Two Canadian energy companies are joining forces to build something neither could easily achieve alone. Tamarack Valley Energy Ltd. and Headwater Exploration Inc. announced Tuesday they've agreed to merge in an all-stock transaction valued at CA$10 billion, or roughly $7.2 billion, with Stikeman Elliott LLP and Burnet Duckworth & Palmer LLP advising each side, respectively.

How the Share Exchange Works

Under the agreement, Headwater shareholders will receive one Tamarack share for every Headwater share they hold, with Tamarack issuing approximately 237.8 million new shares to complete the exchange. Once the dust settles, Tamarack shareholders will own about 66.5% of the combined company, while Headwater shareholders will hold the remaining 33.5% — a split that reflects Tamarack's position as the larger of the two merging partners.

Building Canada's Top Clearwater Producer

The two companies said the merger will create the largest producer focused specifically on Canada's Clearwater oil formation — an oil-bearing geological formation located in Alberta that formed during the early Cretaceous period, making it a resource with roots stretching back tens of millions of years.

The Numbers Behind the Combined Company

Once combined, the new entity is expected to produce more than 80,000 barrels of oil equivalent per day from the Clearwater formation alone, backed by more than CA$50 million in net cash and access to more than CA$1.2 billion in available funding — a financial cushion designed to support continued development across the combined asset base.

Spinning Off Noncore Assets

Not every asset from either company is sticking around under the new combined banner. As part of the transaction, certain noncore holdings from both Tamarack and Headwater will be transferred to Tributary Exploration Inc., a newly created exploration company set to be led by Headwater President and CEO Jason Jaskela.

What's Moving to the New Entity

Those transferred assets include Headwater's McCully natural gas operation in New Brunswick, along with roughly 168,000 acres of undeveloped exploration prospects spread across Alberta and Saskatchewan — effectively carving out earlier-stage opportunities into their own dedicated vehicle rather than folding them into the larger merged company.

Timeline and Required Approvals

The transaction is expected to close during the fourth quarter, pending a lengthy checklist of approvals: shareholder and court sign-off, Canadian competition clearance, approval from the Toronto Stock Exchange, and other customary closing conditions. Special shareholder meetings for both companies are expected to take place in November.

Leadership of the Combined Company

Once the deal closes, Tamarack President Steve Buytels will step into the role of president and CEO of the combined company, effective Jan. 1, 2027. Current Tamarack CEO Brian Schmidt will transition into the role of executive chair. Jaskela, along with another nominee from Headwater, will join Tamarack's board of directors following the deal's completion.

Unanimous Board Support

The boards of both Tamarack and Headwater unanimously approved the merger agreement and have recommended that their respective shareholders vote in favor of the deal when it comes up for approval.