Headwater Exploration Inc. press release

Tamarack Valley Energy and Headwater Exploration Announce $10 Billion Strategic Combination to Create a Premier North American Oil Producer and a New Growth-Oriented Exploration Company

2026-09-08

TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada · M&A / Asset Transactions

Canada NewsWire

CALGARY, AB, Sept. 8, 2026/CNW/ -- Tamarack Valley Energy Ltd. (TSX: TVE) ("Tamarack") and Headwater Exploration Inc. (TSX: HWX) ("Headwater") are pleased to announce they have entered into a definitive arrangement agreement whereby the two companies will merge in an all-stock transaction valued at $10 billion (the "Transaction"), creating a premier North American oil company that combines top-tier profitability with an unmatched position as the only publicly-traded pure-play Clearwater producer.

Under the terms of the Transaction, Headwater shareholders will receive 1.0 common share of Tamarack for each Headwater common share held, resulting in Tamarack issuing a total of 237.8 million common shares to acquire all of the issued and outstanding common shares of Headwater. Following the closing of the Transaction, Tamarack shareholders will own 66.5% and Headwater shareholders will own 33.5% of the total common shares outstanding in the combined entity. The combined company, led by current Tamarack management, is expected to have run-rate pro forma Clearwater production of >80,000 boe per day(2), net cash(1)of >$50 million and available funding(1)of >$1.2 billion. In connection with the Transaction, Tamarack plans to increase its quarterly dividend by 20% from $0.05 per share to $0.06 per share ($0.24 per share annualized), commencing December 2026.

The Transaction brings together two leading Clearwater producers, each characterized by low-cost, high-margin production, low corporate decline rates, modest reinvestment requirements and low corporate breakeven oil prices. The combined business will benefit from decades of Clearwater drilling and waterflood inventory, meaningful operating and capital synergies and greater scale across the play. Shareholders will have exposure to a unique and differentiated value proposition from the enhanced efficiency, profitability and durability of a combined Clearwater asset base. The Transaction is expected to be immediately accretive to Tamarack's free funds flow per share(1), enhance its five-year plan and position the combined company to deliver higher total returns to shareholders.

In addition, certain non-core exploration assets will be transferred into Tributary Exploration Inc. ("Tributary Exploration"), a new exploration company, providing Tamarack and Headwater shareholders with continued exposure to these prospective assets under the leadership of the current Headwater management team.

Highlights of the Transaction

Differentiated Clearwater Focus-The Transaction will establish Tamarack as a premier North American oil producer valued at $10 billion with exceptional economics. Tamarack will be a differentiated market leader as the only publicly-traded pure-play Clearwater company and the largest Clearwater producer. The combined company will create a highly contiguous core land position at Marten Hills, Nipisi and Marten Hills West bringing together two complementary asset bases with significant depth of quality inventory. Enhanced Scale & Depth of Quality Inventory-The Transaction is expected to result in a pro forma land position of >1,500 sections across the greater Clearwater fairway, >300 million boe of proved and probable reserves(2)across all formations, low-decline run-rate production(2)of >80,000 boe per day and >3,000 identified drilling locations(2), supporting a long runway of high-quality development inventory. The Transaction more than doubles Tamarack's existing footprint at Pelican and Seal, providing the combined company with greater exposure to upside potential on prospective Clearwater and Wabiskaw targets in the Greater Clearwater fairway. Immediately Accretive to Financial and Operating Metrics-The Transaction is expected to be immediately accretive to Tamarack's free funds flow per share of >10% and its existing five-year plan, while also improving Tamarack's operating profile through a lower 2027 decline of 15% and a reduced free funds flow breakeven cost(1)of US$37 per bbl (unhedged). Leading Financial Strength & Capital Allocation Flexibility-At closing, the combined company is expected to have net cash(1)of >$50 million and available funding(1)of >$1.2 billion providing substantial flexibility to fund development, return capital to shareholders and pursue strategic opportunities while maintaining balance sheet strength. Available funding is expected to include a fully undrawn credit facility of $875 million maturing in May 2030. Meaningful Synergy Capture -The combined company is expected to realize immediate synergies through the integration of operations, marketing and corporate offices. Near-term synergies are also expected through the consolidation and streamlining of the combined company's exploration and development programs starting in 2027. Run-rate synergies are expected to be over $50 million per year, or greater than $350 million over the development plan. Enhanced Shareholder Returns -In connection with the Transaction, Tamarack plans to increase its quarterly dividend by another 20% from $0.05 per share to $0.06 per share ($0.24 per share annualized), commencing December 2026. This represents Tamarack's second dividend increase in 2026 demonstrating the strength of the combined business and commitment to shareholder returns. The increase to Tamarack's dividend is contingent upon the closing of the Transaction. Continued Shared Upside Participation -Shareholders of both Tamarack and Headwater will retain exposure to emerging exploration and development opportunities through Tributary Exploration, a newly formed company led by the current Headwater management team. Tributary Exploration is expected to be publicly-listed and well capitalized to fund emerging exploration opportunities.

Pro Forma Outlook On a pro forma basis, Tamarack expects full year 2026 corporate production(2)to average 65,500 - 67,500 boe per day, a 7% increase over previous guidance, reflecting the impact of the Transaction, which is expected to close mid-way through the fourth quarter of 2026. Run-rate production(2)of the combined company is >80,000 boe per day. Assuming completion of the Transaction, Tamarack's full year 2026 capital program is expected to be $450 - 470 million reflecting incremental spending associated with Headwater's planned capital program following the Transaction closing. The 2026 combined capital investment programs of both companies for the full year are expected to be approximately $700 million.

Tamarack expects to remain flexible with significant optionality and balance sheet strength to maximize total shareholder returns across commodity price cycles. In the near-term, the combined company is expected to continue executing a disciplined capital management strategy targeting a balanced allocation of Clearwater growth of 10-12% through its five-year plan (up from 8-10% for Tamarack prior to the Transaction) and enhanced shareholder returns in the form of an increased dividend and share buybacks.

Egress Update Following the Transaction, Tamarack will be positioned to accommodate expected growth in its Clearwater production with existing and planned pipe-connected transportation egress into Edmonton, Alberta. Tamarack has also secured 35,000 barrels per day of potential long-term egress out of Alberta. 25,000 bbl per day of Trans Mountain service to the west coast is expected to commence in the first quarter of 2027, subject to the completion of the Drag Reducing Agent expansion. 10,000 bbl per day of capacity on the proposed South Bow Prairie Connector pipeline will provide exposure to Cushing, Oklahoma and the US Gulf Coast, potentially starting by the end of 2028 if the project is approved and constructed. These expanded egress options provide Tamarack with an opportunity to mitigate the risk of local capacity constraints and obtain greater exposure to diversified oil markets to enhance margins over the long-term.

Tributary Exploration As part of the Transaction, certain Mannville-stack exploratory mineral rights in Alberta, prospective thermal heavy oil opportunities at Handel, Saskatchewan and the legacy McCully natural gas production in New Brunswick (collectively, the "Tributary Exploration Assets"), will be transferred from Headwater and Tamarack into Tributary Exploration.

In connection with the closing of the Transaction and the transfer of the Tributary Exploration Assets, the capitalization of Tributary Exploration is expected to consist of a total of approximately 237.8 million common shares and 47.6 million share purchase warrants (the "Arrangement Warrants") with a defined net asset value of $0.42 per share. Under the Transaction, Tamarack shareholders will receive approximately 0.33 of a Tributary Exploration share per Tamarack share and Headwater shareholders will receive approximately 0.33 of a Tributary Exploration share per Headwater share and as a result, Tamarack shareholders will own approximately 66.5% and Headwater shareholders will own approximately 33.5% of the total common shares outstanding of Tributary Exploration, with such percentages being equal to their relative ownership of the combined company at closing of the Transaction(6).

Headwater shareholders will also receive 0.20 of an Arrangement Warrant per Headwater share. Assuming all Arrangement Warrants are exercised by Headwater shareholders, Tamarack shareholders will own approximately 55.4% and Headwater shareholders will own approximately 44.6% of the total common shares outstanding of Tributary Exploration (prior to closing of the Tributary Exploration Private Placement (as defined below)). Each whole Arrangement Warrant will entitle the holder to acquire one Tributary Exploration share at an exercise price equal to Tributary Exploration's defined net asset value of $0.42 per share for a period of 60 days following closing.

Following closing of the Transaction, it is expected that Tributary Exploration will complete a non-brokered equity private placement financing (the "Tributary Exploration Private Placement") for up to a total of 71.4 million units at a price of $0.42 per unit for aggregate gross proceeds of up to $30 million. The Tributary Exploration Private Placement will be offered to executive officers, directors and staff of Tributary Exploration. Each unit will consist of one Tributary Exploration common share and one Tributary Exploration purchase warrant with each warrant entitling the holder to acquire one common share of Tributary Exploration at an exercise price of $0.42 per share for a period of four years from the issuance date (subject to performance vesting thresholds based on the trading price of the Tributary Exploration common shares).

Tributary Exploration is expected to be a publicly listed exploration and development company operated by the current management team of Headwater. The Tributary Exploration Assets will be comprised of Headwater's New Brunswick McCully gas asset which has generated an average of $17 million per year in cash flow(1)over the past three winter producing seasons(3), in addition to 168,000 acres of undeveloped Mannville conventional and thermal prospects in Alberta and Saskatchewan.

| Tributary Exploration net asset value (millions, except per share amounts) | | | | At closing | | Total proved plus probable reserves (NPV10%AT)(4) | | | $ | 88.3 | | Undeveloped land(5) | | | $ | 12.4 | | Total Tributary Exploration net asset value | | | $ | 100.7 | | Total outstanding Tributary Exploration shares(6) | | | | 237.8 | | Net asset value per share(6) | | | $ | 0.42 |

Assuming the closing of the Tributary Exploration Private Placement and the full exercise of the Arrangement Warrants, Tributary Exploration will be well capitalized with approximately $50 million of cash(7)for organic development of current acreage, strategic land sales and acquisitions. Tributary Exploration expects to pursue oil weighted assets in western Canada that are rich in organic opportunity and provide stable free cash flow, backstopping the team's relentless pursuit of shareholder returns.

With a proven track record of outsized shareholder returns, precise execution and strong balance sheet stewardship, the Tributary Exploration team, led by Neil Roszell, as Executive Chair, and Jason Jaskela, as President and Chief Executive Officer, is excited for the opportunities ahead. In addition to Mr. Roszell and Mr. Jaskela, the Board of Directors for Tributary Exploration is expected to be comprised of Kevin Olson, Chandra Henry, Steve Larke, Kam Sandhar, and Cheree Stephenson who are all current members of the Headwater Board of Directors.

In connection with the Transaction, the Tributary Exploration common shares are expected to be consolidated on a five-to-one basis following the issuance of Tributary Exploration securities pursuant to the Transaction and the Tributary Exploration Private Placement. The listing of the Tributary Exploration common shares on a stock exchange will be subject to Tributary Exploration fulfilling all the listing requirements of such stock exchange.

Timing, Approvals & Governance The Transaction will be completed through a plan of arrangement in respect of the shares of Tamarack and Headwater under the Business Corporations Act (Alberta) and is subject to the approval of the Transaction by: (i) at least two-thirds of the votes cast by holders of Tamarack common shares and by holders of Headwater common shares; and (ii) a simple majority of the votes cast by holders of Headwater common shares after excluding the votes cast by any holders of Headwater common shares required to be excluded under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions. The issuance of Tamarack common shares pursuant to the Transaction is also subject to the approval of the majority of the votes cast by holders of Tamarack common shares. Closing of the Transaction will be subject to approval by the Court of King's Bench of Alberta as well as other customary closing conditions, including the receipt of approval under the _Competition Act_(Canada) and Toronto Stock Exchange ("TSX") approvals. In addition, the Tributary Exploration Private Placement will require approval by the majority of votes cast by holders of Headwater common shares (after excluding the votes of directors, officers and staff of Tributary Exploration that are participating in the Tributary Exploration Private Placement) and Tamarack common shares.

An independent committee (the "Independent Committee") of the Board of Directors of Headwater was formed to consider and review the Transaction on behalf of the Headwater Board of Directors. Based on, among other things, the unanimous recommendation of the Independent Committee, the Board of Directors of Headwater unanimously determined, among other things, that the Transaction and the entering into of the arrangement agreement are in the best interests of Headwater, the Transaction is fair to the Headwater shareholders and approved the arrangement agreement, and has unanimously recommended that Headwater shareholders vote in favor of the resolution to approve the Transaction at the special meeting of Headwater shareholders expected to be held in November 2026.

The Board of Directors of Tamarack unanimously determined that the Transaction and the entering into of the arrangement agreement are in the best interests of Tamarack, the Transaction exchange ratio is fair to the Tamarack shareholders and approved the arrangement agreement, and has unanimously recommended that Tamarack shareholders vote in favour of the resolution to approve the Transaction and the issuance of Tamarack common shares pursuant to the Transaction at the special meeting of Tamarack shareholders expected to be held in November 2026.

Following closing of the Transaction, Tamarack and Tributary Exploration will operate independently and will each continue to be headquartered in Calgary, Alberta. Jason Jaskela, President and Chief Executive Officer of Headwater and one other individual nominated by Headwater, and agreed upon by Tamarack, will be appointed to the Board of Directors of Tamarack at closing.

All directors and officers of Headwater, who own approximately 6% of the issued and outstanding common shares of Headwater and all directors and officers of Tamarack, who own approximately 2% of the issued and outstanding common shares of Tamarack, have entered into support agreements pursuant to which they have agreed to vote in favour of the Transaction.

At closing, Tamarack will enter into lock-up agreements with certain directors and officers of Headwater who, following completion of the Transaction, will collectively hold or exercise control over approximately 2% of the issued and outstanding Tamarack common shares. Pursuant to the lock-up agreements, each such person will agree not to sell or trade the Tamarack common shares received pursuant to the Transaction, except as follows: (i) 1/3 of such Tamarack common shares shall be eligible for disposition on the date that is three months after the closing of the Transaction; (ii) 1/3 of such Tamarack common shares shall be eligible for disposition on the date that is six months after the closing of the Transaction; and (iii) the remaining 1/3 of such Tamarack common shares shall be eligible for disposition on the date that is nine months after the closing of the Transaction.

A copy of the arrangement agreement will be filed on the SEDAR+ profiles of Tamarack and Headwater and will be available for viewing at www.sedarplus.ca. A joint information circular, which will include details of the Transaction, is expected to be mailed to Tamarack and Headwater shareholders in October 2026.

Leadership Transition Tamarack is pleased to announce that Steve Buytels, current President of Tamarack, will be promoted to President and Chief Executive Officer and join the Board of Directors of the combined company. Mr. Buytels joined Tamarack in March 2020 as Chief Financial Officer and was promoted to President in July 2025. Tamarack is progressing their CEO transition plan, the culmination of a thorough succession planning process that will position the combined company for the future. Brian Schmidt, Tamarack's founding Chief Executive Officer since August 2009, will transition to Executive Chairman of the Board. These appointments are expected to be effective January 1, 2027.

Conference Call Tamarack will host a joint webcast with members of the leadership teams of Tamarack and Headwater at 7:30 AM MDT (9:30 AM EDT) on Tuesday, September 8, 2026, to discuss the Transaction. Participants can access the live webcast through links provided on the corporate websites of Tamarack and Headwater. An archive of the webcast will also be made available on the corporate websites of Tamarack and Headwater. New presentations outlining the combination and Tributary Exploration are available on the Tamarack and Headwater websites.

Advisors National Bank of Canada Capital Markets is acting as exclusive financial advisor to Tamarack with RBC Capital Markets and CIBC Capital Markets acting as strategic advisors and Stikeman Elliott LLP acting as legal counsel. National Bank of Canada Capital Markets has provided a verbal opinion to the Board of Directors of Tamarack that the exchange ratio under the arrangement is fair, from a financial point of view, to Tamarack, subject to the assumptions made and the limitations and qualifications in the written opinion of National Bank of Canada Capital Markets. For Headwater, Peters & Co. Limited is acting as exclusive financial advisor to Headwater and Burnet, Duckworth & Palmer LLP is acting as legal counsel. Peters & Co. Limited has provided a verbal opinion to the Board of Directors of Headwater that, subject to the assumptions made and the limitations and qualifications contained in the written opinion, the total consideration to be received by Headwater shareholders pursuant to the Transaction is fair, from a financial point of view, to Headwater shareholders. In addition, BMO Capital Markets, which was engaged as a financial advisor to the Independent Committee, provided a verbal opinion to the Independent Committee that, subject to the assumptions made and the limitations and qualifications contained in the written opinion, the total consideration to be received by Headwater shareholders pursuant to the Transaction is fair, from a financial point of view, to Headwater shareholders.