Good morning. Welcome, everyone, to the Tamarack Valley Energy Ltd. conference call and webcast on Wednesday, May 6, 2026, discussing the recent Q1 2026 results press release. I would like to introduce today's speakers, Mr. Brian Schmidt, founder and CEO, and Mr. Steve Buytels, President, and also Kevin Johnston, CFO. If you would like to ask a question, please press star one on your telephone keypad to join the queue. If you'd like to withdraw your question, please press star two. Thank you. Mr. Schmidt, you may begin your conference.
Good morning, and thank you, Kelsey. Welcome, everyone, to our call to discuss our first quarter operating and financial results for 2026. My name is Brian Schmidt. I'm the CEO of Tamarack Valley Energy. Today, I'm joined with Steve Buytels, President, and Kevin Johnston, CFO. This morning, Tamarack announced its Q1 2026 results with continued operational momentum in the Clearwater. This marked Tamarack's first full quarter as core Clearwater and Charlie Lake producer after non-core asset dispositions in 2025. Kevin Johnston, our CFO, will discuss the first quarter financial highlights. Kevin?
Thank you, Brian. The first quarter of 2026 was a strong start to the year for Tamarack. Tamarack's first quarter production averaged 71,329 BOE per day, approximately 86% of which was oil and liquids. Corporate production grew 5% from the first quarter of 2025. Tamarack's Clearwater assets produced 53,000 BOE per day in the quarter, a 19% increase year-over-year compared to 2025. Tamarack's Charlie Lake assets produced 18,100 BOE per day so far in the year, which was compared to 17,800 BOE per day in the first quarter of 2025. Tamarack generated adjusted funds flow of CAD 222 million during the quarter, with CAD 93 million of capital expenditures.
This resulted in CAD 128 million of free funds flow on the quarter or CAD 0.26 per share. First quarter free funds flow per share was 44% higher than in the first quarter of 2025. Tamarack repurchased 4.6 million shares during the quarter or nearly 1% of the 2025 year-end share count. Combined with our base dividend, Tamarack returned a total of CAD 66 million to shareholders in the quarter. Since Tamarack began its share buyback program through the NCIB in early 2024, Tamarack has repurchased 13.4% of its 2023 year-end share count or 74.6 million shares at an average cost of CAD 4.93 per share as of March 2026.
Tamarack exited the first quarter of 2026 with CAD 623 million of net debt, which represents less than one times the trailing 12 months adjusted funds flow. With the release of our first quarter of 2026 results, Tamarack reaffirms its full-year guidance as released with our budget in December. Our President, Steve Buytels, will now provide an operational update for our core assets as well as an update on our outlook.
Thanks, Kevin. Our Clearwater assets delivered approximately 53,000 BOE a day of production in the first quarter. This represents a 19% production growth rate year-over-year and is reflective of the success of our primary development program and continued waterflood response, driving lower base decline rates from the asset. We drilled 24 Clearwater wells in the quarter and held water injection volume steady at around 40,000 barrels per day throughout, with approximately 24% of Clearwater oil production now under waterflood. As outlined in our budget, Tamarack plans to place a total of 65 water injectors and conversions into service over the remainder of 2026, and we remain on track to exit the year with approximately 60,000 barrels a day of water injection and greater than 35% of our Clearwater oil production under flood.
Response from the waterflood continues to grow, with total heavy oil uplift from waterflood estimated to be over 6,000 barrels a day to date. Our Charlie Lake asset delivered average production of 18,100 BOE a day in the quarter, approximately 67% of which was oil and liquids compared to production of 17,800 BOE a day during the same period in the prior year. First quarter activity into Charlie Lake was primarily focused in the Wembley area, with four net wells drilled and two wells brought on production in each of the Wembley and Pipestone areas. Tamarack retains the flexibility to scale the 2026 capital program in response to near-term market strength. Our 2026 budget was based on a flat US $60 per barrel WTI price.
Given the cyclicality of the business, we think about capital allocation based on where we sit in the price cycle. At low prices, i.e., $60 WTI and less, we focus on driving per share growth through buybacks and focusing on waterflood investment to continue to lower the future reinvestment needs of the company. At mid-cycle pricing, $60-$75 oil, we see a balanced approach across organic growth, buybacks, waterflood investment, and debt repayment. At high prices of $75 per barrel or better, we focus on maximizing value through higher organic growth rates and waterflood, along with more debt repayment to provide optionality for opportunities that may present themselves in the future.
We have elected to accelerate a portion of our primary drilling activity, originally scheduled for the second half of the year, into the second quarter to capitalize on higher near-term commodity prices based on a measured approach. We'll revisit our capital plans for the back half of the year over the coming months. Our goal is to ensure we are bringing forward value to shareholders in a disciplined manner and ultimately target a reinvestment ratio of 50%- 60% of funds flow. I'm gonna pass it back to Brian to deliver some closing comments on the call.
Thank you, Steve. By now, you have heard of our strategic goal to be a high-profit company in the best place. Our key performance indicator is the accretion of debt-adjusted free cash flow per share. This quarter's results continued to demonstrate Tamarack's commitment to that solid strategy, as did the most recent impressive reserve report results. Many metrics validate that we are on track with our strategy. Low and decreasing decline rate, down to 22% now. Dropping OpEx year-over-year. High recycle ratio that provide multiple paybacks on investment. The waterflood injection ramp ensures declines and sustaining capital will continue to drop over time, ensuring the company trajectory of more profitability. We also manage investment risk by driving down break-even. Moreover, as Steve noted, we will be nimble on capital allocation decisions to maximize outcomes. What does this mean for shareholders?
It means Tamarack is very well-positioned to generate long-term sustainable shareholder returns through a balanced combination of share buybacks, base dividends, growth, and increased debt reduction. I want to thank our dedicated employees who work tirelessly to deliver these results, and I also wish to thank the board for their continued support. Thank you. I'll now turn it back to Kelsey for 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 one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, to pile up questions. At this moment, there are no questions on the phone. I will now pass it back to the company for more questions.
Thank you. Our first question on online is for Mr. Steve Buytels. Who is the end customer for TVE's oil, and how is it transported to them? Is pipeline capacity a limitation for TVE production?
When we look at that, ultimately, the end customer, we sell to many different refineries, on some of the different major pipe egress options that we have out of Canada, so there's not one specifically. The thing I would talk about is we have secured what we would call regional egress out of the Clearwater area that supports us getting into that main Edmonton and Hardisty market to be able to move our barrels outward, and that aligns with our five-year plan growth objectives. I think we're pretty well taken care of there. When we look at the bigger macro basin egress, we continue to work on various options.
One of them was in the news there yesterday with respect to the South Bow project and supporting that with volumes, and there's other open seasons along the way here coming up. We'll continue to look at those options, participate in the various egress opportunities that are there with a goal of ultimately protecting about 50% of our volumes on pipe to ensure that we have egress out of the basin.
Thank you. Our next question is for Mr. Steve Buytels again. In the Pelican area, it looks like there is quite a bit of activity with other operators and secondary recovery with promising results. Two questions. What type of development style is Tamarack planning to de-risk the Clearwater and Wabasca in the area? When is Tamarack planning to drill the Wabasca, would it be safe to assume that this would be near offsetting wells?
I can start here, and then Brian chime in as you see fit. We do have plans to drill two to perhaps three wells in the Pelican area, in the greater area there, testing the Clearwater as well as the Wabasca. This will be a second half program that we'll look to execute, and I think we're watching pretty carefully what some of the competitors are doing. They've been seeing some significant results through the polymer flood. You see a lot of activity, a lot of well licensing there, so it's, it is pretty exciting to watch, and we look forward to looking at that, getting that program going, and then understanding both polymer upside when it comes to the Wabasca, but also potential waterflood upside in the Clearwater. Brian, did you have anything you wanted to add?
Yeah. The thing that I would add is that I think the correct strategy for us in Pelican is to, as Steve said, to continue to monitor what competitors are doing. I think it's one area where we like being a fast follower. One reason for, you know, those impressive recycle ratio on our reserve report is the build-out that we have in Marten Hills and Nipisi are, you know, where we can get the best results with the inventory we have there. We're happy to kind of drill in those areas while we kind of watch and see what happens in these, in these areas.
Thank you. Our next question is for Mr. Brian Schmidt. Can you talk about potential inflationary impacts in the second half of 2026 from service providers and how you expect it to mitigate in your capital program?
Yeah. For the most part, I mean, obviously, rig day rates are the primary piece, as are some of the facilities construction that we're doing. We're not seeing inflation rates and that sort in those kinds of metrics right now. The main reason, I think, is because very few operators are really ramping up capital in a significant way at this point. We have long-term rigs that have been with us for a long time and good steady programs available for those rigs. We see some pretty consistent pricing coming out of theirs.
Thank you. Our next question is for Mr. Brian Schmidt again. Can you speak to optionality in the back half where you would currently prioritize incremental spend? Can you also frame out the current spending cadence based on the second half acceleration?
As Steve mentioned, our goal is to we have not announced any capital increases in our program. We have decided to accelerate some of our program and wait and see what happens with pricing and make a decision later on on increased capital. Clearly the most profitable investment is the waterflood. Typically what we've done is if we start getting a pretty good beat on production with capital and we have extra capital around, we've been allocating it to waterflood, and that's what we did last year. I see a continued pattern this year.
The only thing I would add maybe there is, for us, when we think about adding incremental capital, we obviously want to add more primary to take advantage of higher prices. At the same time, we have to balance that with that waterflood investment that Brian's talking about to ensure that we continue to drive that decline lower and ultimately grow that margin on free funds flow through the plan. We're working through that here over the coming months, like I mentioned on the call, then we'll be back with a better sense of that back half plan here, probably mid-year.
Thank you. Our next question is for Mr. Brian Schmidt. With the declined success to date, what do you see as optimistic decline rates the Clearwater Play could reach medium to longer term?
Yeah. I think, probably in the Clearwater, we're somewhere around the, you know, headed toward a 15% type decline rate over time here. As you can appreciate with the combination of Charlie Lake and Clearwater, the Charlie Lake is a little higher decline. That's how our corporate ends up at 22%. But I think that as we increase our waterflood area and increase our waterflood injection rate, those will be key leading indicators as to how fast declines will go in the future.
Thank you. We have no more questions on the online Q&A. I'll pass it back to the moderator.
Thank you. Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.