Actionable insights straight to your inbox

Equities logo

Tamarack Valley Energy To Acquire Rolling Hills Energy for C$93 Million

The company also announced a 20% increase in its dividend.

Image source: Tamarack Valley Energy

Tamarack Valley Energy (Toronto: TVE; TNEYF ) announced Thursday that it has agreed to acquire Rolling Hills
Energy for C$93.0 million (US$73.5 million).

Rolling Hills is a junior oil and gas company engaged in the exploration and development of oil resources in Alberta, including the Clearwater, Mannville and Viking formations.

Tamarack also announced that it has further consolidated its Clearwater position through the addition of undeveloped lands in the Peavine area.

Tamarack is an oil and gas exploration and production company with an extensive inventory of drilling locations focused primarily
on Charlie Lake, Clearwater and enhanced oil recovery (EOR) plays in Alberta

The Rolling Hills acquisition with its estimated production of 2,100 barrels of oil equivalent per day (boe/d) is expected to deliver $61.0 million of annualized operating field netback.

(Operating field netback is calculated as total petroleum and natural gas sales, less royalties, net production expenses and transportation expense.)

Increasing dividend

Concurrent with the acquisition announcement, Tamarack announced a 20% increase to its dividend to C$0.01 per share per month beginning with the June 2022 declaration. Tamarack further announced that it expects to implement an enhanced return to shareholders payable in Q3 2022 that will be funded through free funds flow.

“Tamarack’s announcements today are the result of our disciplined focus on sustainable free funds flow growth and accretive
acquisitions,” said President and CEO Brian Schmidt (Aakaikkitstaki). Through our strategic focus over the past two years, we have positioned the company for long-term sustainable free funds flow growth and shareholder returns.”

“The acquisition of Rolling Hills completes the consolidation of our core operating area in the Southern Clearwater, which will allow us to fully optimize development and maximize returns from this area.”

Investment thesis

Tamarack shares have rallied strongly since summer 2021, on the back of surging oil prices, and the stock has returned to levels not seen since 2018.

Even after the rally, however, the company has a market cap of just C$2.2 billion (US$1.7 billion), which we don’t think fairly reflects Tamarack’s growth trajectory and prospects.

  • Tamarack grew production to 40,384 boe/d and 34,562 boe/d in Q4 2021 and full year 2021, respectively, representing 83% and 57% growth over the comparable periods in 2020.
  • The company generated free funds flow, excluding acquisition expenditures, of C$82.4 million (a quarterly record) and net income of
  • $140.4 million in Q4 2021, and C$149.1 million and $390.5 million, respectively, for the full year 2021.
  • Tamarack completed C$700 million in acquisitions in 2021, adding 1,000 drilling locations.
  • The company is clearly committed to returning capital to shareholders.
  • Tamarack has a strong balance sheet with low leverage.
  • The company is actively engaged with indigenous partners to be a leader in sustainability initiatives.


Source: Equities News

The saying that there is no such thing as a free lunch is very much true for Robinhood.