Mr. Brian Schmidt reports

TAMARACK VALLEY ENERGY ANNOUNCES 2024 CORPORATE BUDGET

Tamarack Valley Energy Ltd. has released its 2024 capital and operating budget. The 2024 budget prioritizes near-term free funds flow generation with realization of long-term net asset value capture, and is supported by a culture focused on safety and operational excellence.

Highlights of the 2024 budget:

• Two-phase capital budget -- Tamarack has designed a two-phase capital budget, which allows the company to align spending with on stream timing of the new CSV Albright sour gas plant in the Charlie Lake area. Capital spending for 2024 will be financed through adjusted funds flow at $75 (U.S.)/bbl (barrel) WTI (West Texas Intermediate) budget pricing:
  • Base budget: $410-million to $460-million;
  • CSV Albright growth budget: $450-million to $500-million assumes Q4 2024 CVS Albright on stream timing.
• Oil-weighted production -- base budget average 61,000 boe/d (barrels of oil equivalent per day) to 63,000 boe/d (84 per cent to 86 per cent oil and NGLs (natural gas liquids)); CSV Albright growth budget average 61,000 boe/d to 64,000 boe/d (84 per cent to 86 per cent oil and NGLs).
• Optimizing capital programs -- spending allocated 60 per cent and 40 per cent for H1 and H2 2024, respectively, reflecting higher Clearwater activity in H1 to align with expected TMX expansion on stream timing.
• Generating free funds flow -- at $75 (U.S.)/bbl WTI budget pricing, the base budget expects to deliver over $250-million of free funds flow. Free funds flow will be directed to further debt repayment and enhanced return initiatives.
• Top-tier margins driven by low corporate break-even -- low corporate cost structure will achieve a sustaining free funds flow break-even of approximately $37 (U.S.)/bbl WTI, inclusive of the base dividend over the company's five-year plan.
• Delivering ESG (environmental, social and governance) performance -- allocated $13-million to ARO (asset retirement obligation) spending. Investing $27-million to expand gas conservation in support of continuing success with the company's Clearwater development. These gas conservation projects are expected to mitigate approximately 276,000 tonnes of CO2e (carbon dioxide equivalent) while saving an estimated $32-million of carbon tax within the window of the company's five-year plan.

"Our top priority remains maintaining a culture of safe and responsible operations that continues to drive near- and long-term value creation for our investors. Tamarack's portfolio, focused on our highly economic Clearwater and Charlie Lake plays, supports scalable development capable of delivering long-term sustainable free funds flow. Building on assets acquired in 2022, organic drilling and waterflood projects increased our Clearwater production by approximately 16 per cent year-over-year. Success of the 2023 capital program and strategic divestments are accelerating our debt repayment, with 2023 exit net debt expected to be reduced by over $300-million relative to 2022. Long term, we continue to maximize the net asset value of our highly economic Charlie Lake oil resource and estimated 8.7 billion barrels of Clearwater OOIP [original oil in place], investing in infrastructure and lowering our overall cost structure," said Brian Schmidt, president and chief executive officer.

Two thousand twenty-four base budget overview

Tamarack's base budget production of 61,000 boe/d to 63,000 boe/d is focused on delivering free funds flow and supporting long-term value creation. Year-over-year, sustaining capital has been reduced from $370-million in 2023 to approximately $330-million in 2024. This reflects Tamarack's success in balancing the pace of development in Charlie Lake, advancing Clearwater primary and secondary recovery programs, and investment in key infrastructure.

The 2024 base budget builds on the success of the 2023 program, which added strategic owned and operated Charlie Lake infrastructure, and is backed by strong well results that enabled long-term commitments to additional firm service capacity. The Charlie Lake drilling program is designed to balance new well activity with area processing and egress capacity. Approximately $65-million to $70-million and $220-million to $240-million will be allocated to primary DCET (drilling, completions, equip and tie-in costs) activity in the Charlie Lake and Clearwater, respectively. In the North Clearwater, Tamarack will expand its core area through the development of East Nipisi and West Marten Hills in both the B and C sands. In the South Clearwater, the company will continue to leverage the fan well design to advance development. Within the budget, $40-million to $45-million is allocated for secondary recovery spending focused on expansion of Clearwater waterflood projects at Nipisi and Marten Hills.

Two thousand twenty-four CSV Albright growth budget overview

Tamarack pro-actively secured firm processing capacity at the new CSV Albright sour gas plant to support near-term growth and long-term development in the Charlie Lake. Firm capacity through CSV Albright could see Tamarack potentially add 700 boe/d to 900 boe/d in Q4 2024, and over 2,000 boe/d in Q1 2025.

In support of this opportunity, the Tamarack board has approved an incremental CSV Albright growth budget which includes an additional $40-million to $50-million capital over Q3 and Q4 2024. This incremental capital would ensure production is available to fill Tamarack's capacity at the CSV Albright gas plant, which is currently under construction and estimated to be on stream in Q4 2024. Timing on capital deployment will be informed by the plant start-up schedule.

Secondary oil recovery -- waterflood expenditures

Tamarack's 2023 waterflood investment resulted in a reduction of its corporate decline by approximately 2 per cent. For each 1-per-cent improvement, or reduction, in decline rate, Tamarack realizes an estimated annual sustaining capital savings of approximately $12-million to $15-million.

With an estimated 8.7 billion barrels of OOIP across the company's Clearwater portfolio, Tamarack is well positioned to deliver sustainable long-term value for investors through investment in waterflood initiatives which have potential to double primary recovery rates. Currently, 6 per cent of Tamarack's Clearwater production is supported by waterflood and this will increase substantially moving through the company's five-year plan.

Tamarack has increased water injection in the Clearwater from 1,500 bbl/d (barrels per day) at January, 2023, to an estimated 4,000 bbl/d in December, 2023, and is expected to further increase to 15,000 bbl/d by year-end 2024. Results from increased injection in 2023 demonstrated material reservoir response that will lead to significant increases in ultimate recovery factors. In 2024, the company plans to direct $35-million to $40-million of capital toward its Clearwater waterflood projects, following on the excellent results demonstrated to date.

Infrastructure initiatives driving higher margins

Tamarack realized material benefits from investment in key strategic infrastructure through 2023. This included projects in the Charlie Lake, highlighted by the Wembley gas plant, and Clearwater, including the Nipisi pipeline and terminal projects. Combined, these 2023 projects served to drive material year-over-year operating and transportation cost reductions, while also providing for top-line price margin improvements.

The 2024 base budget includes capital to expand the Wembley 16-35-073-08W6 battery. At a cost of approximately $5-million, the expansion will result in an incremental 1,600 boe/d of liquids and gas handling capacity for Tamarack operated and controlled volumes. Some associated downtime is expected during the first quarter as the company shuts in volumes to accommodate the expansion work.

Exploration/delineation capital

The 2023 exploration program successfully tested three Clearwater-equivalent sands at Seal, establishing the potential for up to 1.0 billion bbl of OOIP. In addition, Tamarack was successful with its West Nipisi joint venture, where the first wells drilled have delivered average IP30 (average production for the first 30 days that a well is on stream) rates of approximately 240 bopd (barrels of oil per day) per well.

At West Marten Hills in 2023, Tamarack further tested the Clearwater C sand with initial rates averaging approximately 220 bopd per well. These results expand Tamarack's Upper Clearwater inventory, with 380 million bbl of potential OOIP across 27 net sections of land where the Clearwater B sand is already being developed, enabling Clearwater C sand locations to truly benefit from half-cycle economics given that required surface locations and infrastructure are already in place.

Looking ahead, Tamarack plans to direct approximately $20-million of the 2024 capital program to exploration projects. This includes testing additional zones and targets across its Clearwater and Charlie Lake land base.

Environmental, social and governance, and corporate

Given the success and expansion of the company's Clearwater development, in 2024 Tamarack plans to invest $27-million in a large natural gas and emulsion gathering system, which will serve to reduce corporate emissions and trucking as volumes are tied directly into pipelines. Opex (operating expenditures) and transportation savings associated with the project are estimated to reduce 2024 corporate costs by five cents to 10 cents per boe. Over the next five years, this investment is also expected to reduce annual CO2 (carbon dioxide) emissions by approximately 276,000 tonnes and the company's potential carbon tax exposure by approximately $32-million.

To support the commitments and goals outlined in Tamarack's sustainability report and the performance targets specified as part of Tamarack's sustainability-linked lending, the company has allocated $13-million to ARO in 2024. Actions undertaken in 2023 and 2024, including the divestment of certain non-core assets, along with extensive abandonments across remaining non-core holdings, will materially reduce Tamarack's ARO. It is expected that these projects will result in a significant reduction in required 2025 spending.

Debt reduction and enhanced return delivery

The company remains committed to balancing long-term sustainable free funds flow growth with returning capital to shareholders. Key strategic initiatives executed through 2023, including the divestment of the non-core Cardium assets, coupled with growing production from its high netback core assets, reduced Tamarack's expected exit debt at year-end 2023 by over $300-million relative to year-end 2022. The company now expects to exit the year below $1.1-billion of net debt, representing a 27-per-cent improvement on a year-over-year basis. The 2024 budget will see a further reduction while continuing to support returns within the company's return of capital (ROC) framework. In 2023, Tamarack expects to pay out over $83-million in base dividends to its shareholders. As Tamarack looks to confirm achievement of the first threshold of the ROC framework, share buybacks remain the preferred mechanism to enhance shareholder returns at this time.

Risk management

The company takes a systematic approach to manage commodity price risk and volatility to ensure sustaining capital, debt servicing requirements and the base dividend are protected through a prudent hedging management program. For 2024, approximately 50 per cent of net after royalty oil production is hedged against WTI with an average floor price of approximately $70 (U.S.)/bbl, with structures that allow for upside price participation into the mid-$90 (U.S.)/bbl range. Tamarack's strategy provides protection to the downside while maximizing upside exposure. Additional details of the current hedges in place can be found in the corporate presentation on the company's website.

The company would like to thank its employees, shareholders and other stakeholders for all of their support over the past year. Tamarack materially advanced its multiyear transformation, and would not have been able to achieve this without the dedication and hard work of its employees. The company looks forward to continuing to develop its high-quality assets to create shareholder value in a sustainable and responsible way.

About Tamarack Valley Energy Ltd.

Tamarack is an oil and gas exploration and production company committed to creating long-term value for its shareholders through sustainable free funds flow generation, financial stability and the return of capital. The company has an extensive inventory of low-risk oil development drilling locations focused primarily on Charlie Lake and Clearwater plays in Alberta, while also pursuing EOR (enhanced oil recovery) upside in these core areas. Operating as a responsible corporate citizen is a key focus to ensure Tamarack delivers on its environmental, social and governance commitments and goals.

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