All right. Welcome back from lunch. Patrick O'Rourke from ATB Capital Markets. I will not give you that spiel again because I know everyone has heard it already, but it is our pleasure to have Brian Schmidt, CEO and Founder of Tamarack Valley Energy, here to present. A very exciting Canadian company, one of our top picks. It has about a CAD 6.4 billion EV, and via a recent sale of 18,000 BOE per day of Charlie Lake production, they now have no debt and some cash on the balance sheet they have converted into effectively a pure- play Clearwater producer with some, what we would consider Clearwater- adjacent assets, and I am sure you will get into those here today. I think a lot of you have heard some of the Clearwater stories. I think Baytex presented earlier today the fantastic time to payout and economics on primary production.
But I think one of the things you will hear today as well from Brian is how proud they are of the waterflood success that they have had and how they have been able to attenuate the decline, and of course, as a result, return a lot of capital to shareholders.
Thank you, Patrick, and welcome everybody, and thanks to EnerCom for putting this together. A pretty exciting story we have today. I have been in the business a long time. I have never seen a play like this before. If you get this one in your career, you are really lucky because it makes life a lot easier. Just a little bit of a snapshot on the company. Patrick covered some highlights there. This is a medium to heavy oil play. The permeability is quite good. You increase the inflow by putting more meters in the well.
Typically, our wells are about 900 m deep, but they have 15,000 m to 18,000 m of horizontal wellbore in there. In fact, I think we have a world record for the longest well at 34 km in there. There is no frack. They are all open- hole and just cased down, so pretty simple operation.
The two key parameters are your permeability of the rock and the viscosity of the oil. Everybody knew it was there. Everyone thought it would not move without steam or some kind of solvent. Lo and behold, this moves quite well. If you looked, we have about 900 sections in there in the Clearwater. We are the largest public company in Clearwater. If you want to get into the play, this is probably the company that you have to look at. There is about 200,000 bbl produced in the play, and it started in 2017 at zero. I think at one time it was the fastest- growing play in North America. I am not sure if it still is. Of that 200,000 bbl a day, Tamarack has about 55,000 bbl. A couple of parameters that really stand out here is the low breakeven.
The breakeven hedged, you can see it there, and the unhedged breakeven is only CAD 38 a barrel. That leaves it at a really good margin for the rest of it. If you look at the recycle ratio that we had, those top four bars are all Clearwater players, so that play clearly stands out against the others. A 6.6x recycle ratio, I have never seen that in my career. So it is really outstanding. A couple of characteristics. We have about 12 billion barrels of oil in place on the Tamarack lands. At the end of our five-year plan, only 2% of the oil will have been produced out of that 12 billion barrels. This leaves about 2,100 locations, about 25 years of Clearwater inventory drilling that you see here. Just a couple of highlights. Q2, we grew our Clearwater production 15% from last quarter.
As Patrick mentioned, we sold the Charlie Lake. That puts us in a cash position and about CAD 133 million. As my former boss at Apache used to say, "Just get your production up and your costs down." We are seeing operating costs drop here. Typically, those who had experience with heavy oil would not see operating costs down that low. Field level, lease- level operating costs are only CAD 7 a barrel . Why sell the Charlie Lake? With that many years of drilling inventory in Clearwater, we just chose to divest of Charlie Lake. We got CAD 804 million in proceeds. That was a great acquisition for us, a great asset, and it earned over a 70% return. But the better place to put that is in the Clearwater play and become a pure play focus. How has the company performed?
For those of you who look at financial terms in terms of capital return on capital invested and weighted average cost of capital, you can see the nice margin that we are creating there over time. It gets reflected in the debt-adjusted production per share. That is a key metric that we have in there, and it is just amazing the ramp-up here since 2023. Despite declining oil prices, free cash flow per share has been increasing. Of course, last quarter was our best quarter, with the last quarter's uplift in price.
Since 2023, we have repurchased 15% of our shares. Our belief is there is good value here. The average cost of buying those shares is CAD 5.39. Today, we are probably trading somewhere around CAD 13. So it really has been a good run. I think Royal Bank had us as the top-performing oil and gas stock in North America last year. Just our guidance.
Remember, half the year is going to be with Charlie Lake. The other half without. The Clearwater production is the key production to focus on in that 53.5 to 55. Of course, like everyone, we revised our budget, and we boosted the Clearwater capital spend by another CAD 75 million this year with the divestment of Charlie Lake. The key parameter here is to watch your water injection. You inject 4 bbl of water this year, and likely you are going to get a barrel of oil next year out of that. So it is a pretty good ratio, good investment. I will get into more how the waterflood has been performing for us. How does that get reflected in the returns? We do our five-year plan.
You can see the sustaining capital since 2023, those dark green bars have been dropping from about CAD 400 million is now down around CAD 200 million. Pretty astounding change in sustaining capital. More of that can be focused on growth and decline mitigation. Our five-year capital budget is going to be between CAD 400 million and CAD 450 million. You can see really nice growth through that. You typically are not able to grow and reduce declines at the same time. That's the unique part of this asset, is that you're able to do that. If you look on the right-hand chart, you can see how the declines have changed with this company over time. In around 35%, we're down to 18%.
I accuse my engineers of sandbagging the declines here going forward because it should continue to keep dropping as long as we keep the injection and move the injection up, and we intend to do that. Consequently, I find myself explaining about yield and how yield works over time because typically investors will look at the yield, and for typically multi-stage frack wells, you drill your best wells first. The yields start to decline over time as you move into weaker wells. It's the opposite here. You'll see the yields increase. When you buy Tamarack shares, you really need to get a handle as to what the five-year plan looks like and watch that growth over time. If you look at our shareholder return and total shareholder return, we define as production growth, plus your dividends, plus buybacks, plus the excess cash flow.
You can see that if oil was around CAD 75, you're getting pretty close to getting your total investment back after five years if you bought a share of Tamarack. Even at CAD 55, we're still getting pretty good returns. What makes this asset so unique, so special? This is a map. Each one of those blocks is a township, 36 sections. The core of the play is in that Martin Hills. That's where some of the best wells have been drilled, and all that blue you see there is what's been waterflooded and to increase extraction. There's two exploration, or I would say more development, areas because we've drilled wells or our neighbors have drilled wells, and that's up at Seal. There's about 50 million barrels a section at Seal and about 20 million barrels a section at Pelican.
The Martin Hills, at 60 million barrels per section is the crown jewel, and we end up getting some relatively light oil there in the 20 to 21 degree API, where most of this stuff is around the 16 to 18. If you look at the big pie chart there on your OOIP, 12 billion barrels, we feel that 70% of that 12 billion barrels will be able to be waterflooded over time. A pretty significant piece of that. We'll be doing some waterflood assessments on the other areas to see if that can be added as well. Let me give you just an example of the runway. If we only recover 5% of the oil in place on this play, that'll give us about 35 years of production. We're talking long life, low decline type stuff.
This chart was put together by Enverus, and it compared the Clearwater players in terms of drilling inventory, and we have the highest drilling inventory, in their opinion. If you look at how much runway we have on waterflood, in their assessment, we have only touched 15% of our OOIP by waterflood of what could be available. You can see our competitors are more drilled up and less inventory and also less waterflood runway. Just before I leave the chart, just to give you an idea of paybacks, and when we measure our own performance internally on eight-year debt-adjusted free cash flow per share, the biggest influencer on that is how many times you get your money back on an investment. For the primary wells, you are talking about 3x to 6x your money back.
If you drill secondary injectors with the producers, you are probably going to get 8x to 12x. If you do conversions, you are going to get about 25x payback on your half-cycle investment. How is that waterflood going? If you look at this chart, you can see the significant ramp- up since 2023 on injection, going from really nothing up to about, we are going to exit this year at 70,000 bbl a day injection. That is barely touching the amount of opportunity there. If you look at the lower chart, you can actually see what is happening with the wells. The older wells that we put on in 2024, same well count, how are they responding to water? They are up 45% on production. If you look at the ones put on that we designed in 2025 and then measured them through 2026 at 47%.
With the investments that we invested last year, our production is already up 24% on the wells that are responding to last year's waterflood. All in all, we are about 12,000 bbl a day with the waterflood. Roughly speaking, for every barrel you make on primary, your ultimate is going to be three times. It is a good proxy, then you do not have to get worried about OOIP and that. The decline I showed you it is an incredible impact on the corporate decline. Here is a couple of charts that talk about waterflood performance. This first area is an area where the producers were put on, did not know they could be waterflooded in Martin Hills, so just put on primary. This area was producing about 5,500 bbl a day. Declined down to around 2,000 bbl. We shut a number of wells in and converted them to water.
You can see the well count drop, that green dashed line, and the water ramp up, and look at the waterflood. This will easily surpass its initial IP. Let me give you an example. There is a couple of key wells right in the core that have been on the longest on waterflood. The IP90 when those wells came on was 400 bbl a day each. After 93 months, the IP90 is 950 bbl a day. I know some analysts, they do the top well chart. We have had this 16-2 well on that for, I think it has been probably 10 months now on there, on the highest clear water producer, highest oil producer in Alberta. It has been a really good run. Sorry, in the top 10.
In the other area, where we figured out that you can drill injectors pretty close to your producer and put it on without doing conversions. You can see the wells peaked at about 2,000 bbl in this area. But once you start putting waterflood on, you can see that waterflood ramp at the end. We are now up to about 3,800 bbl a day. There is no reason you would not believe that this is easily going to surpass the IP. If you look at reserve reports, by the way, the injector conversions, my F&D costs on the conversions are about CAD 1 a barrel. They are about CAD 3.50 a barrel on the drilling, injection, and putting those on somewhere between CAD 3.50 and CAD 6. So very low F&D on that.
When I talk about reserve evaluators, one thing that is clear is that when production keeps going up, the reserve evaluators have a hard time predicting where the end is going to go, and I do not blame them for that. So I talked to him about how do we talk about this. He said, "Well," he said, "probably your technical revisions is the best way to talk about it, because next year you are going to get a bump up." Here is a couple of charts that show you our technical revisions last year were 41%. We are not the only one. My competitor, Spur Petroleum, was on the second there at 35% technical revision. So reserve evaluators are getting used to where these things are going to go.
If I ask the reserve guys here in the crowd to take a look at that P+PDP forecast, it just looks silly. It is just not going to happen. Maybe I cannot say anything, I do not know, but you are probably going to get a little bit of an upper. I can tell you today that that curve is up 2,500 bbl from what that line shows so far, and we are only halfway through the year. So I think there is a good chance of that. If you look at our PDP F&D costs, it was CAD 3 a barrel in 2025. So what happens when you do revisions after revisions and bring in more area, you do get good reserve growth. The waterflood- associated reserves grew over 200% year-on-year, and they now account for 40% of the Total TPP reserves.
There is great inventory here of over 25 years at 2,100 locations, and only 2% of the oil in place will be produced at the end of the five-year plan. Consequently, it makes a lot of sense taking cash and accelerating that so that you can bring some of that value forward and shareholders can benefit. A couple of expansion areas, and we have been successful in having others take a look at drill around us, and Cenovus has been a big driller in the Pelican area, 434 bbl, 24 bbl a day, 334 bbl. This is a really nice area that you are going to see here in the Wabasca. And there is a really nice rate there of 541. We will be looking at polymer floods on this one. This area, we think it is more amenable to that.
There's, of course, some headwater wells up above there in the 500 bbl- a- day range. Pretty nice. The cost of these wells are probably about CAD 1.6 million to CAD 1.8 million. You're really talking a pretty nice well for a low cost and a low decline. Seal is the other area. This map's a bit deceiving because there's three different zones there, different layers of Clearwater that can be drilled, and we drilled that Falher C2 well. There's actually three different zones there, 180 bbl a day. This will be a key growth area for us in the future. We're just finishing reservoir simulations and a development plan for this area. You really should be in the roughly 8,000 bbl-10,000 bbl a day coming out of this area. The key points here.
Asset quality is outstanding, and the duration, you're not worried about inventory. Just so you know, as those decline rates came down, growth was up 15%, but the number of wells we were drilling dropped from 145 down to 85. It's just amazing to see that kind of transformation in the company, and that's going to continue. The waterfloods are going to lower declines further. I think there's reason to believe that we're a little pessimistic on that forecast that we have there right now, and that's going to result in compounding returns to shareholders through the different means that I mentioned: dividends, share buybacks, growth, and then keeping your powder dry for little tuck-ins. Operating costs, break-even price operationally. When you buy Tamarack stock and that kind of break- even, you're not taking a ton of risk for that reason.
We can tolerate some low prices and low commodities and still do really good. With that, I'll conclude my talk. There's a breakout room in Blake at 1:55 P.M. Would be glad to take any questions there. Thank you.
Oh yeah.
Yeah. Just so you I've had to fight. I'm not up there speaking like you, but I have to turn my head a little bit or look down. It's pretty intense.
That is a little bit intense. Yeah. I saw the light on the end.
What's that? Good afternoon. Our next presenting company is CanCambria Energy. They're a Canadian-based exploration and production company focused on the development of their Hungarian assets. They're working to develop this resource, obviously will have a big impact on Europe and on Hungary. Here to tell their story is their President and CEO, Dr. Paul Clarke. Please welcome him.