Tamarack Valley Energy and Headwater Exploration have entered into a definitive agreement to combine in an all-stock transaction valued at $10 billion, creating what the companies expect to be the largest producer focused exclusively on the Clearwater oil play.
Under the agreement, Headwater shareholders will receive one Tamarack common share for each Headwater share held. Tamarack will issue approximately 237.8 million shares, with existing Tamarack shareholders owning approximately 66.5% of the combined company and Headwater shareholders owning approximately 33.5%.
The combined business is expected to have run-rate Clearwater production of more than 80,000 barrels of oil equivalent per day, net cash of more than $50 million, and more than $1.2 billion of available funding.
The companies expect the combination to create a land position exceeding 1,500 sections across the greater Clearwater fairway, more than 300 million barrels of oil equivalent of proved and probable reserves, and more than 3,000 identified drilling locations.
The transaction is expected to be immediately accretive to Tamarack’s free funds flow per share by more than 10%. Management also expects the combined business to achieve run-rate synergies exceeding $50 million annually, representing more than $350 million over its development plan.
Tamarack plans to increase its quarterly dividend by 20%, from C$0.05 per share to C$0.06 per share, or C$0.24 annually, following completion of the transaction. This would represent Tamarack’s second dividend increase during 2026.
The combined company expects to target Clearwater production growth of approximately 10% to 12% through its five-year plan while balancing growth investments with dividends and share repurchases.
As part of the transaction, certain exploration assets will be transferred into a newly formed company called Tributary Exploration. The assets include Mannville exploration rights in Alberta, prospective thermal heavy oil assets in Saskatchewan, and Headwater’s McCully natural gas operation in New Brunswick.
Tributary is expected to become a separately listed exploration and development company led by Headwater’s current management team. Assuming completion of a planned private placement and exercise of certain warrants, Tributary is expected to have approximately $50 million of cash available for development and acquisitions.
The Tamarack-Headwater transaction is expected to close midway through the fourth quarter of 2026, subject to shareholder, court, regulatory, Competition Act, and Toronto Stock Exchange approvals.
Steve Buytels, currently President of Tamarack, is expected to become President and CEO of the combined company and join its board on January 1, 2027. Tamarack founder and CEO Brian Schmidt is expected to transition to Executive Chairman.
National Bank of Canada Capital Markets is serving as exclusive financial advisor to Tamarack, with RBC Capital Markets and CIBC Capital Markets acting as strategic advisors and Stikeman Elliott serving as legal counsel. Peters & Co. is Headwater’s exclusive financial advisor, Burnet, Duckworth & Palmer is legal counsel, and BMO Capital Markets advised Headwater’s independent committee.
