Good morning. Welcome everyone to the Tamarack Valley Energy Ltd. conference call and webcast on Wednesday, October 29, 2025, discussing the recent third quarter 2025 results press release. I would like to introduce today's speakers: Mr. Steve Buytels, President and Chief Financial Officer; Mr. Kevin Johnston, Vice President Finance; and Mr. Ben Studley, Vice President Engineering. If you would like to ask a question, please press star, then the number one on the telephone keypad to join the queue. If you would like to withdraw your question, please press star, then the number two. Thank you, Mr. Buytels. You may begin your conference.
Good morning and thank you. Welcome everyone to the call to discuss our third quarter operating and financial results. My name is Steve Buytels, President of Tamarack Valley, and today I'm joined by Kevin Johnston, VP Finance, and Ben Studley, VP Engineering. This morning, Tamarack announced its Q3 results, another positive update to our 2025 guidance, and a dividend increase. Highlights of the quarter: corporate production averaged 66,126 BOE/D, reflecting the previously announced 2,000 BOE/D impact of planned service interruptions at a third-party gas processing facility in the Charlie Lake and maintenance turnarounds in the Clearwater. Our production guidance of 67,000 to 69,000 BOE/D remains on track for the full year. In terms of portfolio optimization, we continued with that strategy during the quarter.
As we previously announced, Tamarack completed a $51.5 million synergistic tuck-in acquisition of a private company in the Clearwater, adding approximately 1,100 BOE/D of production and over 114 net stacked sections of Clearwater land, primarily in the West Nipisi area. We see significant operating infrastructure and waterflood synergies on the newly acquired assets. In October, we closed the sale of our remaining non-core producing assets in Eastern Alberta for $112 million and disposed of approximately $63 million of undiscounted asset retirement obligations. This transaction is expected to reduce net production expense corporately by approximately 10% per BOE on a full-year run rate basis. Tamarack has now completed its transition to a pure play Clearwater and Charlie Lake producer.
Our strong base volumes and lower decline rates from expanded waterflood activities in the Clearwater, combined with the Clearwater tuck-in acquisition, are expected to replace most of the production from the East Asset divestiture in the fourth quarter of 2025 and has allowed us to maintain our full-year guidance range. In terms of shareholder returns, Tamarack repurchased 6.7 million shares during the quarter, which represents 1.3% of the 2024 year-end share count. During the quarter, we returned $57 million to shareholders through a combination of the base dividend and share buybacks. Consistent with our strategy of growing shareholder returns, we also increased our annual base dividend by 5% to $0.16 per share per year. Tamarack plans to move the timing of dividends from monthly to quarterly payments beginning in 2026.
In the first nine months of the year, we have returned $194 million to shareholders through base dividends and share buybacks, representing a 6% return yield through the combination of both the dividend and the buybacks. In terms of the waterflood, we increased Clearwater waterflood injection volumes during the third quarter to exit at more than 30,000 barrels a day in September. This represents the updated 2025 exit target rate being achieved three months ahead of schedule. We expect 2025 exit injection rates to exceed 35,000 barrels a day, which would represent approximately 22% of our Clearwater production being under waterflood support. This equates to a 250% increase over 2024 exit water injection rates. This significant response in oil rates from waterflood has driven approximately 3,600 barrels a day of full-year production growth this year, which has been a key driver in the positive guidance revisions.
In terms of our capital structure and net debt reduction, during the quarter, we completed a $325 million note offering of five-year 2030 senior unsecured notes. The proceeds of the offering were used to redeem $100 million of our existing 2027 senior unsecured notes, with the remaining proceeds used to reduce the drawn portion of the credit facility. Tamarack Valley Energy Ltd. ended the third quarter with net debt of $631 million, which represents a reduction of $144 million, or 19% since the beginning of the year. With this note offering, Tamarack Valley Energy Ltd. has laddered its debt maturity structure across several years and currently has undrawn credit capacity of over $700 million. In October, S&P raised our corporate credit rating from B to B+ as a reflection of Tamarack Valley Energy Ltd.'s ongoing debt reduction and strong operational performance.
Ben is now going to walk through the latest developments in the Clearwater and Charlie Lake.
Thanks, Steve. Operationally, waterflood in the Clearwater is driving our growth, while the Charlie Lake continues to deliver strong, repeatable performance. Clearwater production has grown by 11% year-over-year. This continues to demonstrate the success of our primary development and strong response for the ongoing expansion of Tamarack's waterflood program. Response from waterflooding continues to grow, with a total production uplift from waterflood now estimated to be 4,500 barrels per day of oil. Year to date, Tamarack has drilled 20 injection wells, a source water well, and have converted 13 producing wells to injectors. Tamarack is demonstrating the long-term value creation and resource capture capability of deploying waterflood as part of a multilateral development strategy in conventional heavy oil reservoirs. To demonstrate this, we can look at the highest producing well rates in the Clearwater during the month of September.
Four of Tamarack's wells under waterflood, the 16 of 2, 15 of 2, and 1 of 11 wells at Martin Hills, and the 11 of 24 well at Nipisi, were four of the 10 highest producing wells in the Clearwater in the month of September, despite all of these wells being brought on production three or more years ago. In the month of September, these four wells produced at a daily rate of approximately 940, 930, 430, and 490 barrels a day, respectively. These four wells under waterflood have collectively produced nearly 2 million barrels of oil to date as of September. Tamarack plans to rig-release 22 net producing wells and two injectors in the Clearwater in the fourth quarter of 2025. Our Charlie Lake asset continues to deliver strong results.
The Charlie Lake produced approximately 14,000 BOE/D during the quarter, reflecting planned service interruptions at a third-party gas processing facility in the Pipestone area. We continue to await startup of the CSV Albright plant and are prepared to commence delivery of gas as the facility is currently in the final stages of commissioning. Delays to the startup of the CSV Albright gas processing facility are not expected to have a significant impact on Tamarack's production for 2025 or 2026, with several mitigation plans already in place. Tamarack resumed drilling and completion activities, with four net horizontal wells drilled and three net horizontal wells completed during the third quarter. Tamarack plans to continue running a one-rig program for the remainder of 2025 and to rig-release a total of four net wells in the Pipestone and Saddle Hills areas of the Charlie Lake in the fourth quarter of 2025.
I'll turn it over to Kevin to expand on the financial results and our updated corporate guidance.
Thank you, Ben. Q3 2025 marks the completion of our multi-year transition to a pure play Clearwater and Charlie Lake producer. In the quarter, we generated an adjusted funds flow of $201 million, or $0.40 per share, which was in line with 2024. Tamarack earned $96 million of free funds flow, or $0.19 a share in Q3. In the first nine months of 2025, Tamarack has generated a free funds flow of $320 million, or $0.63 per share, which is 17% higher than the first nine months of 2024, even with WTI pricing 14% lower. This year-over-year increase reflects the compounding effects of production outperformance, lower cash costs, and continued share buybacks. Since beginning our share buybacks in January 2024, Tamarack has repurchased 63 million shares, which represents over 11% of our 2023 year-end common share float.
We believe that long-term share buybacks allow Tamarack to both accelerate and compound per share value. Since the fourth quarter of 2022, Tamarack has delivered debt-adjusted production per share and debt-adjusted funds flow per share growth of 40%. The ongoing reduction in our share count allows us to increase our dividend while keeping the absolute dollar payout relatively unchanged. Tamarack's base dividend will increase by 5% to $0.16 per share annually, beginning with the November 2025 payment. As Steve mentioned, during the quarter, Tamarack completed the tuck-in acquisition of a private Clearwater producer, the disposition of non-core producing assets in Eastern Alberta, and a bond refinancing. With all of this, Tamarack ended the quarter with net debt of $631 million, which represents approximately 0.6 times net debt to the trailing 12 months EBITDA since the fourth quarter of 2022.
We have reduced our net debt by $750 million and our net debt to the last 12-month EBITDA by an entire turn. Tamarack's balance sheet is in a very strong position, with low leverage, a ladder maturity schedule, and currently 75% undrawn on its credit facility. We announced two positive revisions to annual guidance with the quarter. First, given the continued margin enhancement and expected cost savings from the East Asset disposition, we further reduced guidance for net production expense by 5% on the full year. Second, we reduced guidance for royalty expenses by one and two percentage points on both the low and high end of our guidance, given lower commodity prices and greater gas cost allowance credits. Year to date, net production expenses have declined by 19% compared to the same period last year.
The East disposition is expected to further reduce our net production expenses by 10% per BOE going forward. Tamarack will be announcing its 2026 corporate guidance and capital program in early December. I will now turn it back to Steve for closing commentary before we open the call to questions.
Thanks, Kevin. We announced two executive updates this morning as well. First off, Kevin Screen, Tamarack Valley Energy Ltd.'s Chief Operating Officer, has decided to retire in January. Kevin joined Tamarack Valley Energy Ltd. in 2011 as the Vice President, Production and Operations, and has served as the Chief Operating Officer since 2021. Kevin's 15 years of experience and integrity have been instrumental to the success of Tamarack Valley Energy Ltd. and are an important part of the company's foundation. We all wish Kevin and his family a happy, lengthy, and healthy retirement. To ensure we keep one Kevin in the C-suite, Kevin Johnston, our Vice President Finance, has been promoted to our Chief Financial Officer effective January 1, 2026. Kevin joined Tamarack Valley Energy Ltd. in 2023 and has been expanding his role since then to ensure a smooth transition.
We'd like to congratulate both Kevins on these upcoming changes. Tamarack Valley Energy Ltd. continues to be differentiated by the scale and quality of our assets. Through our recent acquisition and divestiture activity, we continue to build on both of those factors with the overarching goal of becoming one of the most profitable exploration and production companies in North America. There are three important themes I'd like to emphasize about Tamarack Valley Energy Ltd., which have been further demonstrated this quarter. First, the margin of profit on our barrels is consistently improving as we streamline into the best-in-class assets and drive down unit costs. Second, the Clearwater, aided by waterflood, continues to deliver best-in-class economics with growing production and lower declines, driving enhanced free funds flow margin. Third, we continue to increase returns to shareholders through meaningful buybacks and growing dividends.
These themes contribute to a sustainable business where we see compounding free funds flow per share growth and sector-leading margins. This positions Tamarack Valley Energy Ltd. uniquely across all commodity price cycles. Our focus maintains on maximizing the value of our barrels for investors, and we will continue to allocate capital and free funds flow in a manner that maximizes shareholder returns. We see the buyback and waterflood investments as our most attractive investments at modest commodity prices. On behalf of the executive team, we would like to thank our staff and board of directors in supporting the continued success of the company. Thank you. I will now turn it back to the moderator for questions.
Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question. There are no questions at this time. I will now hand the call back to the management team.
Thank you. We will now read through some questions from the online Q&A. Our first question is for Mr. Ben Studley. Today, you announced Clearwater waterflood uplift of 4,500 barrels from waterfloods implemented prior to 2025. How many wells are responsible for these 4,500 barrels? Is this the maximum expected from these wells, or is the number expected to increase?
Yeah, I think for that 4,500 BOE/D of uplift, we would attribute that to approximately 40 wells currently seeing response. They're in various portions or parts of the cycle of response. Some are inclining, and some are quite stable. I don't believe that all of the patterns have reached their peak yet, and that will continue to evolve, but it's about 40 there.
Thank you, Ben. Our next question is for Mr. Kevin Johnston. Given Q3 end net debt and given the disposition closed in October, it seems that net debt is in the low to mid-$500 million range presently. Can you give us an update as to whether the expectation is to hit the net debt target sooner than previously communicated?
Thank you. It's important to note that the $630 million net debt we have as at Q3 includes the Eastern Alberta disposition. They're on our balance sheet as assets held for sale, so those proceeds are already reflected in that $630 million number. That being said, at our investor day in June, we were pointing to 2027 as when we saw ourselves kind of achieving our net debt target, and we do see that being accelerated with the recent success we've seen on lowering declines, waterflood performance, and margin enhancement.
Thank you, Kevin. Our next question is for Mr. Ben Studley. The 1602 and 1502 wells are remarkable. In September, they produced more than double their primary production high. Are these unusual performances, or do you expect to be able to rejuvenate other old wells to exceed their primary production highs?
Yeah, we do expect this trend to continue, particularly in the Martin Hills area where we do have some older patterns. That's where 1502 and 1602 are. The other pattern we discuss often is our longest on injection W pattern, which is the lateral flood, and it's now showing a combined from the offsetting producers showing response uplift of almost 700 barrels a day. It's also trending towards exceeding the initial peaks. We do have a large inventory of those wells, probably about 55 currently in the ground, and we continue to drill under these various waterflood patterns to build that inventory further. We do expect these trends to continue across that area of the play.
Thank you. Our next question is for Mr. Steve Buytels. How much does a new barrel of Clearwater oil from waterflood compare to a new barrel from new drilling?
Yeah, I think just sort of easy math, it would be probably about half, depending on the style of the waterflood injection. If we're drilling new injectors, I'd say you're probably going to be in that $5 - $6 a barrel range. If you are converting wells, which are old producers, into injectors, the cost of that is probably about a third of drilling a new injector. You're going to see those costs on an F&D basis trend even lower. I think we highlighted it last year in our really strong reserve report and our really strong F&D metrics. I think you'll continue to see, as we put more waterflood, that come through the business.
As Ben just talked about, specifically at Martin Hills, with the response we're seeing, the incremental recoveries we're seeing there, we hope to continue to see that trend of that overall cost per barrel moving lower from a finding and development perspective.
Thank you. Our next question is for Mr. Steve Buytels again. With debt levels moderating, how is the company looking at M&A opportunities versus share repurchases and further dividend increases?
Yeah, I think at the end of the day, as Kevin mentioned, we're ahead of where we thought we'd be and forecasted at investor day with respect to debt levels. Obviously, the Eastern Alberta asset sale has accelerated that. At the same time, we continue to look at maximizing shareholder value. As we've walked through, there's a combination of different things we can do with that. It's allocating capital appropriately. Here we see waterflood investment being the most attractive at a lower commodity price. We put limited capital in the ground today, and we get a significant amount of production response in what we see is hopefully a better commodity environment. In terms of M&A, you can see that we added the Clearwater tuck-in acquisition during the quarter in conjunction with the disposition of the non-core pieces.
You still see us shuffling the deck, if you will, in terms of coring up the Clearwater. I think our focus going forward will be continuing to do these smaller tuck-ins that offer synergies both on the infrastructure side, the operating side, and potentially the marketing side with our barrels. We've been successful in being able to do that. I think the other element, too, is the more we can get cored up and take advantage of our infrastructure with waterflood moving forward, you're going to see just enhanced full cycle profitability in the business. All those elements are going to play a part. Lastly, on shareholder returns, the buyback continues to be top of mind here. We want to be front-footed at these levels, even at these commodity levels. We see a growing return profile through our business at depressed pricing, and we want to get ahead of that.
Ben just walked through what we're seeing on the waterflood and the results and what they should indicate just moving forward from a reserve growth perspective and lower declines, lower sustaining capital, and more margins. Shareholder returns are top of mind, and we continue to want to be front-footed there and be opportunistic there at this time.
Thank you. Our next question is for Mr. Ben Studley. At a high level, what are some of the reasons why the waterflood in the Clearwater has worked as well as it has so far?
Okay. Our modeling and testing lands on really two primary reasons why that waterflood has been so exceptional. One is the characteristics of the reservoir. This includes the relative permeability to oil and water. This creates a very efficient flood where the water naturally displaces oil rather than fingering through the water phase. The other thing is just the large surface area we create by drilling horizontal and multilateral wells, which is such a large step change from a vertical waterflood. The rate at which your water is being injected is more like sweating into the reservoir or soaker hose rather than high-rate injection, even though we are injecting at high rates. This causes the flood front to move very slowly through the reservoir. Despite that, the pressure front is moving quite quickly, and that's why we're seeing these disproportionate responses at the producing wells.
Thank you. Our next question is for Mr. Steve Buytels. You touch on it in the financial statements, but can you speak to the strength in this quarter's production expense on a per BOE basis? How should we be thinking about the production expenses into 2026 compared to 2025 guidance?
Yeah, I think when you look at that, we've guided to, with the Eastern Alberta asset disposition there, what that means for OpEx moving forward on a run rate basis. We do see OpEx trending down into 2026, and we'll update that here in December when we come out with the budget. I think really when you look at it, as we core up into the Clearwater and in the Charlie Lake, you're seeing that more efficient, higher netback barrel come through, which is a function of, in a lot of cases, that lower OpEx that comes with the Clearwater. The growth in the Clearwater and the growth just in production ahead of where we would have budgeted, obviously, is driving on a per BOE basis lower costs there as well.
I think ultimately, at the end of the day, our goal here is to core up into the two plays that we're in, the Charlie Lake and the Clearwater. We see best-in-class economics. As we look at the budget here in December, that margin in that barrel should come through, and we'll provide more detail then.
Thank you. Our next question is for Mr. Steve Buytels again. Tamarack mentioned it is able to mitigate the delays in on-stream timing of the CSV Albright facility, but can you provide any timing updates on when the facility could be on-stream?
Yeah, I want to be careful here because it feels like there's a lot of false starts with this one through the year, and there's been some different messaging. As we've highlighted in the press release on the quarter and we've talked about previously, we've been able to do things to mitigate that. Even if there are delays, we see that mitigation being handled through some other processing alternatives that we have. We drill to fill those volumes corporately here, too, in the Charlie Lake to manage that. However, the latest update we did receive is that the plant was in the warm-up phase and that we could be seeing gas volumes moving through that plant here this week. I have not heard any change, so I think for now we leave it at that.
Again, as we look at it, I want to make sure we drive the point home: even if there are further delays, we don't see any impact to our production guidance for 2025, and we have different mitigating alternatives for 2026 as well should there be further delays.
Thank you. Our next question is for Mr. Steve Buytels again. What is Tamarack's general view on A&D activity now that you have finished disposing of the non-core assets in your portfolio?
Yeah, we screen all A&D the same way, and for that matter, we actually look at capital investment or all the business decisions very similarly. If it is accretive to the business on a debt-adjusted free funds flow per share basis, does it make our internal eight-year plan better by competing for capital with existing assets or inventory? Those are all things that we look at, and how do we sit currently versus where that opportunity set could lead us and what threshold in terms of does that rank higher than what we currently have in the portfolio exists. We look at a lot of different things, but again, as I mentioned earlier, tuck-ins in the Clearwater where we can leverage our infrastructure, our operating experience, the waterflood footprint, they're going to make a lot of sense for us. However, again, we'll be very disciplined with it.
The other thing I would say there too is it also has got to compete with our ability to buy back our own stock in many different ways. I think we've shown the street that we've been very disciplined. We've had a plan in terms of what we want to bring in, and we'll continue to look at all of that from an opportunity perspective. You know, it's got to be accretive to the underlying earnings potential of Tamarack.
Thank you. Our next question is for Mr. Kevin Johnston. Are you considering adopting a DRIP program?
We have been discussing we see great value in buying back our shares and reducing our share count. You know, a DRIP program, you're issuing additional shares for your dividends, so kind of going the wrong way. We are not looking at a DRIP program at this time, but you know, any investors who want to use their dividends to buy additional Tamarack stock, options available.
Thank you. We have no more Q&A questions online, so I will pass it back to Steve to finish off the call.
Yeah, again, we just want to thank all our shareholders and our staff for the support here in the success of the company and the patience that you've had as we've transformed the company. We're really excited now with where we're at in terms of being a pure play Charlie Lake and Clearwater producer. Hopefully here we'll talk to you guys again in December with what could be a good update on the future of the company with those core assets in place. Thank you.
Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect.