Tamarack Valley Energy TSE: TVE reported record second-quarter cash flow as Clearwater production growth, strong operating netbacks and higher commodity prices supported results, while the company outlined plans to accelerate investment in its core oil assets following the sale of its Charlie Lake business.
Chief Executive Officer Brian Schmidt said the company’s second-quarter performance reflected operational execution and elevated commodity prices. He said Tamarack is continuing to expand waterflood operations across its Clearwater fields while pursuing production growth through drilling.
“We are on track to grow our Clearwater production by over 15% year-over-year and raise our exit water rate injection volumes by 75%, setting the stage for 2027 and beyond,” Schmidt said.
The company previously announced the divestiture of its Charlie Lake assets for more than CAD 800 million. Schmidt said the sale completed a portfolio transformation that has positioned Tamarack as a pure-play Clearwater operator, with run-rate Clearwater production exceeding 54,000 barrels of oil equivalent per day, net cash of CAD 130 million and what he described as decades of low-cost, high-margin oil inventory.
Record cash flow and shareholder returns
Chief Financial Officer Kevin Johnson said adjusted funds flow reached a record CAD 255 million, or CAD 0.53 per share, in the second quarter. That was 29% higher than in the comparable period a year earlier. After capital expenditures, Tamarack generated CAD 155 million of free funds flow during the quarter.
For the first half of 2026, Tamarack generated CAD 280 million of free funds flow, or CAD 0.58 per share, Johnson said.
The company repurchased 6.5 million shares during the second quarter and 11 million shares year to date. Since beginning its buyback program in January 2024, Tamarack has reduced its common share count by 15% at an average purchase price of CAD 5.39 per share, according to Johnson.
Combined dividends and repurchases totaled more than CAD 165 million returned to shareholders in the first six months of the year. Tamarack also declared a third-quarter dividend of CAD 0.05 per share, payable Sept. 30. Johnson said the dividend was increased 25% following the Charlie Lake sale and now represents an annualized distribution of CAD 0.20 per share.
The company redeemed its remaining 2027 notes and extended its credit facility by four years to 2030. Proceeds from the Charlie Lake sale were used in part to repay all amounts drawn under that facility. Tamarack ended the quarter with more than CAD 500 million of cash and CAD 875 million of undrawn credit capacity, Johnson said.
Waterflood expansion drives Clearwater strategy
President Steve Buytels said Tamarack drilled 42 horizontal wells in the Clearwater fairway during the first half using a four-rig program. The company also completed preparatory work for a planned expansion of waterflood activity in the second half.
Water injection volumes were approximately 45,000 barrels per day at the time of the call, with Tamarack expecting to increase volumes to roughly 50,000 barrels per day by early August and reach its year-end target of 70,000 barrels per day.
Buytels said the company estimates that 8,500 barrels per day of oil production came from waterflood uplift during the second quarter, equivalent to 16% of Clearwater production. At Marten Hills, production under waterflood had recovered to 88% of the historical primary-production peak from more than five years ago, he said. The associated barrels carried a finding and development cost of less than CAD 1 per barrel.
At West Marten, waterflood activity was generating new production highs above historical primary peaks in the B and C Clearwater sands, according to Buytels. He said the waterflood results are helping reduce Tamarack’s corporate decline rate and future sustaining capital needs.
- Tamarack expects more than 50% of Clearwater production to be under waterflood over its five-year plan, potentially approaching 60%.
- The company said sustaining reinvestment needs could fall below 20% of cash flow at CAD 75 commodity pricing.
- Management said higher waterflood penetration could support increased margins and free funds flow.
Higher capital spending and new delineation work
Following the Charlie Lake divestiture and higher near-term commodity prices, Tamarack elected to increase Clearwater development spending by CAD 75 million versus its original budget. About half of the increase represents capital previously allocated to Charlie Lake in the second half of the year.
The company now plans to spend up to CAD 450 million in 2026, with the added capital split between primary drilling and secondary waterflood activities.
Tamarack is also expanding delineation work at Pelican and Seal. The program includes three wells at Pelican targeting Clearwater and Wabasca prospects. Buytels said the first Pelican well is expected to be spudded in late September or early October, with more substantive results likely available around the company’s fourth-quarter reserves update. Seal is planned as a winter program, with potential updates more likely in the first quarter.
Management is evaluating waterflood, polymer flood and thermal recovery approaches in areas with different reservoir and fluid characteristics. Schmidt said Tamarack is also assessing multi-leg injectors as a potential way to reduce costs, while a South Clearwater development includes fan wells designed for later conversion of every second well to injection.
Capital allocation and balance-sheet flexibility
During the question-and-answer session, management said it intends to remain disciplined in deploying its cash balance. Buytels said the company sees potential to use capital for organic development, waterflood acceleration, land acquisitions and small tuck-in transactions, but emphasized that investments must improve Tamarack’s internal eight-year earnings model based on US$55 West Texas Intermediate oil.
Buytels said Tamarack has increased its Clearwater land position by 30% over the past year through Crown land sales and smaller acquisitions. However, he said the company’s own portfolio offers significant opportunity, particularly through waterflood development and potential upside at Pelican, Seal and South Clearwater.
Schmidt added that management sees value in Tamarack’s shares and views buybacks as a potential use of capital. “Probably the best acquisition we could do is our own stock right now,” he said.
Johnson said Tamarack expects to maintain a more modest hedge book now that it holds a net cash position. The company previously hedged roughly 45% to 50% of production, but he said future coverage will likely be closer to 20%, generally using wide collars or downside protection.
Tamarack also announced the appointment of Scott Shimek as chief operating officer. Shimek joined the company five years ago as vice president of production operations.
About Tamarack Valley Energy (TSE:TVE)
Tamarack Valley Energy Ltd. engages in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in the Western Canadian sedimentary basin. It primarily holds interests in Cardium light oil plays in Wilson Creek/Alder Flats/Pembina, and Garrington and Lochend areas in Alberta; Viking light oil resource plays in Redwater and Westlock in Alberta, as well as in the Consort area of southeast Alberta and Hoosier area of southwest Saskatchewan; Barons Sands light oil plays located in the Penny area of Southern Alberta; and heavy oil properties located in Hatton area of Saskatchewan.
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