In short: Announced a one-for-one share merger with Headwater (same day) to form an 80,000 boe/d pure Clearwater play after selling its Charlie Lake assets; the bigger company "will get a premier multiple" as institutions can own it. Stock C$5.20 at the 52-week low, C$13.58 today.
Tamarack produces oil in Alberta's Clearwater formation. It has been using "waterflooding" — injecting water into the reservoir to push more oil toward the wells — which slows how fast production falls and recovers more oil from each field. It sold its other (Charlie Lake) assets to focus on Clearwater and has just agreed to merge one-for-one with Headwater, creating an 80,000 barrel-a-day company.
His view is that size matters: a bigger company can be owned by large institutional investors, so it tends to earn a higher valuation. He also points to how far the stock has already come — from about C$5.20 at its low to C$13.58 — as proof that buying when a stock looks like a bargain pays off.
35:49One share of Tamarack for every share of Headwater. And the merged company will be 80,000 boe a day. They'll be aggressively moving to add more waterflooding. And it'll get a premier multiple because it's larger which means more investors especially institutional investors can get into the stock. Just looking at the market cap, it's doubled because of that deal, because of the merger, and so I think that people should be looking, whenever they see something that's a bargain they should be taking advantage of it because you don't know,
In short: His other "top pick" — a great example of taking multilateral tech into older Clearwater/Mannville plays to pull out more oil at 2–3× payout economics.
Tamarack Valley is another Clearwater/Mannville-focused Canadian oil producer, and McCrea's other top pick.
The core idea is "multilateral" drilling: instead of one horizontal well leg, you drill up to eight legs off a single vertical well — like a pitchfork underground — which pulls far more oil out cheaply (wells cost only ~$1.5–2.5M). By applying this to old, already-developed fields that still have roads, pipes and power in place, operators get "full-cycle economics for half-cycle costs" and recover their money 2–3 times over. Tamarack is a prime example of doing exactly that.
33:39You have your pipelines connected, your pipe, your power, and so you can get full cycle economics for half cycle costs. And that's what's driving a lot of these capital efficiencies and the profitability for our sector here today, much more than what we've seen in other sectors. — Companies like Headwater and Tamarak, there's just great examples of that taking the technology into older plays and getting more oil.
In short: Owned — the one non-SAGD name. Clearwater waterflood throws off "incredible returns on capital by just cash," and the reserve life is longer than the booked numbers show (unbookable up front). Should finally merge with Headwater to add scale ("the most overweighted marriage").
Tamarack is the one holding here that isn't a steam/oil-sands play. Its edge is "waterflooding" the Clearwater formation — injecting water to push more oil out of the rock — which throws off strong cash returns cheaply. Smead argues the real value is understated because accounting rules won't let the company "book" all the extra reserves this technique keeps revealing, so the true reserve life is longer than the reported numbers. His catalyst: Tamarack should finally merge with Headwater to gain scale in the Clearwater — a long-expected pairing that would cut overhead and improve economics for both.
10:36The only other place outside the SAGD operators that we're currently invested is Tamarack. Now, why? Because there was something unique about the Clearwater. And watching what's going on in water flooding and applying capital to an asset like that and watching it produce incredible returns on capital by just cash. — Mhm.
In short: Cole — owned, governance-critical (poison-pill reprise). Waterflood returns are great (CEO Brian Schmidt, CFO doing "a great job"), but the December poison pill makes no sense here (no pre-operable asset to protect) — shareholders should reject it. "Appalled that more people in Toronto don't care." As liquidity rises, the valuation rises.
47:38— Cole loves to wrestle with boards. — Yeah. Yeah. No, I not not in general. Uh, you prefer not. So, so just let me um so Tamarack Valley, they're doing everything. Yeah, they're they're they're doing everything great. Uh uh they're using, you know, as most people know, they're using water flooding. What they're getting out of those walls are incredible.
In short: Owned (bought in last season's tumult) — governance-critical. On the December poison-pill proposal: "you should vote no — that's stupid; shareholders are the powerful creatures, don't give up your rights." The DD&A masterclass: waterflooding keeps announcing higher reserves it "never paid for" — reserves booked essentially for free, so true earnings are understated.
Tamarack is Smead's Clearwater waterflood holding. Two things here. First, governance: the company proposed a "poison pill" that would hand its board more power to block a takeover, and Smead is adamant shareholders should vote no — owners, not boards, should be in control. Second, an accounting gem: as Tamarack floods water into its wells, it keeps discovering more oil reserves than it originally paid for. Because it books those extra reserves essentially "for free," its true earnings are higher than the reported numbers suggest — a hidden value the market misses.
48:16You should vote no because that's stupid. You should not give up your right as shareholders. And I don't care whether you have a 100 shares or you have millions of shares and you're high up on the Bloomberg for the holders of the stock. You shouldn't vote for that because ultimately the shareholders are the powerful creatures in this game.
In short: Not owned (yet). "I think a lot about Tamarack like Baytex." Cheap on free cash (~7x), but return on invested capital is closer to ~10%; at this ~$3–5B market cap the limited liquidity keeps it below Smead's preferred size. Good behaviors (buybacks, low debt) but not the highest-return use of capital.
47:15com plannned okay our next question is about tamarak Valley this is the one that said ask the American Eric nuttle what he thinks of Tamar Valley um and do you have a price prediction one year out this one coming from Fred and C say marray yeah I I would so I think a lot about tamarak Valley like beex to be honest okay um you know if you go out and look at free cash flow yields again these stocks all look cheap I think you're going to you know pay seven times free cash for this stock today but again I think the idea that we're really
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