October 4, 2022
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The Clearwater oil reserve in Alberta receives attention once again with the latest acquisition from Tamarack Valley Energy Ltd. (Tamarack) of Deltastream Energy Corp (Deltastream), whose assets are clustered in a Clearwater fairway. Tamarack announced its biggest takeover: $1.4B for private producer Deltastream, to further expand their growing Clearwater heavy oil play in north-central Alberta.
What do the companies look like prior to completing the agreement? What do we know about each company’s assets, core areas, and recent activity? How might this combination affect others in the area? We’ve looked at both companies through a few different lenses using our AssetSuite software tools to allow you to compare the companies and gain some insight of your own.
This Tamarack Valley acquisition was described as an expansion of holdings in Clearwater, priming the company to grow. The acquisition follows three other high-profile corporate roll-ups, including Crestwynd Exploration (Clearwater), Anegada Oil Corp (Charlie Lake), and most recently Rolling Hills Energy (which we covered here). Mapping Deltastream’s core assets with Tamarack’s core Clearwater assets, the consolidation shows that it is an extension of assets, not an area with significant synergy between the two but is adjacent to Tamarack’s Nipisi area.
Of particular interest is the Tamarack press release on the upside potential of these assets. Looking at the Deltastream/Tamarack map you can see the considerable land holdings in this area that Tamarack will be acquiring.
Other notable companies in Deltastream’s core include Spur Petroleum (88% of Spur’s production is in this area), Headwater Exploration Inc (100% of Headwater is in this area), and Canadian Natural Resources Ltd.
According to XI’s new LCA report, Deltastream has seen year-over-year growth in BOE. Deltastream also has a very low inactive well percent, so no immediate suspend and abandon requirements and no wells that are considered marginal (<10 BOE/day), indicating this is a good growth opportunity with few short-term liabilities and good operational efficiency.
Using the XI ARO cost model we see that these assets are predominantly under 5 years of age and active. XI’s ARO cost model value of these assets does diverge from the Government LLR model on these assets when it comes to reclamation and remediation so comparing the two models is valuable to estimate a more comprehensive picture of the ultimate liabilities.
Looking at the acquisition from an emissions standpoint, operational synergies should provide significant reductions in overall GHG intensity and increase gas conservation of the newly acquired assets. Tamarack Valley recently completed phase 2 (announced in Q1) of their Nipisi Gas Conservation Project, which had an immediate impact on decreasing absolute emissions. The adjacent Deltastream assets, which have lower XI-calculated gas conservation rates (~60%) and higher emissions intensity (in the ~0.04 range), should stand to benefit from the existing and future gas conservation efforts by Tamarack in the area.
Tamarack Valley has a proven track record of innovative strategies to mitigate higher emissions, and mentions in their press release that this acquisition will continue their “focus on environment, indigenous partnerships and ethical governance that includes sustainability-linked lending, emission reductions, proactive asset decommissioning, stakeholder engagement and indigenous partnership”.