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Tamarack Valley Energy Ltd. Announces 2012 Audited Year End Financial and Operating Results

Mar 27 2013 12:00AM

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CALGARY, ALBERTA -- (Marketwire) -- 03/27/13 -- Tamarack Valley Energy Ltd. (TSX VENTURE: TVE) ("Tamarack" or the "Company") has filed its audited condensed consolidated financial statements for the year ended December 31, 2012 ("Financial Statements") and management's discussion and analysis ("MD&A") on SEDAR. Selected financial and operational information is outlined below and should be read in conjunction with the Financial Statements, which were prepared in accordance with International Financial Reporting Standards ("IFRS") and related MD&A. These documents are accessible on Tamarack's website at www.tamarackvalley.ca or on SEDAR at www.sedar.com.

Year-end 2012 Results

Tamarack is pleased to announce its fourth quarter financial and operational highlights as follows:

-- Production increased by 103% to 2,166 boe/d in 2012 from 1,069 boe/d in 2011.-- Production guidance for 2012 was achieved while maintaining the Company's initial capital expenditure guidance.-- Crude oil and natural gas liquids production weighting increased to 51% in Q4/12 from 49% in Q3/12.-- Funds from operations were $6.03 million for Q4/12 and $16.67 million for the year ended 2012 compared to $2.89 million and $8.85 million for the same periods in 2011.-- Operating netbacks increased by 5% to $31.83/boe in Q4/12 from $30.22/boe in Q3/12.-- Drilled 8 (4.8 net) successful Cardium oil wells, 12 (11.6 net) Viking oil wells and one net heavy oil well in 2012.



Tamarack's production guidance, disclosed on April 19, 2012, assumed the Company would average 2,000 to 2,200 boe/d in 2012 compared to actual production of 2,166 boe/d. Tamarack was able to achieve production guidance despite two (1.0 net) non-operated Lochend wells, drilled in the third quarter of 2012, not coming on-stream until the middle of the first quarter of 2013.

During 2012, Tamarack enjoyed continued Cardium oil drilling success in the Lochend and Garrington areas of Alberta. Production rates from wells operated by Tamarack, continue to outperform industry averages for Cardium water fracture stimulated wells in both areas. This was achieved while reducing drilling, completion and equipping costs by more than 30% from Tamarack's first Cardium well drilled in 2010.

On April 17, 2012, Tamarack increased its exposure to the Redwater Viking oil trend by completing the acquisition of Echoex Ltd. During the remainder of 2012, the Company drilled 12 Viking oil wells in the Redwater and Westlock areas of Alberta. Viking economics have been enhanced through the achievement of higher initial production rates and lower capital costs. Average initial production rates of 76 bbls/d exceeded pre-acquisition expectations by 27%. Costs to drill, complete and equip the Redwater wells in 2012 were also reduced by 20% from those incurred by the previous operator.

The significant capital cost savings in Lochend, Garrington and Redwater and better Cardium and Viking oil well production performance has allowed Tamarack to reduce its payout times to less than 14 months. By reducing payout times, Tamarack is better positioned to continue to grow production while maintaining industry competitive debt to cash flow levels.

Financial & Operating Results

-------------------------------------------------------------------------------------------------------------------------------------------------------- Three months ended December 31,---------------------------------------------------------------------------- 2012 2011 % change----------------------------------------------------------------------------($, except share numbers)Total Revenue 11,444,879 5,644,601 103Funds from operations (1) 6,029,731 2,894,004 108 Per share - diluted (1) 0.20 0.18 11Net income (loss) (2,455,973) (2,441,267) 1 Per share - basic (0.08) (0.15) Per share - diluted (0.08) (0.15)Working Capital (deficiency) (2) (47,543,639) (7,614,163) 524Total assets 152,343,868 64,955,397 135Capital Expenditures (3) 11,872,879 8,724,373 36----------------------------------------------------------------------------Weighted average shares outstanding (4) Basic 29,706,752 15,880,374 87 Diluted 29,706,752 15,880,374 87----------------------------------------------------------------------------Average daily production Crude oil and NGLs (bbls/d) 1,310 442 196 Natural gas (mcf/d) 7,505 6,391 17 Total (boe/d) 2,561 1,507 70----------------------------------------------------------------------------Average sale prices Crude oil and NGLs ($/bbl) 76.29 89.87 (15) Natural gas ($/mcf) 3.26 3.39 (4) Total ($/boe) 48.57 40.71 19----------------------------------------------------------------------------Operating netbacks ($/boe) (5) Average realized sales 48.57 40.71 19 Royalty expenses (4.43) (2.45) 81 Production expenses (13.32) (10.07) 32---------------------------------------------------------------------------- Operating field netback 30.82 28.19 9 Realized commodity hedging gain (loss) 1.01 (1.61) (163)---------------------------------------------------------------------------- Operating netback 31.83 26.58 20---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Year ended December 31,---------------------------------------------------------------------------- 2012 2011 % change----------------------------------------------------------------------------($, except share numbers)Total Revenue 34,413,170 16,624,658 107Funds from operations (1) 16,666,872 8,846,541 88 Per share - diluted (1) 0.65 0.60 8Net income (loss) (4,140,275) (3,062,843) 35 Per share - basic (0.16) (0.21) Per share - diluted (0.16) (0.21)Working Capital (deficiency) (2) (47,543,639) (7,614,163) 524Total assets 152,343,868 64,955,397 135Capital Expenditures (3) 35,729,818 40,545,790 (12)----------------------------------------------------------------------------Weighted average shares outstanding (4) Basic 25,815,366 14,836,809 74 Diluted 25,815,366 14,836,809 74----------------------------------------------------------------------------Average daily production Crude oil and NGLs (bbls/d) 986 314 214 Natural gas (mcf/d) 7,078 4,528 56 Total (boe/d) 2,166 1,069 103----------------------------------------------------------------------------Average sale prices Crude oil and NGLs ($/bbl) 77.76 91.23 (15) Natural gas ($/mcf) 2.45 3.73 (34) Total ($/boe) 43.42 42.62 2----------------------------------------------------------------------------Operating netbacks ($/boe) (5) Average realized sales 43.42 42.62 2 Royalty expenses (3.39) (1.77) 92 Production expenses (12.10) (10.16) 19---------------------------------------------------------------------------- Operating field netback 27.93 30.69 (9) Realized commodity hedging gain (loss) (0.17) (0.57) (70)---------------------------------------------------------------------------- Operating netback 27.76 30.12 (8)--------------------------------------------------------------------------------------------------------------------------------------------------------



Notes:

(1) Funds from operations is a non-GAAP measure and is calculated as cash flow from operating activities before the change in non-cash working capital and abandonment.

(2) Working capital (deficiency) includes accounts receivable, prepaid expenses and deposits, bank debt and accounts payable and accrued liabilities, but exclude the future value of financial instruments.

(3) Capital expenditures include property acquisitions and are presented net of disposals, but exclude corporate acquisitions.

(4) On July 16, 2012 the Company consolidated its common shares on a 1 for 12 basis and all number of shares and per share amounts have been restated to reflect the consolidation.

(5) "Operating netback" does not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Operating netback equals total petroleum and natural gas sales including realized gains and losses on commodity derivative contracts less royalties and operating costs calculated on a boe basis. Tamarack considers operating netback an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.

Redwater 2012 Drilling Update

Since completing the Echoex transaction, Tamarack has been focused on reducing costs and increasing Viking oil productivity at Redwater. The average drilling, completion and equipping costs of the most recent five wells was $1.056 million, a 12% reduction relative to the four wells drilled in the spring of 2012 and a 20% reduction relative to pre-2012 costs. To date, Tamarack has drilled nine wells in total, stimulated with the standard 10 stage, 10 ton gelled water fracture treatment, with the initial 30 day production oil rate averaging 76 bbls/d. This average exceeds Tamarack's original acquisition drilling type curve by 27%.

Garrington Drilling Results

During the fourth quarter of 2012, Tamarack drilled two (1.0 net) Cardium oil wells in Garrington. The Company stimulated these wells with 18 stage slick water fracture treatments in the first quarter of 2013. Both wells were equipped and tied into permanent facilities and began producing on February 9, 2013. Based on field estimates, the 3-29-32-3 W5M (52% net) well averaged 417 boe/d (215 net) (88% oil and natural gas liquids weighted) of production over an initial 30 day period. The 2-29-32-3 W5M (52% net) well averaged 353 boe/d (182 net) (89% oil and natural gas liquids weighted) of production over an initial 30 day period.

2013 Spring Drilling Program Commenced

During March 2013, Tamarack commenced its spring drilling program in the Redwater area of Alberta. It drilled, completed and equipped five (4.7 net) Viking oil wells. These wells will be put on production in late March or early April. Tamarack is currently drilling the first of two net operated Cardium oil wells from an existing surface location in Lochend. The first Cardium well is expected to come on production during the second quarter of 2013 and the second well is expected on production in early July, 2013. Both wells will be tied into existing operated facilities.

2013 Production Update

Based on early 2013 drilling results and first quarter field production estimates of 2,625 to 2,675 boe/d, Tamarack is on target to meet its 2013 average production guidance of 2,900-3,000 boe/d. One of the two (1.0 net) non-operated Lochend wells began producing in early February and is currently producing at a constrained rate of 362 bbls/d (181 net). The scheduled Lochend facility expansion that Tamarack is also participating in is on track to be completed in April 2013 at which time the constraint will be lifted and both wells will produce at unrestricted rates. Tamarack also plans to commence a second five well Viking oil drilling program either late in the second quarter or early third quarter of 2013, pending surface access.

About Tamarack Valley Energy Ltd.

Tamarack is an oil and gas company involved in the identification, evaluation and operation of resource plays in the Western Canadian sedimentary basin. The Company uses a rigorous, proven modeling process to carefully manage risk and identify growth opportunities. Tamarack's diversified suite of oil-focused assets provides exposure to the high impact Cardium light oil resource plays in Lochend, Garrington/Harmattan and Buck Lake in Alberta, low cost Viking light oil resource plays in Redwater, Foley Lake and Westlock in Alberta and highly economic heavy oil opportunities southeast of Lloydminster in Saskatchewan.

Abbreviations

bbl barrelbbls/d barrels per dayboe/d barrels of oil equivalent per daymcf thousand cubic feetmcf/d thousand cubic feet per day



Unit Cost Calculation

For the purpose of calculating unit costs, natural gas volumes have been converted to a barrel of oil equivalent ("boe") using six thousand cubic feet equal to one barrel unless otherwise stated. A boe conversion ratio of 6:1 is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This conversion conforms with Canadian Securities Regulators' National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. Boe's may be misleading, particularly if used in isolation.

Forward Looking Information

This press release contains certain forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "potential", "intend", "objective", "continuous", "ongoing", "encouraging", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. More particularly, this press release contains statements concerning Tamarack's production estimates for 2013 and future drilling plans and operations. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Tamarack relating to prevailing commodity prices, the availability of drilling rigs and other oilfield services, the timing of past operations and activities in the planned areas of focus, the drilling, completion and tie-in of wells being completed as planned, the performance of new and existing wells, the application of existing drilling and fracturing techniques, the continued availability of capital and skilled personnel, the ability to maintain or grow the banking facilities and the accuracy of Tamarack's geological interpretation of its drilling and land opportunities. Although management considers these assumptions to be reasonable based on information currently available to it, undue reliance should not be placed on the forward-looking statements because Tamarack can give no assurances that they may prove to be correct.

By their very nature, forward-looking statements are subject to certain risks and uncertainties (both general and specific) that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures); commodity prices; the uncertainty of estimates and projections relating to production, cash generation, costs and expenses; health, safety, litigation and environmental risks; and access to capital. Due to the nature of the oil and natural gas industry, drilling plans and operational activities may be delayed or modified to react to market conditions, results of past operations, regulatory approvals or availability of services causing results to be delayed. Please refer to Tamarack's revised Annual Information Form ("AIF") dated March 27, 2013 for additional risk factors relating to Tamarack. The AIF is available for viewing under the Company's profile on www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.



Contacts:
Tamarack Valley Energy Ltd.
Brian Schmidt
President & CEO
403.263.4440

Tamarack Valley Energy Ltd.
Ron Hozjan
VP Finance & CFO
403.263.4440
www.tamarackvalley.ca





Source: Marketwire