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Tamarack Valley Can Sustain Depressed Canadian Oil Prices

Hervé Blandin profile picture
Hervé Blandin


  • Tamarack Valley benefited from improved liquids prices during Q3.
  • With the recent drop of the Canadian oil prices, management will have to update the preliminary 2019 budget.
  • But thanks to the low debt, the hedges, and the gas production exposed to improved U.S. prices, the company can sustain this challenging environment.
  • The flowing barrel valuation is becoming attractive.

Tamarack Valley (OTC:TNEYF) generated positive total netbacks during Q3 thanks to improved oil prices.

But the focus is now on the impact of recent depressed Canadian oil prices. Management released a preliminary budget corresponding to a production growth. But because of the oil prices below management assumptions for 2019, the company will adapt.

Tamarack can sustain depressed Canadian oil prices for several quarters, though. The net debt is low, the production is hedged, and the gas production is exposed to improved U.S. gas prices.

As the company has the capacity to adapt to the challenging environment, the flowing barrel valuation, below C$30,000/boe/d, is now attractive.

Oil rigImage source: jp26jp via Pixabay

Note: All the numbers in the article are in Canadian dollars unless otherwise noted.

Q3 earnings

With organic growth due to the capital program, the production increased by 4% QoQ to reach 24,765 boe/d.

Tamarack Valley Q3 2018 production

Source: Q3 2018 MD&A

Compared to last year, the production grew by 21%.

Liquids represented 66% of the production. Considering the higher liquids prices in Q3, liquids revenue represented 94% of the total revenue.

Tamarack Valley Q3 2018 realized prices

Source: Q3 2018 MD&A

The liquids production is exposed to the Edmonton Par prices. And management is trying to avoid the AECO gas prices by selling gas to the U.S. markets.

Tamarack Valley Q3 2018 natural gas markets

Source: Q3 2018 MD&A

Management is planning to further diversify the gas marketing.

"Through the third quarter of 2018, more than 50% of Tamarack’s total natural gas production was priced in alternate US markets, including Malin, Chicago, Michigan Consolidated, Dawn and NYMEX daily index pricing less transportation tolls or fixed basis fees. In addition to the diversification in place during the third quarter, effective November 1, 2018 through 2030, an additional 10% of the Company’s current gas production will be exposed to an alternate US market. Tamarack will continue to explore alternatives to minimize exposure to Alberta gas market volatility." -

This article was written by

Hervé Blandin profile picture
I leverage my 15-year career as an IT engineer to write mostly about tech stocks with a long-term perspective.Disclaimer: Anything I write isn't investment advice and will for sure contain errors and inaccuracies. Any investment decision you make should be based solely on your own research and judgment.

Analyst’s Disclosure: I am/we are long PEYUF, BNEFF, BTE, CPG, YGRAF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

Thanks Hervé this is one of the many better Cdn names that got punished unreasonably. At these valuation I was wondering why you don’t go long on it, is decline rate a concern? With the recent cut Bonterra (eventhough still good operationally but with higher debt) is paying close to no dividend.
Hervé Blandin profile picture
Indeed, Tamarack is interesting. But right now, at these prices, I prefer Yangarra and I also sold my first puts last Friday for Seven Generations.
Chancer profile picture

Thanks for article.

I made efforts (since last Fall and recently) to exit Canadian oil.
But I am still holding Tamarack and considering adding 1/3 more to average down on my cost.

I believe oil prices will improve into 2019, as Russia appears to be on board with output cuts requested by KSA. Canadian prices will continue to be depressed until they build enough pipelines to transport, which will take more than 2 more years.
River18 profile picture
Great update on Tamarack Valley, but an impossible name to own for those thinking about buying it as TNEYF. The stock is totally illiquid, and until the management at TVE figures out how to upgrade to at least a Pink OTC listing, they are not going to find anybody in the US that cares about the stock. Just so sad that the management is so out of touch with their US listing.
But maybe someone can tell them. I sent IR an email once and never heard back, so that tells me that they have no interest in getting any US investors buying into their company.

TVE closed Friday at C$2.19 down C$0.11 or down (-4.78%)
TNEYF did not trade any shares on Friday.
Hervé Blandin profile picture
Thanks, River18!
River, isn’t it better for a Cdn oil producer to not get attention from US investors/traders? They will just continue to get shorted until the differential narrows. Look at what happened to BXE and OBE, even though one can argue that it’s due to their operations.
River18 profile picture
BXE and OBE are NYSE listed stocks.
And I have no clue how much OTC listed stocks get shorted, or if anybody even bothers to short them.
I would think that shorts would not want to short at stock with no trading volume. Talk about the mother of all short squeezes if they had to cover a TNEYF short???
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