Tamarack Valley Energy Ltd. solidifies position as the largest Clearwater producer with the acquisition of Deltastream Energy Corporation for $1.425 billion and announces 25% monthly dividend increase

CALGARY, AB – Tamarack Valley Energy Ltd. (“Tamarack” or the “Company“) (TSX: TVE) is pleased to announce that it has entered into a definitive agreement (the “Agreement“) to acquire Deltastream Energy Corporation (“Deltastream“), a privately held pure-play Clearwater oil producer, for total net consideration of $1.425 billion, consisting of $825 million in cash, $300 million in the form of a deferred acquisition payment (“DAP”) and $300 million of equity comprised of approximately 80 million common shares of Tamarack (“Tamarack Shares“) at a deemed price of $3.75 per share (the “Acquisition“).

The cash portion of the Acquisition is expected to be funded, in part, through a structurally transformed expansion of our sustainability-linked revolving credit facility, from a revolving $650 million reserve-based credit facility to a fully-underwritten $700 million, three year senior secured covenant- based, sustainability-linked revolving credit facility (“SLL Facility”). The remaining cash portion will be funded via a fully-underwritten $275 million senior secured amortizing two year term loan (“Term Loan“), a $125 million equity offering, and a proposed additional $75 million aggregate principal amount of Tamarack’s 7.25% senior unsecured sustainability-linked notes due May 10, 2027 (“Notes”) on a private placement basis. The DAP will be unsecured and payable in cash over the 18-month period subsequent to close in six installments ($50 million quarterly) plus 5.75% interest.

Bill Slavin, Managing Director, ARC Financial said: “The Deltastream business is concentrated in the heart of the Clearwater. With this transaction, Tamarack will become the leading public Clearwater business, with an exceptional combined asset base.  ARC Financial is excited to be a shareholder in Tamarack and participate in value creation from the Company’s Clearwater, Charlie Lake and enhanced oil recovery operations. Tamarack has a demonstrated track record of prudent balance sheet management and capital discipline and is led by a highly respected management team with extensive operational and capital markets experience. Tamarack’s proactive approach to the environment, Indigenous partnerships and ethical governance is aligned with ARC’s values.”

Brian Schmidt, President & CEO of Tamarack, said: “The acquisition of Deltastream solidifies Tamarack as the largest producer in the Clearwater oil fairway. This transaction builds on the Company’s core position in the Clearwater, which is recognized as North America’s most economic play. Deltastream brings scale and a leading economic development drilling inventory, comprised of high quality, long life assets with low sustaining capital requirements that enhance capital allocation flexibility. This strategic transaction delivers significant accretion to our existing business model and drives increased long-term value creation for our shareholders.”

• Enhances Clearwater Asset Quality and Scale
• • Average Clearwater production of ~23,000 boe/d⁽⁴⁾ (94% oil and natural gas liquids) for 2023
  • Delivering an estimated ~$500 million of EBITDA^(1,2)  for 2023, including the impact of the newly created 5% gross overriding royalty on Deltastream’s oil production
  • Over 500 net future development locations⁽³⁾, across 184 net sections of land adjacent to Tamarack’s core Nipisi and Marten Hills operations
  • Positions Tamarack as the largest producer in the Clearwater with considerable scale and upside across Nipisi, Canal, Marten Hills, Greater Peavine, Perryvale and Jarvie

• Resilient Asset Base
  • The Clearwater ranks as the most economic play in North America, with wells that payout in less than six months at current prices
  • Industry leading returns and superior payouts drive asset level free funds flow breakeven⁽²⁾ of less than US$32/bbl WTI

• Operational Synergies
  • Increased scale affords improved netbacks through egress and marketing efficiencies
  • Optimized capital deployment: continuous operations and improved access to rigs and field services
  • Consolidates road access requirements, reducing costs and resulting in more efficient long term play development
  • Provides for economies of scale regarding gas conservation infrastructure at Nipisi

• Top Tier Assets Acquired at Attractive Valuation with Immediate Accretion
  • Attractive purchase price of ~2.9x 2023E EBITDA^(1,2)
  • Drives 2023 free funds flow (FFF)⁽²⁾ per share accretion of 25% and represents a pro forma FFF yield⁽²⁾ of 27%
  • 16% accretive to adjusted funds flow (AFF)^(1,2) per share in 2023
  • Pro forma 2023 FFF⁽²⁾, prior to dividends, expected to exceed $600 million
  • Long term annual FFF⁽²⁾ expected to exceed $500 million on strip prices

• 5 Year Plan Accretion at Tamarack’s long-term base pricing at US$55/bbl WTI
  • 5-year average FFF⁽²⁾ per share accretion of 28%, drilling 60 – 65 wells per year
  • 5-year average debt adjusted funds flow per share (DAFFPS)⁽²⁾ accretion of 35%, highlighting the increased resiliency of the asset base at lower commodity prices

• Increases Returns to Shareholders
  • Upon the closing of the Acquisition, Tamarack expects to increase the annual base dividend by 25% from $0.12/share to $0.15/share
  • Positions Tamarack for significant enhanced return of capital in H2 2023
  • Updated enhanced return framework provides a more resilient free funds flow⁽²⁾ profile across the commodity prices spectrum with significant accretion to long term return of capital for shareholders

• Maintains Balance Sheet Strength and Increases Financial Flexibility
  • Moves Tamarack to a three-year, covenant-based credit facility; provides stability, flexibility and a lower cost of capital, which is not subject to semi-annual reviews
  • Prudent hedging profile protects substantial free funds flow⁽²⁾; underpins dividends and debt repayment to rapidly de-lever the balance sheet
  • Hedging portfolio structure designed to provide downside protection while retaining significant upside pricing exposure
  • Deltastream expected to be debt free at close of the transaction

• Leveraging Experience and ESG Leadership
  • Combined technical expertise related to enhanced recovery across a large original oil in place and active waterflood projects to deliver stable long-term cash flow and low decline production
  • Track record of prudent balance sheet management and capital discipline, with a clear plan to reduce pro-forma leverage and to manage risk, including an active commodity price hedging program
  • Focus on environment, indigenous partnerships and ethical governance that includes sustainability-linked lending, emission reductions, proactive asset decommissioning, stakeholder engagement and indigenous partnership

Acquisition Metrics

Pro Forma 2023 Guidance

Including the contribution of the Acquisition, Tamarack is providing initial preliminary guidance for 2023.

Base Dividend Increase

In conjunction with the Acquisition, Tamarack’s Board of Directors has approved a 25% increase to the monthly dividend to $0.0125 per share, from $0.01 per share previously, which equates to $0.15 per share on an annual basis, for the November dividend, payable in December. The increase in Tamarack’s monthly cash dividend reflects the improvement in sustainable FFF⁽²⁾ per share the Company has generated since implementation of its dividend policy in October 2021. The Company’s improved FFF⁽²⁾ per share profile is a cumulative result of enhanced sustainable FFF⁽²⁾ along with the Acquisition, delivers accretion at flat pricing of US$55/bbl WTI and $2.50/GJ AECO.

Enhanced Return of Capital Update