Tamarack Valley Energy Ltd. and Headwater Exploration Inc. have agreed to a $10-billion all-stock combination that would create the largest publicly traded oil producer focused on Alberta’s Clearwater formation.

The companies announced Tuesday that they had signed a definitive arrangement agreement. The transaction is expected to close in the fourth quarter, subject to shareholder, court, regulatory and stock-exchange approvals.

Headwater shareholders would receive one Tamarack share for each Headwater share. Tamarack expects to issue about 237.8 million shares under the agreement.

Existing Tamarack shareholders would own about 66.5 per cent of the combined company. Headwater shareholders would own the remaining 33.5 per cent.

The combined business is expected to have more than 1,500 sections of land, more than 300 million barrels of oil equivalent in proved plus probable reserves and more than 3,000 identified drilling locations.

The companies project run-rate production above 80,000 barrels of oil equivalent per day. Their pro forma production forecast for 2026 is between 65,500 and 67,500 barrels per day.

Those figures are company estimates and depend on operating results, commodity prices, development plans and completion of the transaction.

The core operating areas include Marten Hills, Nipisi and Marten Hills West, with additional assets at Pelican and Seal. The portfolio is concentrated in northern Alberta communities where oil activity supports contractors, service companies, municipal tax bases and local employment.

The companies forecast more than $50 million in annual operating, corporate and financial benefits. They did not provide a community-by-community estimate of job, contracting or spending changes.

Tamarack also plans to increase its quarterly dividend by 20 per cent, from five cents to six cents per share, beginning with the December 2026 payment after the transaction closes.

Certain non-core exploration assets would be separated into a new company called Tributary Exploration Inc.

The new company would be led by members of Headwater’s current management team.

Tamarack’s management would lead the combined producer. Steve Buytels is expected to become chief executive Jan. 1, 2027, while Brian Schmidt would serve as executive chair.

The combined company says it would have 35,000 barrels per day of long-term export capacity. That includes 25,000 barrels per day on the Trans Mountain system expected in early 2027 and 10,000 barrels per day on South Bow’s Prairie Connector expected later in 2028.

Both sets of shareholders are expected to vote at meetings in November. Until the required approvals are obtained and the arrangement closes, Tamarack and Headwater remain separate companies.