Tamarack Valley Energy Ltd. announces the strategic acquisition of Anegada Oil Corp., a leading Charlie Lake light-oil producer, for total net consideration of $494 million

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 Anegada Oil Corp. (“Anegada“), a privately held pure play Charlie Lake light-oil producer, for total net consideration of $494 million (the “Acquisition“), after deducting the proceeds from the sale of a 2% newly created gross overriding royalty (the “GORR“) on the acquired assets (the “Assets“). The total net consideration consists of $247.5 million in cash and debt (net of GORR), subject to adjustment, and approximately 105.3 million common shares of Tamarack (“Tamarack Shares“) at a deemed price of $2.34 per Tamarack Share. Tamarack’s credit syndicate has provided commitments to increase the available capacity under the Company’s credit facilities to $600 million and extend the revolving period to May 31, 2022, concurrent with the close of the Acquisition.

M. Brandon Swertz, President & CEO of Anegada, stated: “Our shareholders indicated a desire to be a part of a larger high-quality entity with greater free cash flow. We see the combination of the Clearwater and Charlie Lake oil plays providing Tamarack with top decile inventory with significant free cash flow growth and yield potential.”

Brian Schmidt, President & CEO of Tamarack, said: “The Acquisition will provide Tamarack with a material position in the Charlie Lake, one of the leading oil plays in North America. Our strategic portfolio approach of investing in high-impact oil plays, combined with a focus on decline mitigation through our waterflood assets enhances corporate free cash flow sustainability and resiliency. Our team’s execution of integrating new assets into the Company has been exceptional and we are confident this will continue. We would like to thank all of our employees for their time and effort in helping to further our corporate strategy.”

Acquisition Highlights

• Establishes a material contiguous position in the Charlie Lake, one of the most economic plays in North America
  • Approximately 11,800 boe/d⁽¹⁾ of Charlie Lake light oil production (71% oil and natural gas liquids) with annualized operating field netback⁽²⁾ of ~$135 million
  • Expect 2022 production to increase and be maintained between 12,000 and 13,000 boe/d⁽³⁾
  • Over 200 net future drilling locations,⁽⁴⁾ across 332.4 (321.2 net) sections of Charlie Lake land, support current production levels for more than a decade
  • The Charlie Lake ranks among the most economic plays in North America, with wells that payout in approximately 6 months and generate IRRs in excess of 400%

• Enhances Tamarack’s free adjusted funds flow and meaningfully reduces corporate sustaining free adjusted funds flow breakeven⁽²⁾
  • High productivity wells (IP30 >650 boe/d) with high operating field netbacks⁽²⁾ (>$30/boe) and attractive capital costs ($2 to $3.5 million per well, dependent on length) results in asset level free adjusted funds flow breakeven⁽²⁾ of approximately US$30/bbl WTI, reducing Tamarack’s corporate free adjusted funds flow breakeven⁽²⁾ below US$36/bbl WTI
  • Modest sustaining capital⁽²⁾ requirements (~$65 million annually, <50% of annualized operating field netback⁽²⁾) drives meaningful free adjusted funds flow⁽²⁾ from the Assets

• Immediately and materially accretive to per share metrics
  • Attractive purchase price (<3.7x annualized adjusted funds flow⁽²⁾) provides for immediate accretion to per share metrics
  • Expected to be ~13% accretive to adjusted funds flow⁽²⁾ per share and ~20% accretive to free adjusted funds flow⁽²⁾ per share in 2022

• Owned infrastructure footprint provides egress, operational flexibility and blending upside
  • Strategic ownership in four gas plants, nine operated multi-well batteries, four operated oil satellites and ~260 km of pipeline infrastructure

• Positive environmental, social and governance (“ESG”) contributions
  • Attractive asset base with minimal asset retirement obligation (“ARO“) ($18 million, undiscounted, uninflated)
  • Forecasted emissions intensity of 10 to 15 kg CO₂e/boe is in line with the low emissions Veteran oil play and will positively contribute to lower overall corporate emissions intensity

• Maintains Tamarack’s strong balance sheet and enhances liquidity
  • Upon closing of the Acquisition, Tamarack expects to have net debt⁽²⁾ of approximately $525 million and over $75 million of available liquidity under a $600 million credit facility, which is anticipated to close concurrent with the Acquisition
  • Pro forma the Acquisition, Tamarack remains well hedged with approximately 35%⁽⁵⁾ of its H2 2021 oil production hedged
  • Pro forma the Acquisition, Tamarack expects a strong 2021 year-end net debt to Q4 annualized adjusted funds flow⁽²⁾ ratio of less than 1.2x, dropping to less than 0.7x in 2022 based on the free adjusted funds flow⁽²⁾ profile

Acquisition Metrics

Proved developed producing (“PDP”) reserves of 10.5 MMboe (70% liquids) and total proved plus probable (“TPP”) reserves of 40.1 MMboe (71% liquids) based on Tamarack’s internal reserves evaluation effective June 1, 2021. In conjunction with the Acquisition, Tamarack has entered into an agreement with Topaz Energy Corp. to sell a 2% GORR on the Assets for gross proceeds of $32 million.

Pro Forma 2021 Guidance

To reflect the contribution from the Acquisition effective June 1, 2021, Tamarack is providing an update to its 2021 guidance.

Post-acquisition guidance numbers are based on pricing assumptions of: a WTI price of US$58.65/bbl; an MSW/WTI differential of US$4.00/bbl; an AECO price of $2.45/GJ; and a USD/CAD exchange rate of $1.2545.

Transaction Details

Concurrent with the execution of the Agreement, shareholders of Anegada representing 100% of the outstanding common shares executed letters of transmittal irrevocably accepting Tamarack’s offer and tendering their shares in connection with the Acquisition. The Agreement provides for, among other things, a non-solicitation covenant on the part of Anegada. A copy of the Agreement will be filed on Tamarack’s SEDAR profile at www.sedar.com.

The Acquisition is expected to close on May 31, 2021, subject to certain customary conditions and regulatory and other approvals, including the approval of the Toronto Stock Exchange (the “TSX“) and the Commissioner of Competition pursuant to the Competition Act (Canada).

In accordance with the rules of the TSX, the issuance of 105,341,880 Tamarack Shares pursuant to the Acquisition (the “Share Issuance“) will require approval of Tamarack’s shareholders as it will result in an issuance in excess of 25% of the issued and outstanding Tamarack Shares. Tamarack’s Board of Directors has unanimously determined that the Acquisition is in the best interests of Tamarack, is fair to Tamarack’s shareholders, and has unanimously recommended that Tamarack’s shareholders approve the Share Issuance. Unless the Company obtains approval by way of written consent of shareholders holding the majority of the issued and outstanding Tamarack Shares, Tamarack will call a special meeting of shareholders to vote on the Share Issuance. It is expected that the special meeting will be held on or about May 28, 2021.

All of the directors and executive officers and certain other shareholders representing an aggregate of 71.3 million Tamarack Shares (or approximately 24% of the issued and outstanding Tamarack Shares) have agreed to consent to or vote their Tamarack Shares in favour of the Share Issuance, as applicable.

At closing, Tamarack will enter into lock-up agreements with each of the directors, officers and insiders of Anegada who, following completion of the Acquisition, will collectively hold or exercise control over approximately 18% of the issued and outstanding Tamarack Shares. Pursuant to the lock-up agreements, each such shareholder will agree not to sell or trade the Tamarack Shares received pursuant to the Acquisition, except as follows: (i) 1/2 shall be eligible for disposition on the date that is three months after closing of the Acquisition; (ii) the remaining 1/2 of such Tamarack Shares shall be eligible for disposition on the date that is six months after closing of the Acquisition; and (iii) all sales of Tamarack Shares within 12 months after closing of the Acquisition must be effected via block trades facilitated by Tamarack.

Advisors

RBC Capital Markets is acting as lead financial advisor to Tamarack with respect to the Acquisition and has provided its opinion to the Board of Directors of Tamarack that, based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be paid by Tamarack in connection with the Acquisition is fair, from a financial point of view, to Tamarack.  CIBC World Markets is also acting as a financial advisor to Tamarack with respect to the Acquisition.

Stifel FirstEnergy and Peters & Co. are acting as strategic advisors to Tamarack with respect to the Acquisition.

National Bank Financial Inc. is acting as exclusive financial advisor to Anegada and as advisor with respect to the GORR.

Stikeman Elliott LLP is acting as legal counsel to Tamarack with respect to the Acquisition and the GORR.

McCarthy Tétrault is acting as legal counsel to Anegada with respect to the Acquisition.

Investor Call and Webcast

Tamarack will host a call and webcast at 9:00AM MT (11:00AM ET) on April 12, 2021 to discuss the Acquisition. Participants can access the live webcast through this link or through links provided on the Company’s website. A recorded archive of the webcast will be available on the Company’s website following the live webcast.

About Tamarack Valley Energy Ltd.

Tamarack is an oil and gas exploration and production company committed to long-term growth and the identification, evaluation and operation of resource plays in the Western Canadian Sedimentary Basin. Tamarack’s strategic direction is focused on two key principles: (i) targeting repeatable and relatively predictable plays that provide long-life reserves; (ii) using a rigorous, proven modeling process to carefully manage risk and identify opportunities; and (iii) operating as a responsible corporate citizen with a focus on environmental, social and governance (ESG) commitments and goals. The Company has an extensive inventory of low-risk, oil development drilling locations focused primarily in the Cardium, Clearwater and Viking fairways in Alberta that are economic over a range of oil and natural gas prices. With this type of portfolio and an experienced and committed management team, Tamarack intends to continue delivering on its strategy to maximize shareholder returns while managing its balance sheet.

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