By: Jon Costello
In 2024, I argued that Headwater Exploration (HWX:CA) deserved a steep premium to Tamarack Valley Energy (TVE:CA). I pointed to Headwater’s economics, operating track record, long-term growth prospects, and the management team led by Neil Roszell.
I bought Headwater in 2020, before the company had established the operating record investors would later come to value, and held it until 2024. The high quality of management was an important reason I was willing to invest that early.
The transaction announced on September 8 reverses that expectation. Tamarack is issuing the stock, Headwater is accepting a one-for-one exchange ratio, and the Headwater management team is moving to a new exploration company rather than running the combined business.
I remain constructive on Tamarack’s Clearwater assets. But the deal and the stock are separate questions. Tamarack got the better end of the transaction. As a combined entity, the shares are too expensive.