CALGARY,
AB, Nov. 1, 2023 /CNW/ - Tourmaline Oil Corp.
(TSX: TOU) ("Tourmaline" or the "Company") is pleased
to release financial and operating results for the third quarter of
2023.
HIGHLIGHTS
- Third quarter cash flow(1)(2) of $878.5 million ($2.55 per diluted share(3)).
- Generated Q3 free cash flow(4) ("FCF") of
$332.3 million ($0.96 per diluted share) enabling the Company to
declare a special dividend of $1.00
per common share paid on November 1,
2023 to holders of record on October
24, 2023. Tourmaline has distributed total dividends of
$6.52 per share (inclusive of this
November 1, 2023 special dividend)
since December 1, 2022, an implied 9%
trailing yield(5).
- Full-year 2023 free cash flow forecast of $1.9 billion(6) (2022 free cash flow -
$3.2 billion).
- September 30, 2023 net
debt(7) of $879.8 million
or 0.3 times Q3 2023 annualized cash flow of $3.5 billion.
- Tourmaline Q3 2023 net earnings of $274.7 million ($0.80 per diluted share).
- In October 2023, the Company
entered into an agreement to acquire all of the shares of Bonavista
Energy Corporation ("Bonavista") for $1.45
billion, consisting of $725
million in Tourmaline common shares and $725 million of cash, less Bonavista's net debt(8) at closing.
The closing of the transaction is expected to occur in the second
half of November 2023, subject to
customary regulatory and stock exchange approvals.
PRODUCTION UPDATE
- Q3 2023 average production of 502,524 boepd was at the higher
end of the guidance range of 495,000-505,000 boepd. Q3 production
was reduced by planned turnarounds (16,000 boepd for the quarter)
and planned storage injections in California and Dawn, Ontario (3,440 boepd).
- 2023 average production guidance of 520,000 boepd is
maintained, the Company expects exit 2023 production of over
600,000 boepd, including the acquired Bonavista volumes.
- Inclusive of the Bonavista
assets at a maintenance only, conservative capital budget,
Tourmaline anticipates 2024 average annual production to range
between 600,000-610,000 boepd (formal guidance based on 600,000
boepd). Tourmaline plans to grow production from the Bonavista assets in 2025 into an anticipated
higher gas price environment.
- 2024 average liquids production (oil, condensate, and NGLs) of
over 140,000 bbls/d is forecasted as the Company also grows into
one of the largest Canadian liquids producers.
- Tourmaline is Canada's largest natural gas producer with
forecast production of over 2.7 bcf/day in 2024.
FINANCIAL RESULTS
- Third quarter 2023 cash flow was $878.5
million ($2.55 per diluted
share) on total capital expenditures(9) of $565.4 million (EP spending(10) of
$533.4 million in Q3), generating
free cash flow of $332.3 million for
the quarter ($0.96 per diluted
share).
- Tourmaline generated Q3 2023 net earnings of $274.7 million ($0.80 per diluted share), and first nine-month
2023 earnings of $1,035.7 million
($3.01 per diluted share).
- Exit Q3 2023 net debt was $879.8
million, well below the Company's long-term net debt target
of $1.2-$1.4
billion. This net debt target will provide for a long-term
net debt to cash flow ratio of approximately 0.25 to 0.35 times in
2024 and throughout the Company's five-year plan. The Company
currently has $3.1 billion of total
credit capacity.
- At September 30, 2023, Tourmaline
is in a surplus position when including the value of its 45.1
million shares of Topaz Energy Corp (valued at $967.6 million using the closing price of
$21.43 per Topaz common shares on
September 29, 2023).
- The continued strong free cash flow generated during the third
quarter of 2023, as well as the forecast free cash flow for Q4 2023
have allowed the Company to pay the previously announced special
dividend of $1.00/share paid on
November 1, 2023, as well as increase
the base dividend from $1.04 to
$1.12/share on an annualized basis,
effective as of the December 2023
quarterly base dividend payment.
MARKETING UPDATE
- Average realized natural gas price was C$4.56/mcf in Q3 2023 significantly higher than
the AECO 5A benchmark price of C$2.64
mcf over the period.
- Tourmaline has an average of 755 mmcfpd hedged at a weighted
average fixed price of C$5.07/mcf, an
average of 155 mmcfpd hedged at a basis to NYMEX of US$0.39/mcf and an average of 809 mmcfpd of
unhedged volumes exposed to export markets in the fourth quarter of
2023. Of this 809 mmcfpd, 68% is exposed to premium markets such as
the US Gulf Coast, Western US, JKM and Sumas.
- Tourmaline has an average of 722 mmcfpd hedged at a weighted
average price of C$5.35/mcf, an
average of 119 mmcfpd hedged at a basis to NYMEX of US$-0.05/mcf and an average of 833 mmcfpd of
unhedged volumes exposed to export markets in 2024. Of this 833
mmcfpd, 65% is exposed to the aforementioned premium export
markets.
- Tourmaline's exposure to Western US markets will increase in
November 2023 with the addition of
approximately 82 mmcfpd of transportation capacity. With this
addition and others, Tourmaline's natural gas exports will reach
1.08 bcfpd by exit 2023.
- The Company has further diversified its natural gas marketing
portfolio by entering into a long-term Henry Hub netback
arrangement to move approximately 60 mmcfpd to the US Gulf Coast,
which is expected to commence in November
2026.
- Tourmaline has joined the NeeStaNan venture as an industry
supporter. NeeStanNan is an Indigenous led project that will create
a multi-product utility corridor, including natural gas, connecting
Alberta, Saskatchewan and
Manitoba to tidewater on Hudson's
Bay. The project involves a port for containers, potash and other
prairie products and envisions an electrified LNG facility on
Hudson's Bay.
CAPITAL BUDGET AND FINANCIAL OUTLOOK
- Q3 2023 EP capital spending of $533.4
million, forecast full year 2023 EP capital spending is now
anticipated to be approximately $1.825
billion, up from the prior $1.675
billion. The increase includes the incorporation of
anticipated Bonavista related
capital expenditures post-closing in Q4, incremental inflation of
5.0% over forecast levels as the Company locked in services during
Q2 and Q3 for the 2H 2023 – 1H 2024 EP season, and the acceleration
of fracking of two pads into 2023 from Q1 2024 due to faster
realized drilling times.
- Tourmaline's Board of Directors has approved a full year 2024
EP capital budget of $2.15 billion,
reflecting a 14-15 rig program and including $225 million associated with the Bonavista assets.
- The 2024 EP program is expected to deliver cash flow at strip
pricing of $4.5 billion and FCF of
$2.2 billion. As in previous years,
the Company is strongly committed to returning the majority of free
cash flow to shareholders and plans to continue its practice of
quarterly special dividends in 2024.
- The updated five-year plan incorporates modest growth from the
Bonavista assets commencing in
2025 as well as a deferral of the North Montney Phase 2 Conroy
development by one year. The deferral allows the Company to spread
out facilities capital spending, evaluate potential Phase 2
facility electrification options and results in a significant
increase in FCF in 2026-2028. The current five-year plan does not
currently include any capital for the Phase 2 project.
- Between 2022 and 2028, Tourmaline anticipates organically
growing the NEBC Montney Gas Condensate complex volumes by over
125,000 boepd, with further growth to be realized with the North
Montney Phase 2 Conroy project.
EP UPDATE
- Tourmaline continues to operate 13 drilling rigs and 3-4 frac
spread across the 3 EP complexes. The Company anticipates adding
1-2 drilling rigs in 2024 to accommodate drilling on the
Bonavista assets.
- The Company has drilled 178.2 net wells and completed 163.89
wells through the first nine months of 2023 and has an inventory of
48 net DUCs entering Q4 2023.
- Tourmaline anticipates bringing 76.15 net wells onstream during
the fourth quarter driving strong Q4 average production and the
2023 exit level.
- The Company delivered a new pacesetter well in the North Montney of NEBC, drilled in Q3, in 4.91
days from spud to rig release for the 4164m b-E9-G/94-H-4 well.
- As of September 30, 2023,
Tourmaline has made 19 new pool/new zone discoveries and drilled
one uneconomic marginal oil well since the inception of the
Company's exploration program. The program has yielded 1.26 TCFe of
booked 2P reserves in the independent GLJ December 31, 2022 year-end reserve report, which
does not include results from the successful 2023 program. The
exploration program has added an estimated 957 Tier 1 and Tier 2
drilling locations to date to an existing drilling inventory of
over 22,000 locations. Due to the success of this program,
Tourmaline plans to allocate up to $100
million of free cash flow to exploration activities in
2024.
NORTH DEEP BASIN ACQUISITION AND GROWTH PROJECT
- Tourmaline is planning a new North Deep Basin facility project
that will optimize production at the existing company-operated
Musreau-Kakwa plants and accelerate gas processing access to 215
Lower Cretaceous horizontal locations. This compression and
pipeline project is expected to add 15,000 boepd during 2025-26,
into an anticipated stronger natural gas pricing environment.
- The Company also completed the acquisition of assets from White
Horse Resources Ltd. ("White Horse") during the third quarter of
2023 for $19.1 million. The
acquisition included production of 595 boepd, existing 2P reserves
of 4.287 mmboe(11), and over 75 drilling locations. The
acquisition expands lands and inventory adjacent to a Cardium oil
discovery made by the Company in the Resthaven-Kakwa area in Q1
2023 (02/13-11-60-3W6M). The initial discovery has an IP90 of 270
bbls/day oil, 0.6 mmcfpd gas, and estimated EUR of 250 mstb oil,
2.0 bcf gas. Between the White Horse acquisition and existing
prospective Tourmaline lands around the discovery, the Company
estimates a total drilling inventory of over 150 premium Cardium
oil locations.
BOARD UPDATE
- Tourmaline is pleased to announce that Christopher Lee has been appointed to the board
of directors. Mr. Lee recently retired from the board of directors
of Deloitte Canada and serves on the
boards of Mount Royal University
and Alberta Blue Cross.
(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 specified financial measures:
"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)
|
Calculated as the
dividend per common share for the stated period divided by the
closing stock price of $69.46 on October 13, 2023.
|
(6)
|
Based on oil and gas
commodity strip pricing at October 13, 2023.
|
(7)
|
"Net debt" is a
capital management measure. See "Non-GAAP and Other Financial
Measures" in this news release and in the Q3
MD&A.
|
(8)
|
For the purposes of
the Bonavista acquisition only, net debt is defined as all
indebtedness (including bank debt) plus working capital (excludes
commodity hedging) and includes all transaction and related
costs.
|
(9)
|
"Capital Expenditures"
is a non-GAAP financial measure defined as Cash flow used in
investing activities adjusted for the change in non-cash working
capital (deficit). See "Non-GAAP and Other Financial
Measures" in this news release.
|
(10)
|
"EP
spending" is defined as Capital Expenditures, excluding
acquisitions, dispositions, and other corporate
expenditures.
|
(11)
|
Internally estimated by
qualified reserve evaluators in accordance with National Instrument
51-101 – Standards of Disclosure for Oil and Gas
Activities and the Canadian Oil and
Gas Evaluation Handbook with an effective date of July 1,
2023.
|
CORPORATE SUMMARY – THIRD QUARTER 2023
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
2023
|
2022
|
Change
|
|
2023
|
2022
|
Change
|
OPERATIONS
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
2,318,316
|
2,240,641
|
3 %
|
|
2,364,246
|
2,314,655
|
2 %
|
Crude oil, condensate
and NGL (bbl/d)
|
116,138
|
108,457
|
7 %
|
|
113,993
|
111,430
|
2 %
|
Oil equivalent
(boe/d)
|
502,524
|
481,897
|
4 %
|
|
508,034
|
497,206
|
2 %
|
Product
prices(1)
|
|
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
4.56
|
$
5.37
|
(15) %
|
|
$
5.04
|
$
5.52
|
(9) %
|
Crude oil, condensate
and NGL ($/bbl)
|
$
57.68
|
$
63.77
|
(10) %
|
|
$
57.78
|
$
68.35
|
(15) %
|
Operating expenses
($/boe)
|
$
4.60
|
$
4.36
|
6 %
|
|
$
4.62
|
$
4.27
|
8 %
|
Transportation costs
($/boe)
|
$
5.12
|
$
4.66
|
10 %
|
|
$
5.22
|
$
4.86
|
7 %
|
Operating netback
($/boe)(2)
|
$
21.61
|
$
23.68
|
(9) %
|
|
$
23.04
|
$
25.82
|
(11) %
|
Cash general and
administrative
expenses ($/boe)(3)
|
$
0.73
|
$
0.55
|
33 %
|
|
$
0.71
|
$
0.57
|
25 %
|
FINANCIAL
($000, except share and per share)
|
|
|
|
|
|
|
|
Commodity sales from
production
|
1,311,167
|
1,677,370
|
(22) %
|
|
3,985,213
|
6,178,322
|
(35) %
|
Total revenue from
commodity sales and realized gains
|
1,587,929
|
1,743,856
|
(9) %
|
|
5,048,114
|
5,566,374
|
(9) %
|
Royalties
|
139,601
|
293,820
|
(52) %
|
|
487,953
|
822,765
|
(41) %
|
Cash flow
|
878,532
|
1,051,400
|
(16) %
|
|
2,789,675
|
3,481,302
|
(20) %
|
Cash flow per share
(diluted)
|
$
2.55
|
$
3.06
|
(17) %
|
|
$
8.11
|
$
10.18
|
(20) %
|
Net earnings
|
274,687
|
2,097,929
|
(87) %
|
|
1,035,678
|
4,517,415
|
(77) %
|
Net earnings per share
(diluted)
|
$
0.80
|
$
6.11
|
(87) %
|
|
$
3.01
|
$
13.21
|
(77) %
|
Capital expenditures
(net of dispositions)(2)
|
565,448
|
415,447
|
36 %
|
|
1,437,262
|
1,373,365
|
5 %
|
Weighted average shares
outstanding (diluted)
|
344,510,350
|
343,461,348
|
– %
|
|
343,892,727
|
341,926,025
|
1 %
|
Net debt
|
|
|
|
|
(879,799)
|
(564,633)
|
56 %
|
(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.
|
|
Conference Call Tomorrow at 9:00 a.m.
MT (11:00 a.m. ET)
Tourmaline will host a conference call tomorrow, November 2, 2023 starting at 9:00 a.m. MT (11:00 a.m. ET).
To participate without operator assistance, you may register and
enter your phone number at https://emportal.ink/3Fkv3Rc to receive
an instant automated call back.
To participate using an operator, please dial 1-888-664-6383
(toll-free in North America), or
1-416-764-8650 (international dial-in), a few minutes prior to the
conference call.
Conference ID is 36835289.
REPLAY DETAILS
If you are unable to dial into the live
conference call on November
3rd, a replay will be available by dialing
1-888-390-0541 (international 1-416-764-8677), referencing Encore
Replay Code 835289. The recording will expire on November 16, 2023.
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: the anticipated benefits
and production growth to be derived from the Bonavista and Whitehorse acquisitions; anticipated petroleum
and natural gas production and production growth for various
periods including 2023 and 2024 average production estimates;
full-year 2023 free cash flow estimates; anticipated level of
natural gas exports in 2023; 2023 and 2024 EP capital spending
levels; the benefits to be derived from the EP program and
anticipated cash flow associated therewith; the benefits to be
derived from the updated five-year plan and the projected increase
in FCF in 2026-2028; the anticipated organic growth up to 2028 in
the NEBC Montney Gas Condensate complex and further from the North
Montney Phase 2 Conroy project; the plans to proceed with a new
North Deep Basin facility project and the benefits and production
growth to be derived from such project; target net debt to cash
flow ratios in 2024 and throughout the Company's five-year plan;
the future declaration and payment of base and special dividends
and the timing and amount thereof including any future increase and
the intention to continue to pay special dividends in 2024; the
expansion of Tourmaline's LNG business and core areas; the timing
of future growth and developments projects; cost reduction
initiatives; projected operating and drilling costs and drilling
times; anticipated future commodity prices; the ability to
generate, and the amount of, anticipated free cash flow over
various periods; as well as Tourmaline's future drilling locations,
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; severe weather (including forest fires); inflation; supply
chain risks; the impact of wars or other hostilities (including the
current war in Ukraine and the
Israel-Hamas war) and pandemics (including COVID-19); and changes
in legislation, including but not limited to tax laws, royalties
and environmental regulations.
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.sedarplus.ca) 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.
RESERVES DATA
The reserves data set forth above
relating to the reserves associated with the White Horse
acquisition is based upon an internal estimate prepared by a
Qualified Reserves Evaluator ("QRE") in accordance
with the standards contained in the Canadian Oil and Gas Evaluation
Handbook. The information in this news release pertaining to this
estimate is based solely on internal estimates made by the
QRE and such estimates have not been reflected in any
independent reserve or resource evaluations prepared pursuant to NI
51-101.
The reserves data set forth above relating to the reserves
associated with the Company's exploration program is based on the
reports of GLJ Ltd. ("GLJ") and Deloitte LLP, each dated effective
December 31, 2022, which have been
consolidated into one report by GLJ and adjusted to apply certain
of GLJ's assumptions and methodologies and pricing and cost
assumptions.
There are numerous uncertainties inherent in estimating
quantities of crude oil, natural gas and NGL reserves and the
future cash flows attributed to such reserves. The reserve and
associated cash flow information set forth above are estimates
only. In general, estimates of economically recoverable crude oil,
natural gas and NGL reserves and the future net cash flows
therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties,
production rates, ultimate reserve recovery, timing and amount of
capital expenditures, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially. For
those reasons, estimates of the economically recoverable crude oil,
NGL and natural gas reserves attributable to any particular group
of properties, classification of such reserves based on risk of
recovery and estimates of future net revenues associated with
reserves prepared by different engineers, or by the same engineers
at different times, may vary. The Company's actual production,
revenues, taxes and development and operating expenditures with
respect to its reserves will vary from estimates thereof and such
variations could be material.
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 2023 free cash flow and
Tourmaline's 2024 cash flow and free cash flow, which are based on,
among other things, the various assumptions as to production
levels, capital expenditures and other assumptions disclosed in
this news release and including Tourmaline's estimated average 2023
and 2024 production of 520,000 boepd and
600,000 boepd, respectively, commodity price
assumptions for natural gas ($2.82/mcf 2023 NYMEX
US, 2024 - $3.62/mcf
2024 NYMEX US; $2.77/mcf 2023 AECO 5A,
$3.12/mcf 2024
AECO 5A; $14.94/mcf
2023 JKM US, $17.83/mcf 2024 JKM
US), crude oil ($79.63/bbl 2023 WTI US,
$80.11/bbl 2024
WTI US) and an exchange rate assumption of $0.74 and $0.73
(US/CAD) for 2023 and 2024, respectively. To the extent such
estimates constitute financial outlooks, they were approved by
management and the Board of Directors of Tourmaline on November 1, 2023, 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", "EP
spending", "free cash flow", and "operating netback", which
are considered "non-GAAP financial measures" and the terms "cash
flow per diluted share", "free cash flow per diluted share", and
"operating netback per boe", 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 or more meaningful than the most directly comparable
GAAP measures in evaluating the Company's performance. See
"Non-GAAP and Other Financial Measures" in the most recent
Management's Discussion and Analysis for more information on the
definition and description of these terms.
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)
|
2023
|
2022
|
2023
|
2022
|
Cash flow from
operating activities (per GAAP)
|
$
882,814
|
$ 1,112,202
|
$
3,393,273
|
$ 3,577,332
|
Current income
taxes
|
(102,669)
|
(4,335)
|
(355,629)
|
(4,335)
|
Current income taxes
paid
|
5,261
|
–
|
34,497
|
–
|
Change in non-cash
working capital
|
93,126
|
(56,467)
|
(282,466)
|
(91,695)
|
Cash flow
|
$
878,532
|
$ 1,051,400
|
$
2,789,675
|
$ 3,481,302
|
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)
|
2023
|
2022
|
2023
|
2022
|
Cash flow used in
investing activities (per GAAP)
|
$
319,106
|
$
303,048
|
$
1,406,341
|
$ 1,422,658
|
Corporate
acquisition
|
–
|
(67,770)
|
–
|
(67,770)
|
Change in non-cash
working capital
|
246,342
|
180,169
|
30,921
|
18,477
|
Capital
expenditures
|
$
565,448
|
$
415,447
|
$
1,437,262
|
$ 1,373,365
|
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.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
(000s)
|
2023
|
2022
|
2023
|
2022
|
Cash flow
|
$
878,532
|
$ 1,051,400
|
$
2,789,675
|
$ 3,481,302
|
Capital
expenditures
|
(565,448)
|
(415,447)
|
(1,437,262)
|
(1,373,365)
|
Property
acquisitions
|
19,242
|
41
|
58,536
|
261,717
|
Proceeds from
divestitures
|
-
|
(67,659)
|
(7,789)
|
(71,380)
|
Free Cash
Flow
|
$
332,326
|
$
568,335
|
$
1,403,160
|
$ 2,298,274
|
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,
|
(000s)
|
2023
|
2022
|
2023
|
2022
|
Commodity sales from
production
|
$
1,311,167
|
$ 1,677,370
|
$
3,985,213
|
$
6,178,322
|
Premium on risk
management activities
|
119,103
|
334,751
|
620,027
|
107,868
|
Realized gain (loss) on
financial instruments
|
157,659
|
(268,265)
|
442,874
|
(719,816)
|
Royalties
|
(139,601)
|
(293,820)
|
(487,953)
|
(822,765)
|
Transportation
costs
|
(236,892)
|
(206,648)
|
(723,579)
|
(659,934)
|
Operating
expenses
|
(212,616)
|
(193,331)
|
(640,711)
|
(579,267)
|
Operating
netback
|
$
998,820
|
$
1,050,057
|
$
3,195,871
|
$
3,504,408
|
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)
|
2023
|
2022
|
2023
|
2022
|
Revenue, excluding
processing income
|
$
34.35
|
$
39.33
|
$
36.40
|
$
41.01
|
Royalties
|
(3.02)
|
(6.63)
|
(3.52)
|
(6.06)
|
Transportation
costs
|
(5.12)
|
(4.66)
|
(5.22)
|
(4.86)
|
Operating
expenses
|
(4.60)
|
(4.36)
|
(4.62)
|
(4.27)
|
Operating
netback
|
$
21.61
|
$
23.68
|
$
23.04
|
$
25.82
|
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 reconciliation of working capital
(deficit) to adjusted working capital (deficit), is set forth
below:
(000s)
|
As at
September 30,
2023
|
As at
December 31,
2022
|
Working capital
(deficit)
|
$
(161,167)
|
$
809,449
|
Fair value of financial
instruments – short-term asset
|
(305,901)
|
(709,286)
|
Lease liabilities –
short-term
|
5,251
|
3,109
|
Decommissioning
obligations – short-term
|
30,000
|
30,000
|
Unrealized foreign
exchange in working capital – liability (asset)
|
585
|
(8,605)
|
Adjusted working
capital (deficit)
|
$
(431,232)
|
$
124,667
|
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 reconciliation
of bank debt and senior unsecured notes to net debt, is set forth
below:
(000s)
|
As at
September 30,
2023
|
As at
December 31,
2022
|
Bank debt
|
$
–
|
$ (170,767)
|
Senior unsecured
notes
|
(448,567)
|
(448,342)
|
Adjusted working
capital (deficit)
|
(431,232)
|
124,667
|
Net debt
|
$
(879,799)
|
$ (494,442)
|
Supplementary Financial Measures
The following
measures are supplementary financial measures: cash flow per
diluted share, free cash flow per diluted share, operating expenses
($/boe), cash general and administrative expenses ($/boe) and
transportation costs ($/boe). These measures are calculated by
dividing the numerator by a diluted share count or by total
production for the period, depending on the financial measure
discussed.
ESTIMATES OF DRILLING LOCATIONS
Unbooked drilling
locations are the internal estimates of Tourmaline based on
Tourmaline's prospective acreage and an assumption as to the number
of wells that can be drilled per section based on industry practice
and internal review. Unbooked locations do not have attributed
reserves or resources (including contingent and prospective).
Unbooked locations have been identified by Tourmaline's management
as an estimation of Tourmaline's multi-year drilling activities
based on evaluation of applicable geologic, seismic, engineering,
production and reserves information. There is no certainty
that Tourmaline will drill all unbooked drilling locations and if
drilled there is no certainty that such locations will result in
additional oil and natural gas reserves, resources or
production. The drilling locations on which Tourmaline will
actually drill wells, including the number and timing thereof is
ultimately dependent upon the availability of funding, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While a certain number of the
unbooked drilling locations have been de-risked by Tourmaline
drilling existing wells in relative close proximity to such
unbooked drilling locations, the majority of other unbooked
drilling locations are farther away from existing wells where
management of Tourmaline has less information about the
characteristics of the reservoir and therefore there is more
uncertainty whether wells will be drilled in such locations and if
drilled there is more uncertainty that such wells will result in
additional oil and gas reserves, resources or production.
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 2023 average daily
production, forecast 2023 average daily production and forecast
2024 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 2023 Average Daily
Production
|
44,355
|
|
1,206,316
|
|
1,112,000
|
|
71,783
|
|
502,524
|
2023 Forecast Average
Daily Production
|
44,800
|
|
1,290,000
|
|
1,121,000
|
|
73,400
|
|
520,000
|
2024 Forecast Average
Daily Production
|
51,000
|
|
1,565,000
|
|
1,180,000
|
|
91,500
|
|
600,000
|
(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.
|
INITIAL PRODUCTION RATES
Any references in this
news release to initial production rates are useful in confirming
the presence of hydrocarbons; however, such rates are not
determinative of the rates at which such wells will continue
production and decline thereafter and are not necessarily
indicative of long-term performance or ultimate recovery. While
encouraging, readers are cautioned not to place reliance on such
rates in calculating the aggregate production for the Company. Such
rates are based on field estimates and may be based on limited data
available at this time.
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
|
CNG
|
compressed natural
gas
|
DUC
|
drilled but uncompleted
wells
|
EP
|
exploration and
production
|
gj
|
gigajoule
|
gjs/d
|
gigajoules per
day
|
JKM
|
Japan Korea
Marker
|
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
|
TCFe
|
trillion cubic feet
equivalent
|
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, 2023 and 2022, please refer to
SEDAR+ (www.sedarplus.ca) 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.
SOURCE Tourmaline Oil Corp.