CALGARY,
AB, Nov. 2, 2022 /CNW/ - Tourmaline Oil Corp.
(TSX: TOU) ("Tourmaline" or the "Company") is pleased to release
financial and operating results for the third quarter ("Q3") of
2022, increase the quarterly base dividend and declare a special
dividend.
HIGHLIGHTS
- Third quarter 2022 before tax cash flow(1)(2) ("CF")
was $1.056 billion and $1.051 billion after tax ($3.06 per diluted share(3)), a 38%
increase over third quarter 2021 CF.
- Third quarter 2022 free cash flow(4) ("FCF") was
$568.3 million ($1.65 per diluted share).
- The Company will pay a special dividend of $2.25/share on November
18 to shareholders of record on November 9 and beginning in Q4, will increase the
quarterly base dividend by 11% to $0.25/share providing for an annualized dividend
of $1.00/share. Including the
payments of both the Q4 special dividend and base dividend, the
Company will pay a total of $7.90/share in dividends in 2022, resulting in
approximately a 10% yield based on an October 14, 2022 closing share price of
$76.51.
- Third quarter 2022 EP capital spending was $468.8 million, within previous guidance.
- Net debt(5) at September 30,
2022, was $564.6 million, well
below the long-term net debt target of $1.0-$1.2
billion.
- At current strip pricing, full-year 2022 CF of $4.76 billion(6) is now anticipated
($13.90 per diluted share).
- Tourmaline's 2023 EP capital program is estimated at
$1.6 billion. The 2023 EP program is
expected to deliver an annual average production of 545,000 boepd,
and CF at strip pricing of $5.4
billion, yielding FCF of $3.7 billion in 2023.
PRODUCTION UPDATE
- Q3 2022 production was 481,897 boepd, within the guidance range
of 480,000-485,000 boepd.
- The Company is executing its Q4 2022 production plan with
anticipated November average production between 520,000-530,000
boepd and anticipated December average production between
530,000-540,000 boepd.
- 2023 average production guidance remains at 545,000 boepd
(2,500 mmcfpd of natural gas and over 125,000 bpd of oil,
condensate, and NGLs).
- Consistent with the previously released EP growth plan,
production is expected to average 700,000 boepd in 2028 after
completion of both phases of the North Montney Conroy BC
development in the 2025-2028 time frame.
FINANCIAL RESULTS
- Q3 2022 before tax CF was $1.056
billion and $1.051 billion
after tax ($3.06/diluted share after
tax), a 38% increase over Q3 2021.
- Tourmaline generated FCF of $568.3
million in the third quarter of 2022.
- Q3 2022 net earnings were $2,097.9
million ($6.11/fully diluted
share).
- Net debt at Sept 30, 2022 was
$564.6 million, well below the
long-term net debt target of $1.0
billion to $1.2 billion.
MARKETING UPDATE
- Average realized natural gas price in Q3 2022 was $5.37/mcf as the Company continued to benefit
from rising natural gas prices when compared to Q3 2021.
- Tourmaline currently has 754 mmcfpd accessing US markets
through long-term firm transport agreements, increasing to 854
mmcfpd in Q2 2023, and to 926 mmcfpd at exit 2023. Tourmaline is
amongst the most diversified of all North American large gas
producers from a market access standpoint.
- Tourmaline has 20 mmcfpd of February/March 2023 JKM hedged at USD $54.78/mcf, 40 mmcfpd of Summer 2023 at USD
$31.26/mcf, and 20 mmcfpd of Summer
2024 at USD $27.13/mcf. This provides
fixed price protection on a portion of Tourmaline's 140 mmcfpd Gulf
Coast LNG deal for which physical gas deliveries will commence on
January 1, 2023. The 2023 JKM strip
price was USD $35.01/mmbtu as of
October 28, 2022.
- Tourmaline has an average of 711 mmcfpd hedged for 2023 at a
weighted average fixed price of CAD $5.77/mcf, an average of 110 mmcfpd hedged at a
basis to NYMEX of USD $0.12/mcf, and
an average of 754 mmcfpd of unhedged volumes exposed to export
markets in 2023, including Dawn, Iroquois, Empress, Chicago, Ventura, Sumas, US Gulf Coast, JKM,
Malin, and PG&E.
- Realized NGL prices averaged $43.48/bbl in Q3 2022, up 28% from Q3 2021.
Tourmaline is the largest NGL producer in Canada.
- The Company is pursuing multiple additional market
diversification opportunities for both natural gas and natural gas
liquids.
CAPITAL BUDGET AND FINANCIAL
OUTLOOK
- Q3 2022 EP capital spending was $468.8
million, forecast full year 2022 EP capital spending remains
at approximately $1.5 billion.
- Full year 2023 EP capital budget remains at approximately
$1.6 billion. The Company updated its
EP plan in its July 27, 2022 press release which included
additional capital in 2022 and 2023 to account for inflationary
pressures.
- Tourmaline expects 2023 CF of $5.4
billion and FCF of $3.7
billion at strip pricing as of October 14, 2022. The current 7-year EP growth
plan is expected to deliver estimated FCF of $19.4 billion on total capital spending
(excluding acquisitions and dispositions) of $13.4 billion.
BASE DIVIDEND INCREASE AND SPECIAL
DIVIDEND
- Commencing in Q4 2022, Tourmaline will increase the quarterly
base dividend by 11% to $0.25/share
providing for an annualized dividend of $1.00/share. The Q4 base dividend is
expected to be paid on December 30,
2022 to shareholders of record on December 15, 2022.
- Tourmaline has also elected to declare and pay a Q4 2022
special dividend of $2.25/share on
November 18, 2022 to shareholders of
record on November 9, 2022.
This special cash dividend is designated as an "eligible dividend"
for Canadian income tax purposes.
- Including the payments of both the Q4 special dividend and base
dividend, the Company will pay a total of $7.90/share in dividends in 2022, resulting in
approximately a 10% yield based on an October 14, 2022 closing share price of
$76.51.
- The Company continues to focus on returning the majority of FCF
to shareholders through base dividend increases, special dividends,
and share buybacks. The magnitude of the special dividends
will be a function of commodity prices and available quarterly FCF.
The Company now anticipates returning greater than 75% of FCF in
2022, achieving a year end net debt to cash flow ratio of
approximately 0.1x, which positions the Company to return 50-90% of
FCF in 2023 while also growing production by approximately 7%. A
component of FCF will also be used for modest incremental EP
investments, including new pool/new zone exploration opportunities,
asset acquisitions within existing core complexes, and select
margin improving infrastructure investments.
RISING STAR TRANSACTION
- Tourmaline completed the previously announced Rising Star
Resources Ltd. ("Rising Star") acquisition during the third quarter
of 2022, for $67.8 million in cash
and $123.4 million in Topaz Energy
Corp. ("Topaz") shares owned by Tourmaline.
- In September 2022, the Company
also sold a royalty interest in developed and undeveloped lands,
including some Rising Star lands, to Topaz for cash consideration
of $51.0 million, net of customary
closing adjustments.
- Subsequent to closing the Rising Star acquisition, Tourmaline
sold non-core assets acquired from Rising Star for cash
consideration of $16.7 million plus
certain undeveloped lands. Net production from the Rising Star
assets after the non-core dispositions is approximately 3,500-4,000
boepd.
EP UPDATE
- Tourmaline is currently operating 13 rigs across the three EP
complexes. The Company drilled 86 net wells and completed 75
net wells in the third quarter of 2022.
- The Company expects to tie in, and bring on production, a total
of approximately 75 net wells in November and December with
approximately 24 DUCs carried over into 2023.
- Tourmaline is operating eight rigs in the Alberta Deep Basin,
four rigs in the NEBC Montney complex, and one rig in the Peace
River High.
- Continuous improvement in new technology applications and
drilling methodologies has resulted in a 37% improvement in meters
drilled per day (from April 2020 to
July 2022) in the Company's BC
Montney area.
- The Q4 2022 and 2023 EP programs include multiple new zone and
new pool exploration tests across the three operated complexes as
the Company expands the highly successful, and somewhat unique,
exploration effort.
MODIFIED ACCOUNTING TREATMENT OF
GAS SUPPLY AGREEMENT
- In July 2021, the Company entered
into a 15-year natural gas supply agreement ("Agreement"), under
which it will deliver 140,000 mmbtu per day (approximately 140
mmcfpd) commencing in January 2023.
Under the terms of the Agreement, Tourmaline will deliver natural
gas to its counterparty at a delivery point in
Louisiana, USA and receive a Japan
Korea Marker ("JKM") index price less deductions for transport and
liquefaction. This transaction is viewed by the Company as another
way to continue to expand its sophisticated market diversification
strategy.
- During the third quarter of 2022, the Company identified that,
although it had previously accounted for the Agreement in a manner
that was consistent with the convention in the oil and gas industry
for executory physical delivery sales contract, after further
review of this complex accounting issue, the Agreement was
determined to contain an embedded derivative. The embedded
derivative arises as a result of the volumes being delivered to a
counterparty in the United States
while Tourmaline ultimately receives a JKM index price. It
was further determined that this embedded derivative should be
accounted for separately based on the forecast pricing spread
between JKM and NYMEX, as these markets were deemed to not be
closely related.
- As a result of this review, a natural gas embedded derivative
is being recognized at its fair value at each reporting period over
the life of the Agreement. Refer to note 4 of the Q3 interim
condensed consolidated financial statements for further details of
the natural gas embedded derivative and the determination of its
fair value. The embedded derivative will result in the
Company recording unrealized gains (losses) based on the relative
movements in the JKM and NYMEX price forecasts. The Company will
not record realized gains (losses) in its financial statements
until it begins delivering natural gas under the
contract.
- Accordingly, the Company's Q3 2022 interim condensed
consolidated financial statements and MD&A include restated
values for the first and second quarters of 2022 reflecting higher
earnings than those contained in the financial statements
previously issued for those periods. This change does not affect
cash flow, cash-related items, net debt or production volumes, and
impacts only non-cash earnings on the Company's consolidated income
statements as well as the fair value of the financial instruments
on the Company's balance sheet. A description of these changes is
contained under the heading "Accounting Restatement" in the Q3
MD&A and note 2 of the interim condensed consolidated financial
statements for Q3 2022. Other than the change in accounting
treatment for the Agreement, there are no other changes to the
previously filed 2022 interim financial reports, which are
available under the Company's SEDAR profile at www.sedar.com.
ENVIRONMENTAL PERFORMANCE
IMPROVEMENT
Tourmaline plans to release the Company's latest sustainability
report in December 2022.
Highlights over the past 12 months include:
- Tourmaline achieved its net 25% methane reduction target in
2021, three years earlier than targeted in the Company's five-year
environmental performance improvement plan, despite growing
production by 17% from 265,044 boepd in 2018 to 310,598 boepd in
2020.
- In 2021, the Company's Emission Testing Centre ("ETC"), the
first of its kind in the world, at the West Wolf gas plant, became
fully operational. The ETC is critical in evolving new
technology and methodologies to continue materially reducing
methane and other emissions over the entire EP business
- Tourmaline has received preliminary platinum ratings from the
Project Canary (Trustwell) assessment of a series of
Company-operated NEBC assets, with an average score of 131
achieved. Tourmaline is the first Canadian gas company with a
Trustwell score and ranks in the top 10% in North America.
- All of the Tourmaline-contracted rig fleet is displacing diesel
with natural gas or running fully electric. Tourmaline was
operating three Cat Tier 4 DGB natural gas powered frac spreads in
Western Canada in July 2022. The evolving diesel displacement
initiative continues to reduce both emissions and costs for the
Company.
- Tourmaline has invested approximately $25 million over the past 5 years in water
recycling and water management facilities as part of an ongoing
effort to ultimately eliminate fresh water in well-stimulation
activities. In September 2022,
over 70% of the Company's completions-related water usage was
recycled water.
- Tourmaline is a major participant in the Natural Gas Innovation
Fund (NGIF), an effort to produce lower emission natural gas across
the whole spectrum of natural gas operations. The Company is
sponsoring emerging cleantech companies in the areas of diesel
displacement, methane emission monitoring and reduction, waste heat
recovery, carbon capture, and water recycling.
__________________________________________________________
|
(1)
|
This news release
contains certain specified financial measures consisting of
non-GAAP financial measures, non-GAAP financial ratios, capital
management measures and supplementary financial measures. See
"Non-GAAP and Other Financial Measures" in this news release for
information regarding the following non-GAAP financial measures,
non-GAAP financial ratios, capital management measures and
supplementary financial measures used in this news release: "cash
flow", "capital expenditures", "free cash flow", "operating
netback", "operating netback per boe", "cash flow per diluted
share", "free cash flow per diluted share", "adjusted working
capital", and "net debt". Since these specified financial measures
do not have standardized meanings under International Financial
Reporting Standards ("GAAP"), securities regulations require that,
among other things, they be identified, defined, qualified and,
where required, reconciled with their nearest GAAP measure and
compared to the prior period. See "Non-GAAP and Other Financial
Measures" in this news release and in the Company's most recently
filed Management's Discussion and Analysis (the "Q3 MD&A"),
which information is incorporated by reference into this news
release, for further information on the composition of and, where
required, reconciliation of these measures.
|
(2)
|
"Cash flow" is a
non-GAAP financial measure defined as cash flow from operating
activities adjusted for the change in non-cash working capital
(deficit) and current income taxes. See "Non-GAAP and Other
Financial Measures" in this news release.
|
(3)
|
"Cash flow per
diluted share" is a non-GAAP financial ratio. Cash flow, a non-GAAP
financial measure, is used as a component of the non-GAAP financial
ratio. See "Non-GAAP and Other Financial Measures" in this
news release and in the Q3 MD&A
|
(4)
|
"Free cash flow" is
a non-GAAP financial measure defined as cash flow less capital
expenditures, excluding acquisitions and dispositions. Free cash
flow is prior to dividend payments.
See "Non-GAAP and Other Financial Measures" in this news
release.
|
(5)
|
"Net debt" is a
capital management measure. See "Non-GAAP and Other Financial
Measures" in this news release and in the Q3
MD&A.
|
(6)
|
Based on oil and gas
commodity strip pricing at October 14, 2022.
|
CORPORATE SUMMARY – THIRD QUARTER
2022
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2022
|
2021
|
Change
|
|
2022
|
2021
|
Change
|
OPERATIONS
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
2,240,641
|
2,146,477
|
4 %
|
|
2,314,655
|
1,994,091
|
16 %
|
Crude oil, condensate
and NGL
(bbl/d)
|
108,457
|
98,743
|
10 %
|
|
111,430
|
93,951
|
19 %
|
Oil equivalent
(boe/d)
|
481,897
|
456,489
|
6 %
|
|
497,206
|
426,300
|
17 %
|
Product
prices(1)
|
|
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
5.37
|
$
3.88
|
38 %
|
|
$
5.52
|
$
3.67
|
50 %
|
Crude oil, condensate
and NGL
($/bbl)
|
$
63.77
|
$
49.21
|
30 %
|
|
$
68.35
|
$
44.52
|
54 %
|
Operating expenses
($/boe)
|
$
4.36
|
$
3.76
|
16 %
|
|
$
4.27
|
$
3.70
|
15 %
|
Transportation costs
($/boe)
|
$
4.66
|
$
4.17
|
12 %
|
|
$
4.86
|
$
4.17
|
17 %
|
Operating
netback(3) ($/boe)
|
$
23.68
|
$
18.35
|
29 %
|
|
$
25.82
|
$
17.22
|
50 %
|
Cash general and
administrative
expenses ($/boe)(2)
|
$
0.55
|
$
0.51
|
8 %
|
|
$
0.57
|
$
0.56
|
2 %
|
FINANCIAL
($000, except share and per share)
|
|
|
|
|
|
|
|
Total revenue from
commodity sales
and realized gains
|
1,743,856
|
1,213,376
|
44 %
|
|
5,566,374
|
3,139,918
|
77 %
|
Royalties
|
293,820
|
109,423
|
169 %
|
|
822,765
|
219,746
|
274 %
|
Cash
flow(3)
|
1,051,400
|
761,333
|
38 %
|
|
3,481,302
|
1,960,890
|
78 %
|
Cash flow per share
(diluted)(3)
|
$
3.06
|
$
2.32
|
32 %
|
|
$
10.18
|
$
6.33
|
61 %
|
Net
earnings(4)
|
2,097,929
|
361,057
|
4,81 %
|
|
4,517,415
|
1,029,743
|
339 %
|
Net earnings per share
(diluted)
|
$
6.11
|
$
1.10
|
455 %
|
|
$
13.21
|
$
3.32
|
298 %
|
Capital expenditures
(net of
dispositions)
|
415,447
|
56,108
|
640 %
|
|
1,373,365
|
1,142,910
|
20 %
|
Weighted average shares
outstanding
(diluted)
|
|
|
|
|
341,926,025
|
309,744,281
|
10 %
|
Net
debt(3)
|
|
|
|
|
(564,633)
|
(1,465,090)
|
(61) %
|
(1)
|
Product prices
include realized gains and losses on risk management activities and
financial instrument contracts.
|
(2)
|
See "Non-GAAP and
Other Financial Measures" in this news release and in the Q3
MD&A.
|
(3)
|
Excluding interest
and financing charges.
|
(4)
|
The first and second
quarters of 2022 have been restated. See the "Accounting
Restatement" section and note 2 of the interim
condensed consolidated financial statements for Q3
2022.
|
Conference Call Tomorrow at
9:00 a.m. MT (11:00 a.m. ET)
Tourmaline will host a conference call tomorrow, November 3, 2022 starting at 9:00 a.m. MT (11:00 a.m. ET). To
participate, please dial 1-888-664-6383 (toll-free in North America), or international dial-in
1-416-764-8650, a few minutes prior to the conference call.
Conference ID is 55076708.
REPLAY DETAILS
If you are unable to dial into the live conference call on
November 3rd, a replay
will be available (usually by that afternoon) by dialing
1-888-390-0541 (international 1-416-764-8677), referencing Encore
Replay Code 076708. The recording will expire on November 17, 2022.
Reader Advisories
CURRENCY
All amounts in this news release are stated in Canadian dollars
unless otherwise specified.
Forward-Looking
Information
This news release contains forward-looking information and
statements (collectively, "forward-looking information") within the
meaning of applicable securities laws. The use of any of the words
"forecast", "expect", "anticipate", "continue", "estimate",
"objective", "ongoing", "on track", "may", "will", "project",
"should", "believe", "plans", "intends" and similar expressions are
intended to identify forward-looking information. More particularly
and without limitation, this news release contains forward-looking
information concerning Tourmaline's plans and other aspects of its
anticipated future operations, management focus, objectives,
strategies, financial, operating and production results and
business opportunities, including the following: anticipated
petroleum and natural gas production and production growth for
various periods; forecast full year 2022 and 2023 EP capital
spending; 2023 and long range cash flow and FCF levels; the
increase in the quarterly base dividend; the timing for the payment
of the Q4 special dividend and base dividend; the focus on
returning the majority of FCF to shareholders through base dividend
increases, special dividends, and share buybacks; the levels of FCF
returns in 2023; the projected year end net debt to cash flow level
in 2023; the additional uses of FCF for EP investments, including
new pool/new zone exploration opportunities, asset acquisitions
within existing core complexes, and select margin improving
infrastructure investment; the future declaration and payment of
base and special dividends and the timing and amounts thereof
including any future increase; the level of free cash flow to be
returned to shareholders through base dividend increases, special
dividends and share buybacks; capital expenditures over various
periods; the number of drilling rigs to be operated; as well as
Tourmaline's future drilling prospects and plans, business
strategy, future development and growth opportunities, prospects
and asset base. The forward-looking information is based on certain
key expectations and assumptions made by Tourmaline, including
expectations and assumptions concerning the following: prevailing
and future commodity prices and currency exchange and interest
rates; applicable royalty rates and tax laws; future well
production rates and reserve volumes; operating costs, the timing
of receipt of regulatory approvals; the performance of existing and
future wells; the success obtained in drilling new wells;
anticipated timing and results of capital expenditures; the
sufficiency of budgeted capital expenditures in carrying out
planned activities; the timing, location and extent of future
drilling operations; the successful completion of acquisitions and
dispositions and the benefits to be derived therefrom; the state of
the economy and the exploration and production business; the
availability and cost of financing, labour and services; ability to
maintain its investment grade credit rating; and ability to market
crude oil, natural gas and NGL successfully. Without limitation of
the foregoing, future dividend payments, if any, and the level
thereof is uncertain, as the Company's dividend policy and the
funds available for the payment of dividends from time to time is
dependent upon, among other things, free cash flow, financial
requirements for the Company's operations and the execution
of its growth strategy, fluctuations in working capital and the
timing and amount of capital expenditures, debt service
requirements and other factors beyond the Company's control.
Further, the ability of Tourmaline to pay dividends is subject to
applicable laws (including the satisfaction of the solvency test
contained in applicable corporate legislation) and contractual
restrictions contained in the instruments governing its
indebtedness, including its credit facility.
Statements relating to "reserves" are also deemed to be forward
looking information, as they involve the implied assessment, based
on certain estimates and assumptions, that the reserves described
exist in the quantities predicted or estimated and that the
reserves can be profitably produced in the future.
Although Tourmaline believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because Tourmaline can give no
assurances that it will prove to be correct. Since forward-looking
information addresses future events and conditions, by its very
nature it involves inherent risks and uncertainties. Actual results
could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to:
the risks associated with the oil and natural gas industry in
general such as operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
estimates and projections relating to reserves, production,
revenues, costs and expenses; health, safety and environmental
risks; commodity price and exchange rate fluctuations; interest
rate fluctuations; marketing and transportation; loss of markets;
environmental risks; competition; incorrect assessment of the value
of acquisitions; failure to complete or realize the anticipated
benefits of acquisitions or dispositions; ability to access
sufficient capital from internal and external sources; failure to
obtain required regulatory and other approvals; climate change
risks; inflation; supply chain risks and changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations.
In addition, wars (including the war in Ukraine), hostilities, civil insurrections,
pandemics, epidemics or outbreaks of an infectious disease in
Canada or worldwide, including
COVID-19 or other illnesses could have an adverse impact on the
Company's results, business, financial condition or
liquidity. Ongoing military actions between Russia and Ukraine have the potential to threaten the
supply of oil and gas from the region. The long-term impacts of the
actions between these nations remains uncertain. If the
pandemic is further prolonged, including through subsequent waves,
or if additional variants of COVID-19 emerge which are more
transmissible or cause more severe disease, or if other diseases
emerge with similar effects, the adverse impact on the economy
could worsen. It remains uncertain how the macroeconomic
environment, and societal and business norms will be impacted
following the COVID-19 pandemic. In addition, in 2022, industry has
been impacted by significant cost inflation, rising interest rates,
labour shortages and supply constraints, and the Company expects
these pressures will continue through the balance of the year and
into next year. The Company will continue to actively monitor
inflationary pressures and supply chain constraints and their
impact on the Company's business.
Readers are cautioned that the foregoing list of factors is not
exhaustive.
Additional information on these and other factors that could
affect Tourmaline, or its operations or financial results, are
included in the Company's most recently filed Management's
Discussion and Analysis (See "Forward-Looking Statements" therein),
Annual Information Form (See "Risk Factors" and "Forward-Looking
Statements" therein) and other reports on file with applicable
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com) or Tourmaline's website
(www.tourmalineoil.com).
The forward-looking information contained in this news release
is made as of the date hereof and Tourmaline undertakes no
obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, unless expressly required by applicable securities
laws.
BOE Equivalency
In this news release, production and reserves information may be
presented on a "barrel of oil equivalent" or "BOE" basis. BOEs may
be misleading, particularly if used in isolation. A BOE conversion
ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. In addition,
as the value ratio between natural gas and crude oil based on the
current prices of natural gas and crude oil is significantly
different from the energy equivalency of 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of
value.
FINANCIAL OUTLOOKS
Also included in this news release are estimates of Tourmaline's
long-range cash flow and free cash flow, which are based on, among
other things, the various assumptions as to production levels,
capital expenditures, annual cash flows and other assumptions
disclosed in this news release and including Tourmaline's estimated
average daily production for 2023 - 2028 of 545,000 boepd, 565,000
boepd, 585,000 boepd, 620,000 boepd, 670,000 boepd and 700,000
boepd, respectively, 2023 - 2028 commodity price assumptions for
natural gas ($5.60/mmbtu 2023 NYMEX
US, $4.76/mmbtu 2024 NYMEX US,
$4.54/mmbtu 2025 NYMEX US,
$4.47/mmbtu 2026 NYMEX US,
$4.39/mmbtu 2027 NYMEX US
$4.37/mmbtu 2028 NYMEX US,
$5.24/mcf 2023 AECO, $4.60/mcf 2024 AECO, $4.66/mcf 2025 AECO, $4.91/mcf 2026 AECO, $4.97/mcf 2027 AECO, $5.09/mcf 2028 AECO, $37.11/mmbtu 2023 JKM US, $28.82/mmbtu 2024 JKM US, $22.63/mmbtu 2025 JKM US, $15.09/mmbtu 2026 JKM US, $7.55/mmbtu 2027 JKM US, $7.55/mmbtu 2028 JKM US) crude oil ($77.18/bbl 2023 WTI US, $70.46/bbl 2024 WTI US, $66.14/bbl 2025 WTI US, $63.02/bbl 2026 WTI US, $60.45/bbl 2027 WTI US, $58.15/bbl 2028 WTI US) and an exchange rate
assumption of $0.72 (US/CAD) for 2023
and $0.73 for years 2024 – 2028.
Further, readers are cautioned that such estimates are
provided for illustration only and are based on budgets and
forecasts that have not been finalized or approved by the Board of
Directors and are subject to a variety of additional factors and
contingencies including prior years' results. To the extent such
estimates constitute financial outlooks, they were approved by
management and the Board of Directors of Tourmaline on November 2, 2022 and are included to provide
readers with an understanding of Tourmaline's anticipated cash flow
and free cash flow based on the capital expenditure, production and
other assumptions described herein and readers are cautioned that
the information may not be appropriate for other purposes.
Non-GAAP and other Financial
Measures
This news release contains the terms cash flow, capital
expenditures, free cash flow, and operating netback which are
considered "non-GAAP financial measures", operating netback per
boe, cash flow per diluted share, and free cash flow per diluted
share which are considered "non-GAAP financial ratios" . These
terms do not have a standardized meaning prescribed by GAAP. In
addition, this news release contains the terms adjusted working
capital and net debt, which are considered "capital management
measures" and do not have standardized meanings prescribed by
GAAP. Accordingly, the Company's use of these terms may
not be comparable to similarly defined measures presented by other
companies. Investors are cautioned that these measures should not
be construed as an alternative to net income determined in
accordance with GAAP and these measures should not be considered to
be more meaningful than GAAP measures in evaluating the Company's
performance.
Non-GAAP Financial
Measures
Cash Flow
Management uses the term "cash flow" for its own performance
measure and to provide shareholders and potential investors with a
measurement of the Company's efficiency and its ability to generate
the cash necessary to fund its future growth expenditures, to repay
debt or to pay dividends. The most directly comparable GAAP
measure for cash flow is cash flow from operating activities.
A summary of the reconciliation of cash flow from operating
activities to cash flow, is set forth below:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
(000s)
|
2022
|
2021
|
2022
|
2021
|
Cash flow from
operating activities (per GAAP)
|
$
1,112,202
|
$
543,855
|
$
3,577,332
|
$ 1,788,657
|
Current income
taxes
|
(4,335)
|
-
|
(4,335)
|
-
|
Change in non-cash
working capital (deficit)
|
(56,467)
|
217,478
|
(91,695)
|
172,233
|
Cash flow
|
$
1,051,400
|
$
761,333
|
$
3,481,302
|
$ 1,960,890
|
Capital Expenditures
Management uses the term "capital expenditures" as a measure of
capital investment in exploration and production activity, as well
as property acquisitions and divestitures, and such spending is
compared to the Company's annual budgeted capital expenditures. The
most directly comparable GAAP measure for capital expenditures is
cash flow used in investing activities. A summary of the
reconciliation of cash flow used in investing activities to capital
expenditures, is set forth below:
|
Three Months Ended
September 30,
|
Nine Months
Ended
September 30,
|
(000s)
|
2022
|
2021
|
2022
|
2021
|
Cash flow used in
investing activities (per GAAP)
|
$
303,048
|
$ (223,170)
|
$
1,422,658
|
$
911,727
|
Corporate
acquisitions
|
(67,770)
|
-
|
(67,770)
|
-
|
Proceeds from sale of
investments
|
-
|
103,824
|
-
|
103,824
|
Change in non-cash
working capital
|
180,169
|
175,454
|
18,477
|
127,359
|
Capital
expenditures
|
$
415,447
|
$
56,108
|
$
1,373,365
|
$ 1,142,910
|
Free Cash Flow
Management uses the term "free cash flow" for its own
performance measure and to provide shareholders and potential
investors with a measurement of the Company's efficiency and its
ability to generate the cash necessary to fund its future growth
expenditures, to repay debt and provide shareholder returns. Free
cash flow is defined as cash flow less capital expenditures,
excluding acquisitions and dispositions. Free cash flow is prior to
dividend payment. The most directly comparable GAAP measure for
cash flow is cash flow from operating activities. See
"Non-GAAP Financial Measures – Cash Flow" and " Non-GAAP Financial
Measures – Capital Expenditures" above.
Operating Netback
Management uses the term "operating netback" as a key
performance indicator and one that is commonly presented by other
oil and natural gas producers. Operating netback is defined
as the sum of commodity sales from production, premium (loss) on
risk management activities and realized gains (loss) on financial
instruments less the sum of royalties, transportation costs and
operating expenses. A summary of the reconciliation of
operating netback from commodity sales from production, which is a
GAAP measure, is set forth below:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
($/boe)
|
2022
|
2021
|
2022
|
2021
|
Commodity sales from
production
|
$
1,677,370
|
$ 1,323,203
|
$
6,178,322
|
$ 3,344,548
|
Premium (loss) on risk
management activities
|
334,751
|
15,303
|
107,868
|
(7,636)
|
Realized (loss) on
financial instruments
|
(268,265)
|
(125,130)
|
(719,816)
|
(196,994)
|
Royalties
|
(293,820)
|
(109,423)
|
(822,765)
|
(219,746)
|
Transportation
costs
|
(206,648)
|
(175,143)
|
(659,934)
|
(485,200)
|
Operating
expenses
|
(193,331)
|
(157,854)
|
(579,267)
|
(430,932)
|
Operating
netback
|
$
1,050,057
|
$
770,956
|
$
3,504,408
|
$ 2,004,040
|
Non-GAAP Financial
Ratios
Operating Netback per-boe
Management calculates "operating netback per-boe" as operating
netback divided by total production for the period. Netback
per-boe is a key performance indicator and measure of operational
efficiency and one that is commonly presented by other oil and
natural gas producers. A summary of the calculation of
operating netback per boe, is set forth below:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
($/boe)
|
2022
|
2021
|
2022
|
2021
|
Revenue, excluding
processing income
|
$
39.33
|
$
28.89
|
$
41.01
|
$
26.98
|
Royalties
|
(6.63)
|
(2.61)
|
(6.06)
|
(1.89)
|
Transportation
costs
|
(4.66)
|
(4.17)
|
(4.86)
|
(4.17)
|
Operating
expenses
|
(4.36)
|
(3.76)
|
(4.27)
|
(3.70)
|
Operating
netback
|
$
23.68
|
$
$18.35
|
$
25.82
|
$
$17.22
|
Cash Flow per diluted share
Management uses cash flow per diluted share as a measurement of
the Company's efficiency and its ability to generate the cash
necessary to fund its future growth expenditures, to repay debt or
to pay dividends on a per diluted share basis. Cash flow per
diluted share is calculated using cash flow divided by the weighted
average diluted shares outstanding.
Free Cash Flow per diluted
share
Management uses free cash flow per diluted share as a measure of
the Company's efficiency and its ability to generate the cash
necessary to fund its future growth expenditures, to repay debt and
provide shareholder returns on a per diluted share basis. Free cash
flow per diluted share is calculated using free cash flow divided
by the weighted average diluted shares outstanding.
Capital Management
Measures
Adjusted Working Capital
Management uses the term "adjusted working capital" for its own
performance measures and to provide shareholders and potential
investors with a measurement of the Company's liquidity. A
summary of the composition of adjusted working capital (deficit),
is set forth below:
|
As at
September 30,
|
As at
December 31,
|
(000s)
|
2022
|
2021
|
Working capital
(deficit)
|
$
513,115
|
$
(361,034)
|
Fair value of financial
instruments – short-term liability, net of short-term
asset
|
(656,281)
|
240,970
|
Lease liabilities –
short-term
|
3,101
|
2,997
|
Decommissioning
obligations – short-term
|
30,000
|
20,103
|
Unrealized foreign
exchange in working capital - asset
|
(6,306)
|
(6,441)
|
Adjusted working
capital (deficit)
|
$
(116,371)
|
$
(103,405)
|
Net Debt
Management uses the term "net debt", as a key measure for
evaluating its capital structure and to provide shareholders and
potential investors with a measurement of the Company's total
indebtedness. A summary of the composition of net debt, is
set forth below:
|
As at
September 30,
|
As at
December 31,
|
(000s)
|
2022
|
2021
|
Bank debt
|
$
-
|
$
(421,539)
|
Senior unsecured
notes
|
(448,262)
|
(448,035)
|
Adjusted working
capital (deficit)
|
(116,371)
|
(103,405)
|
Net debt
|
$
(564,633)
|
$
(972,979)
|
OIL AND GAS METRICS
This news release contains certain oil and gas metrics which do
not have standardized meanings or standard methods of calculation
and therefore such measures may not be comparable to similar
measures used by other companies and should not be used to make
comparisons. Such metrics have been included in this document to
provide readers with additional measures to evaluate the Company's
performance; however, such measures are not reliable indicators of
the Company's future performance and future performance may not
compare to the Company's performance in previous periods and
therefore such metrics should not be unduly relied upon.
SUPPLEMENTAL INFORMATION REGARDING
PRODUCT TYPES
This news release includes references to Q3 2022 average daily
production and estimated November and December 2022 average daily production as well as
estimated full years 2023 and 2028 average daily production. The
following table is intended to provide supplemental information
about the product type composition for each of the production
figures that are provided in this news release:
|
Light and Medium
Crude Oil(1)
|
Conventional
Natural Gas
|
Shale Natural
Gas
|
Natural Gas
Liquids(1)
|
Oil Equivalent
Total
|
|
Company Gross
(Bbls)
|
Company Gross
(Mcf)
|
Company Gross
(Mcf)
|
Company Gross
(Bbls)
|
Company Gross
(Boe)
|
Q3 2022 Average
Daily
Production....................
|
40,728
|
1,241,440
|
999,200
|
67,729
|
481,897
|
November 2022 Average
Daily
Production..........
|
47,000
|
1,325,000
|
1,105,000
|
73,000
|
525,000
|
December 2022 Average
Daily
Production..........
|
47,500
|
1,374,000
|
1,107,000
|
74,000
|
535,000
|
2023 Average Daily
Production
|
47,900
|
1,349,200
|
1,162,400
|
78,500
|
545,000
|
2028 Average Daily
Production………………
|
56,720
|
1,339,340
|
1,884,400
|
105,990
|
700,000
|
(1)
|
For the purposes of
this disclosure, condensate has been combined with Light and Medium
Crude Oil as the associated revenues and certain costs of
condensate are similar to Light and Medium Crude Oil. Accordingly,
NGLs in this disclosure exclude condensate.
|
GENERAL
See also "Forward-Looking Statements", and "Non-GAAP and Other
Financial Measures" in the most recently filed Management's
Discussion and Analysis.
CERTAIN DEFINITIONS:
1H
|
first half
|
2H
|
second half
|
bbl
|
barrel
|
bbls/day
|
barrels per
day
|
bbl/mmcf
|
barrels per million
cubic feet
|
bcf
|
billion cubic
feet
|
bcfe
|
billion cubic feet
equivalent
|
bpd or
bbl/d
|
barrels per
day
|
boe
|
barrel of oil
equivalent
|
boepd or
boe/d
|
barrel of oil
equivalent per day
|
bopd or
bbl/d
|
barrel of oil,
condensate or liquids per day
|
CCUS
|
carbon capture, usage
and storage
|
DUC
|
drilled but uncompleted
wells
|
EP
|
exploration and
production
|
gj
|
gigajoule
|
gjs/d
|
gigajoules per
day
|
mbbls
|
thousand
barrels
|
mmbbls
|
million
barrels
|
mboe
|
thousand barrels of oil
equivalent
|
mboepd
|
thousand barrels of oil
equivalent per day
|
mcf
|
thousand cubic
feet
|
mcfpd or
mcf/d
|
thousand cubic feet per
day
|
mcfe
|
thousand cubic feet
equivalent
|
mmboe
|
million barrels of oil
equivalent
|
mmbtu
|
million British thermal
units
|
mmbtu/d
|
million British thermal
units per day
|
mmcf
|
million cubic
feet
|
mmcfpd or
mmcf/d
|
million cubic feet per
day
|
MPa
|
megapascal
|
mstb
|
thousand stock tank
barrels
|
natural
gas
|
conventional natural
gas and shale gas
|
NCIB
|
normal course issuer
bid
|
NGL or
NGLs
|
natural gas
liquids
|
tcf
|
trillion cubic
feet
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS
To view Tourmaline's Management's Discussion and Analysis and
Interim Condensed Consolidated Financial Statements for the periods
ended September 30, 2022 and 2021,
please refer to SEDAR (www.sedar.com) or Tourmaline's website at
www.tourmalineoil.com.
ABOUT TOURMALINE OIL
CORP.
Tourmaline is Canada's largest
and most active natural gas producer dedicated to producing the
lowest-emission and lowest-cost natural gas in North America. We are an investment grade
exploration and production company providing strong and predictable
operating and financial performance through the development of our
three core areas in the Western Canadian Sedimentary Basin. With
our existing large reserve base, decades-long drilling inventory,
relentless focus on execution and cost management, and
industry-leading environmental performance, we are excited to
provide shareholders an excellent return on capital, and an
attractive source of income through our base dividend and surplus
free cash flow distribution strategies.
Website: www.tourmalineoil.com
SOURCE Tourmaline Oil Corp.