Tamarack Valley Energy (TSX:TVE) Q3 2026 Earnings Call

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8:02 Good morning. Welcome everyone to the Tamarack Valley Energy Ltd. conference call and webcast on Wednesday, October 28, 2026, discussing the recent Q3 2026 results press release. I would like to introduce today's speakers, Mr. Brian Schmidt, Founder and CEO, Mr. Steve Buytels, President, and Mr. Kevin Johnston, CFO. If you would like to ask a question, please press star then the number one on your telephone keypad to join the queue. And if you would like to withdraw your questions, press star two, thank you. Mr. Schmidt, you may begin your conference.

8:44 Good morning and welcome to everyone joining our call to discuss the operating and financial results for the third quarter, 2026. My name is Brian Schmidt. I'm the CEO and founder of Tamarack Valley Energy, and today I'm joined by our president, Steve Buytels, and our CFO, Kevin Johnston. We are excited to report our Q3 results, which reflect the company's first full quarter as a Clearwater-focused producer, following the successful disposition of our Chartergate Lake assets in June. With strong operational execution and elevated commodity prices in 2026, we have generated substantial free cash flows and more. Tamarack's third quarter results were also highlighted by the previously announced deal to acquire headwater exploration in an all-stock transaction that will result in a combined value of $10 billion market cap. The strategic acquisition creates a premier North American Oil Company with top tier profitability and an unmatched position as the only publicly traded pure play clear water producer.

10:00 The combined company will have a run rate production of greater than 80,000 barrels per day. Kevin will now discuss our Q3 financial highlights. Thank you, Brian.

10:11 Tamarack delivered clear water production over 55,000 BOE per day in Q3, a 16% increase over prior year. Tamarack generated Q3 funds flow of $214 million and free funds flow of $92 million. Year to date, the company has generated $375 million of free cash flow or 78 cents per share. Tamarack's Q3 capital investments were $120 million for the quarter and were heavily focused on water flood expansion. Our 2026 capital program is trending towards the higher end of our guidance range of $470 million reflecting the acceleration of development capital into 2026 in response to higher commodity prices and the consolidation of Headwaters Capital Investments from mid-November to the end of the year.

11:01 We continue to drive per share returns through our share buyback program. Year to date, we allocated $190 million to repurchase nearly 16 million common shares. Tamarack has now reduced its common share float by more than 15% since the commencement of the NCIB in 2024 at a weighted average share price of $5.80 per share. On the heels of the Charlie Lake divestiture, we declared a 25% increase to our quarterly dividend to $0.05 per share. In conjunction with the closing of the headwater acquisition, we intend to raise the quarterly dividend a second time by another 20% to $0.06 per share or $0.24 per share analyzed. BAMARAC is entering the fourth quarter with an undrawn credit capacity of $875 million and cash on hand of $540 million, providing substantial balance sheet strength to fund accelerated clearwater development, return capital to shareholders, or pursue strategic initiatives.

12:02 Following the acquisition of headwater, we expect to exit the year with net cash of more than $50 million and available funding of $1.2 billion. Steve will now provide an update on our Clearwater assets, the headwater transaction, and an outlook for the remainder of the year.

12:19 Thank you, Kevin. With respect to the quarter, I'd like to highlight a few key themes. First theme here is the water flood outperformance continues. Reservoir response from a water flood expansion continues to exceed expectations. Oil uplift from water injection is now estimated to be 10,000 barrels per day, or 18% of our total production. This advancing oil recovery continues to drive lower finding and development costs, lower sustaining capital requirements, and lower breakeven prices, resulting in stronger margins. The strong response has led to an increase in the overall standalone Tamarack production guidance for 2026, which offsets some of the production with respect to the delayed, slightly delayed timing of the close into mid-November.

13:08 We exited the third quarter injecting 60,000 barrels per day across our assets and are reaffirming our 2026 exit guidance of over 70,000 barrels per day on legacy Tamarack assets. Following the headwater acquisition, we expect to exit the year injecting over 100,000 barrels per day. 2026 injection becomes 2027 oil production. Second, the South Clearwater water flood pilot. This pilot has illustrated a greater than 100% increase in oil uplift, which is a positive outcome in terms of potential upside for this area and represents potential upside to our five-year plan that we do not currently model. Given this response, we have identified other specific more optimally located well patterns for further water flood development in the area.

13:57 We expect to add an additional water flood pilot here later in the fourth quarter. Third, the headwater acquisition. We're excited to complete the business culmination. This transaction reflects an exceptional opportunity for the shareholders of both companies to gain exposure to a unique and differentiated value proposition through enhanced efficiency, profitability, and durability of an integrated clearwater asset base. The combined company will benefit from decades of clearwater drilling and water flood inventory, meaningful operating capital synergies, and greater scale across the play. As we are designing our budget for next year and laying out a revised five-year plan, we continue to identify additional synergies from the integration of the two companies.

14:44 We plan to release our 2027 budget in conjunction with the closing of the headwater acquisition, which is currently expected to occur shortly after the November 18th shareholder vote. At that time, we will also provide an update on our integration activities and expected synergies moving forward. Brian will now deliver some closing comments.

15:05 Thanks, Steve. Our share price performance over the last three months has continued to reaffirm our decision to transform the business into a Clearwater-focused company. During this time, we have maintained strict discipline in the pursuit of maximizing total shareholder returns through profitable production growth, share buybacks, base dividends, and balance sheets measurement. With our vast drilling inventory and water flood expansions, the company is well positioned to continue to drive long-term sustainable value for our shareholders. As I've said before and will say it again, I'm extremely excited for the future of this company. I will now turn it back to the moderator for questions. Thank you, sir. Ladies and gentlemen, as stated, if you do have any questions, please press star followed by one on your touch-tone phone.

15:55 You will then hear a prompt that your hand has been raised. and if should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, we ask that you please lift the handset first before pressing any keys. Thank you. Please go ahead and press star one now if you have any questions. And first question will be from Sam Burwell at Jefferies. Please go ahead, Sam.

16:18 Hey, guys. Good morning. On the South Clearwater pilot, was that simply just a new injector placed in between two producers? And just curious if anything different from that standpoint might be planned for the next pilot and if it might be in a different area of that Southern Clearwater acreage.

16:37 Yeah, Sam, it's Steve here. Good question. That pilot, I use the word optimal in the call there. What we ended up doing there is we had a Thank you for joining us today. with the most recent data seeing that uplift. It encourages us really now to take that learning and move that into more optimally located patterns where we can better set up and have a true, better set up for really true water flood, I guess, investment moving forward.

17:36 So yes, you'll see us likely potentially do some more there and look at A little bit of incremental investment around that pad given we have the facilities there already, but then we will move into some other areas that are specifically set up in a more optimal way for water flood. So stay tuned. We'll do one here and then we'll probably be able to talk a little bit more when we come out with the budget in terms of other areas within that South Clearwater fairway that we'll look to go after.

18:09 Okay, great. And shifting gears a little bit, on the TMX capacity that you have starting up early next year, I'm curious if you could unpack how much benefit that might be to realizations or netbacks. I mean, is the price that you're getting essentially like Alberta WCS plus the cost of the TMX toll, or is it more tied to, say, an Asian price less shipping? I'm just curious within the context of wider WCS diffs and the higher shipping rates that we've all seen.

18:40 Yep, another fair point. It is really volatile right now with all the pieces moving, but essentially you have your transport locked in to get obviously to the West Coast there. So you know that. The bigger part of that is going to be where and how is that barrel priced on a Brent basis and then working that back. So it's a little bit hard to give you an exact answer right now. And with the cost of freight, that's kind of moved obviously that diff out in general but I do think obviously we signed up on that longer term having that diversification of that barrel into different markets should be helpful and actually drive better realizations than what we would otherwise see on an Edmonton CS basis right so that's why we went after that but again right now it's a little bit tough to say with all of the volatility specifically around the cost of freight to give you an exact answer.

19:38 Yeah, for sure. Totally fair there. Thank you, Steve. Yeah. And at this time, it appears we have no other phone questions. Please proceed. Thank you. We have no questions online, so I'll pass it back to Brian Schmidt for any closing comments.

19:58 Thank you, everybody, for today's call and the interest in Tamarack. I would say in my career, and I think I've said this before, haven't seen an asset like this where you can grow production and reduce sustaining capital at the same time. It's very impressive. So I think the future for this company is very bright based on that unique concept. So with that, I'll close off. And any further questions, please contact our main line. Thank you. Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.