had about 400 barrels down after 3 weeks. So that volume comes back on today, but that's -- it's just a commendable effort from our team, both in the field and in the office and multidisciplinary approach to solve that problem in relatively short order.

Okay. This one I got up to Rocky. Can you please explain what it needs to be [ lack ] connected?

Can you hear me?

There we go.

It just means that we're taking the volume off truck into a centralized battery and then that battery will pipe flow into same and [indiscernible], which ultimately does globally transportation [indiscernible].

Okay. This one is going to be down the Scott Shimek. Earlier in the slide deck, we look at the Charlie Lake infrastructure component, and you spoke to the improvement in reliability. Are there some specifics that you can speak to with the improvements that you've seen?

So yes, Kevin, kind of walk you through how our solution gas and infrastructure in terms of firm processing has grown since we got into play in 2021. Through that growth phase, namely 2022, probably is one of our more challenging years. And as I reflect back, we were averaging on a simple average basis, approximately 15% to 20% third-party downtime at that time. And year-to-date, we do still have an element to third party that we're always mindful of and working on, but we would be about sub 3%.

All right. Thanks. We just -- we're going to wait through the questions here. Maybe, either Steve or Brian, you could speak to certain specific conditions, which might apply, I guess, maybe operationally with regards to accelerating growth? You touched on that earlier but.

Yes. I think this question comes up quite a bit just in terms of returns, growth is one of them. What we want to leave you guys ultimately with is it is a dynamic approach to how we look at it, and it is about maximizing that debt adjusted free cash flow per share of funds flow per share. So we're not going to surprise you and move off on to another quickly, but I do think it is important that at the end of the day, whether it's buybacks, whether it's growth, those are all outputs of the business. And again, we're going to take a dynamic approach to that. And that's what we want to leave you guys here with today. It is flexibility to be able to do that. And right now, like we said, buybacks, long-term buybacks in combination with certain growth and the base dividend are going to lead to the compounding returns. And that ultimately is what we're here to deliver. So that's the way we would message that. And again, we know there's going to be appetite for different things. And yes, the economics of these -- both the Clearwater and Charlie Lake are great, huge IRRs. But I do think over time here, when you see the resource we have and you look at we're -- not to make this above valuation and where we trade at, but where we are on a relative basis to our 1P and the 2P numbers right here right now, it makes the most sense from an accretion perspective to continue with the allocation that we have through the plan to buybacks.

There will be a time in that 5-year where you got to bring that inventory forward and you start a pretty significant growth -- and we actually have done some modeling with that. So it's a good position to be in where you allocate your capital. And -- but it will be when this company -- if share price went up and we turn to growth, you're going to see some pretty significant numbers here on the growth side. Next?

The earlier return on capital framework referenced quarterly look backs on refunds flow and the new framework references an annual term. Can you just speak to how investors should think about enhanced return timing?

Yes. So as Kevin mentioned, once we normalized our cap stack, if you will, where we've got of the term loan, we've got rid of the deferred acquisition notes that were associated with the Deltastream acquisition it's just become a much simpler model, and we're looking to just simplify our return framework. Annual doesn't mean you got to wait annually to get your return. We've talked to build buybacks. We just want to look at it on an annual basis in terms of what on our budget pricing, our free funds flow is. And then according to the framework with respect to where we are on the absolute debt level, what that means is going to go back to you. But ultimately, we want to be procyclical with the buyback. You don't want to be buying back your stock when you got a lot of free cash and your stock is higher. We want to look at that through the year and say, okay, at points of lower commodity price or lower stock valuation, we want to be more active with the buyback and then we'll balance that through the year with respect to the allocation between what's going to go back to you as shareholders and what's got to go back on the balance sheet.

All right. This question is going to go to Ben. You mentioned that reserves will lag a bit. Can you comment on what you might expect to see growth of reserves for excluding flat oil price changes?

Not a specific number, I don't think, but when I referenced the slide that showed the build-out of some of the delineation we're doing, you can see big portions of key areas for us like West Marten pulling into the reserve book. Of course, that's going to be McDaniel's assessment that will contribute to, but no specific reserve growth numbers every year. We've been successful in replacing production, and we expect to continue to be able to do that.

And you've spoken about Clearwater inventory when you think about the number of years of sort of EOR development, how do you think of that time line?

In our current 5-year plan, we have a large portions of West Marten and Nipisi under waterflood, but there's quite a bit of area is not there within the 5 years. Some of the areas -- in between those 2 areas and then large parts of SMEs, we take a more conservative approach when we're modeling some of the things with waterflood until we get out there with some primary results. But if anything, there's quite a bit of water flood still outside the plan.

Let me just add on to what Ben said in the first question. The company's strategy is not to run out and proved reserves all over the place. The company's strategy is to minimize infrastructure CapEx and build out, then take your next step and build infrastructure, roll your meter and then fill that up. So it's a very -- I just want to make that real clear. We're not going to spend a bunch of money to chase reserves and have some assets out there that are a bit of a problem for us or inefficient to operate. We will be adding on as we go. And like Lynne said, that means some of our areas will be delineated by others offsetting us as we stay around our core. We have enough work to do around our core without doing that, stepping out and developing new areas. So an area like Seal, let me use that as an example, we may not be that aggressive on Seal, even though that's a great asset, it's not one that we need to warrant going and putting infrastructure out there yet. It will come in time.

It's the perfect lead into the next question, which is where does Peavine in the time line for further exploration in development?

Lynne?

Yes. In Peavine, we are currently doing a strat program this year, and we'll be working through that and evaluating that those results and then make sense from there.

So what Lynne is saying is that we will do some lower cost core testing and learning about some of our lands that we have away from our core. That's different than the overall development. So we drilled strat wells in . You may see that kind of thing continue on those lands and other lands as well. Next.

Moving into valuation metrics. When you look at valuation, including price to cash flow and cash recycle ratios on well cost versus payoff, Tamarack looks great. However, it could be the lag effect of data, but on the new place where the engineering firms are not giving as much credit in the Clearwater is yet for primary and secondary recovery in the reserve report. Do you believe this gap will persist or eventually close with more data?

Sorry, really talk about how the data is going to contribute to higher reserves over time. Yes. I would say, of course, you have a high concentration of activity, you get fairly reliable reserve results and then a fair amount of uncertainty is applied to areas as you get less of a confluence of data. So as we build the asset base out, again, we've been efficiently near infrastructure. We will expect to see overall recoveries per well start to show up in there as well. That is both in the reserve book and the contingent prospective resources , to be honest with you.

I think to just adding to that, that question. You got to remember, too, the Q1 was really our first, I wouldn't even call it a totally clean quarter because we still had some disposition activity that was booked where we had some impairments on some old ARO heavy assets. Q2 will be generally our first clean quarter where you won't have any of that other little noise in it. So when you look at the question that Ben answered on the lag in terms of reserve value and all of that piece coming through, we already have a pretty significant NAV value in here. Where we got to get back to is, I think, the predictability and as Brian said, the reliability of results coming through. And we do firmly believe here now Q1 was a snapshot of that. Q2 forward is going to look pretty good because they're going to be pretty clean where you're going to see all the elements of the rate of change in the margin, the productive capability of having the Clearwater in Charlie Lake [indiscernible] 90-plus percent of your production corporately. So I think that's an element, too, where you've got to tie all those pieces together. And Brian and I have been on the road for the last 1.5 years, post the major Deltastream acquisition, trying to help people understand what's going to come. But as part of that, you had some significant portfolio transition still ongoing with the disposition of the Cardium and Redwater, the Viking and so forth. So I think now that's the important takeaway here is let's let these numbers come through. And I think it's going to -- the proof will be in the pudding, if you will, in terms of that margin enhancement, what this business is going to look like moving forward and it will give people a little bit better idea on how to value this company and hopefully close that gap, that's being asked in that question.

I think also the gap from the reserve evaluators is going to be well supported by the waterflood information we continue to get. I think that's probably the place where as we continue to see flat declines, that's going to continue to be an upper to the forecast. And we're seeing that kind of across the board. So we haven't really picked that plateau and seen a decline yet. So year-on-year, we're seeing the flat profiles in recovery over the year starting to hit the reserve book, and that's kind of a big scalable piece of what's left on the table.

So Ben showed this slide there when you -- one of the key messages that we want to take is that, when you look at reserves, you can't compare a conventional company to an unconventional company because the reserves are done differently. And those 2 circles just looking at the ratio there, you'd end up with 7.5 more times. More on those, if you look at the area of those surplus forget about everything else. So I just ask that when you compare us to unconventional players that you recognize that, that's a different way of measuring reserves and what it's been used.

And looking at oil markets, Rocky, you referenced TMX coming online. There's a number of questions coming through on, does Tamarack ship directly on to TMX. Does all of our oil go there? Can you speak to that a little bit?

We don't ship -- actually, we sell all of our rails at Edmonton to other counterparties. Based on our size, which makes the most sense, we don't need additional risk or anything like that. I can say, I know our volume is going west based on who we're selling to you, but it's not under our name.

Okay. Are there any other questions from the floor that have come up by the conversation that we've had here today? I think we've covered off a large number of what we've had online. Okay. I think with that, we'll say thank you. Brian, do you want to make any closing remarks?

Yes. Thanks, everybody. Really appreciate you guys coming out. We are available for questions. I know when you kind of go home, ohh jeez, I wish I could have asked that. I guess it's brought through you, Christine, and then we'll get you the answers that you need. So thank you very much for coming out. We'll be hanging around here a bit. So if there are some other things you want to talk one on one, knock yourselves off, there's other Tamarack employees here, lot smarter than I am, they can answer these questions, too.

And maybe I'll just add for those of us who are joining virtually. Our investors can also submit questions from our Investor Relations email and then you can sign directly for the Tamarack press releases for our website now if that helps people keep up to date with our story. So thanks very much, everyone, for joining us this afternoon.