CALGARY,
AB, Jan. 12, 2023 /CNW/ - Tourmaline Oil
Corp. (TSX: TOU) ("Tourmaline" or the "Company") is pleased to
announce a special dividend and provide an operational and 2023
guidance update.
SPECIAL DIVIDEND
Tourmaline is pleased to announce the declaration of a special
dividend of $2.00/share, given the
continued strong financial performance and outlook for the Company.
The special dividend is part of Tourmaline's comprehensive
shareholder return plan and will be paid on February 1, 2023 to shareholders of record on
January 24, 2023. This special
dividend is designated as an "eligible dividend" for Canadian
income tax purposes.
The Company anticipates paying further special dividends each
quarter in 2023 and tactical utilization of its normal course
issuer bid during the course of the year. Net debt(1)
for year-end 2023 is forecast below the long-term net debt target
of $1.0-$1.2
billion.
PRODUCTION UPDATE
- Tourmaline achieved a 2022 exit volume production of 528,000
boepd (peak production was achieved December
12-18, 2022, with average production of 532,000 boepd during
that period).
- Fourth quarter 2022 average production was approximately
512,000 boepd and was challenged by considerable unplanned operated
and third-party downtime. The most significant outages were inlet
compressor failures at the Tourmaline Aitken and Resthaven plants
in November, unplanned disruptions on the Enbridge 26" mainline for
five weeks in October and early November, NGL losses in BC in
December due to railcar interruptions caused by extreme cold
conditions, and higher than planned frac downtime in NEBC.
- The Company has elected to increase the downtime provision from
4% to 6% for 2023. The primary driver for the increased provision
in 2023 is the absence of a finalized permitting framework in NEBC.
The Company has sufficient permits in place to conduct its EP
program for several years, but the distribution of these permits
has led to increased frac related downtime. When the permitting
framework is finalized, much of this higher provision will no
longer be required. The Company now expects 2023 average production
of 520,000-540,000 boepd, the broader range reflecting the higher
downtime provision.
Q4 2022 AND 2023 CASH FLOW
OUTLOOK
- Given below normal temperatures in western North America in November and December and
Tourmaline's significant exposure to those natural gas markets, the
Company expects significantly higher cash flow in the fourth
quarter of 2022 than originally forecasted. December average
natural gas prices were US $28.51/mmbtu at Hunt, US $28.82/mmbtu at Malin, and US $30.53/mmbtu at PG&E. Tourmaline sells
approximately 390 mmcfpd into these markets.
- Tourmaline is now expecting cash flow(2) ("CF") of
$4.5 billion in 2023, based on
updated strip pricing at January 3,
2023, yielding free cash flow(3) ("FCF") of
$2.6 billion on capital
expenditures(4) of $1.86
billion.
- Tourmaline commenced deliveries of 140,000 mmcfpd for its Gulf
Coast LNG contract on January 1,
2023, realizing full exposure to JKM pricing.
- As previously disclosed, the Company intends to return 50-90%
of FCF to shareholders in 2023.
- Given significantly enhanced cash flow in Q4 2022 and
anticipated strong Q1 2023 cash flow, the Company has elected to
pay a special dividend of $2.00/share. The special dividend will be paid on
February 1, 2023 to shareholders of
record on January 24, 2023.
CAPITAL PROGRAMS
- The Company estimates capital expenditures, excluding A&D,
of approximately $1.7 billion in 2022
as inflation was on average 7% higher in the second half of 2022
than the 18% inflation contingency previously assumed in the
mid-2022 outlook.
- Tourmaline now plans EP capital spending of $1.675 billion in 2023 reflecting an inflation
contingency of 25% for 2023 compared to 2021 levels.
- The 2023 total capital expenditures budget also includes
approximately $100 million for
exploration directed spending including drilling approximately 15
wells, seismic expenditures and follow up land sale activity. The
Company will carry the exploration program as a separate,
incremental capital item on a go forward basis outside of the base
EP plan given the slightly higher risk nature of those
expenditures. The Company views this successful exploration program
as a good use of excess FCF beyond what is being returned to
shareholders. Excess FCF may also be allocated to margin-improving
midstream investments, acquisitions, and environmental performance
improvement initiatives.
- The Company is maintaining the long-term net debt target in the
$1.0-1.2 billion range (approximately
0.2 times anticipated 2023 cash flow).
EP UPDATE
- The Company is currently operating the full drilling rig fleet
(13-14 rigs) across all three operated complexes, with one rig in
2023 focused primarily on new pool/new zone exploration
activities.
- The Gundy complex achieved a
record average production of 402 mmcfpd of natural gas in December
with 27,000 bpd of condensate and NGLs.
- The most recent seven well Lower Charlie Lake pad in the Peace
River High complex, brought on-stream in December, is producing at
5,150 boepd (2,844 bpd oil and 14 mmcfd natural gas).
- The Company is pleased with the expanding exploration effort
across all three operated complexes, with an additional nine new
pool/new zone discoveries in 2022. The Company drilled 11 new
pool/new zone and discovery delineation follow up wells in 2022 and
is planning 15 exploration wells in 2023. The Company estimates the
exploration activities have added 481 gross locations to the
existing drilling inventory thus far. Production from this organic
growth program will access the Company's existing extensive
infrastructure network.
- As disclosed previously, the Company believes it has generated
two material new play discoveries over the past three years.
Reserves of 845.1 bcfe have been booked in the 2021 year-end
independent reserve report. Tourmaline will test several additional
new pool/new play opportunities over the next two years which could
lead to further material reserve, production, and inventory
additions.
- Tourmaline currently has 301 valid drilling permits in NEBC and
expects to drill approximately 140 net wells in BC in 2023. While
the Company is well positioned to maintain or modestly grow BC
production over the next two-three years, the remaining permits
don't allow for the most efficient EP program execution. Many of
the permits are on existing large pads which leads to unusually
high frac related impairments during completion operations (for
example, frac downtime at Gundy
increased from 5.5% to 10% in 2022). Some of the remaining permits
are for Tier 2 locations which, given the size of Tourmaline's Tier
1 inventory, would not otherwise be drilled at this time. These
Tier 2 locations are, however, economic at gas prices of
$1.50/mcf. The greater frac-related
impairment and the subset of Tier 2 locations being drilled has
been factored into current 2023 production guidance. The Company
remains confident that an agreement between the BRFN and BC First
Nations with the Province of British
Columbia will be reached in 2023.
2021 SUSTAINABILITY
REPORT
- Tourmaline released its 2021 Sustainability Report on
December 22, 2022, and it can be
found on the Company's website. This report contains 2021
performance data and includes our new methane emission intensity
reduction target of 55% by 2027, using 2020 as a benchmark. We
reiterate our target to reduce scope 1 core emission intensity by
25% by 2027, from 2018 levels.
- Tourmaline lowered scope 1 and 2 emission intensity by 12% in
2021, relative to 2020 levels.
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(1)
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"Net debt" is defined as bank debt and senior
unsecured notes plus working capital deficit (adjusted for the fair
value of financial instruments, short-term lease liabilities,
short-term decommissioning obligations and unrealized foreign
exchange in working capital deficit). See "Non-GAAP Financial
Measures" in this news release and in the Company's Q3 2022
Management's Discussion and Analysis.
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(2)
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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 income tax expense. See
"Non-GAAP Financial Measures" in this news release and in the
Company's Q3 2022 Management's Discussion and
Analysis.
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(3)
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"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 Financial Measures" in this news release
and in the Company's Q3 2022 Management's Discussion and
Analysis.
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(4)
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"Capital Expenditures" is a non-GAAP financial
measure defined as cash flow from investing activities adjusted for
the change in non-cash working capital (deficit), and corporate
acquisitions. See "Non-GAAP Financial Measures" in this news
release and in the Company's Q3 2022 Management's Discussion and
Analysis.
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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, business opportunities and shareholder return plan,
including the following: the use of the normal course issuer bid;
the future declaration and payment of dividends and the timing and
amount thereof which assumes, among other things, the availability
of free cash flow to fund such dividends; anticipated petroleum and
natural gas production and production growth for various periods
including estimated production levels for the fourth quarter of
2022 and full-year 2023; expected full-year 2022 total capital
spending and 2023 EP capital spending levels; the number of
expected wells to be drilled, completed, and brought on production
in Q1 2023; the anticipated receipt of drilling permits and that
BRFN and BC First Nations will reach an agreement with the Province
of British Columbia; anticipated
winter natural gas prices; anticipated inflationary contingencies;
emission reduction targets and anticipated 2022 and 2023 cash flow
and free cash flow and 2023 net debt. 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 rates; the degree to which Tourmaline's
operations and production may be disrupted or by circumstances
attributable to supply chain disruptions and the COVID-19 pandemic
and the responses of governments and the public to the pandemic;
applicable royalty rates and tax laws; interest rates; inflation;
future well production rates and reserve volumes; operating costs,
the timing of receipt of regulatory approvals; the performance of
existing 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 benefits to be derived from acquisitions;
the state of the economy and the exploration and production
business including the impacts of the COVID-19 pandemic and the
responses of governments and the public to the pandemic thereon;
the availability and cost of financing, labour and services; and
ability to market crude oil, natural gas and natural gas liquids
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 will be 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.
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 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; supply chain
disruptions; the uncertain impacts of COVID-19 on Tourmaline's
business, and the societal, economic and governmental response to
COVID-19; 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; changes in rates of
inflation; 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;
uncertainties associated with counterparty credit risk; failure to
obtain required regulatory and other approvals including drilling
permits and the impact of not receiving such approvals on the
Company's long-term planning; 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.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.
UNAUDITED FINANCIAL INFORMATION
Certain anticipated financial and operating results for 2022
included in this news release such as cash flow, free cash flow,
capital expenditures and production information are based on
unaudited estimated results. These estimated results are subject to
change upon completion of the audited financial statements for the
year ended December 31, 2022, and
changes could be material.
BOE EQUIVALENCY
In this news release, production 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 CF and net debt level, 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 2023 average
daily production of 530,000 boepd, 2023 commodity price assumptions
for natural gas ($3.96/mcf NYMEX US,
$3.55/mcf AECO, $24.34/mcf JKM US), crude oil ($76.25/bbl WTI US) and an exchange rate
assumption of $0.73 (US/CAD). To the
extent such estimates constitutes a financial outlook, it was
approved by management and the Board of Directors of Tourmaline on
January 12, 2023 and is included to
provide readers with an understanding of Tourmaline's anticipated
cash flow and net debt level 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 and free cash flow which are considered "non-GAAP
financial measures". These terms do not have a standardized meaning
prescribed by GAAP. In addition, this news release contains the
term net debt, which is considered a "capital management measure"
and does not have a standardized meaning 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. 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.
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 2022 exit production,
Q4 2022 production, and full-year 2023 expected 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:
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Light and Medium
Crude Oil(1)
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Conventional
Natural Gas
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Shale Natural
Gas
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Natural Gas
Liquids(1)
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Oil Equivalent
Total
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Company Gross
(Bbls)
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Company Gross
(Mcf)
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Company Gross
(Mcf)
|
Company Gross
(Bbls)
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Company Gross
(Boe)
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2022 Exit
Production..
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44,900
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1,352,600
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1,098,400
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74,600
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528,000
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Q4 2022
Production………………
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43,500
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1,311,500
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1,065,000
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72,415
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512,000
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2023 Expected
Average
Daily Production........
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48,300
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1,336,100
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1,118,500
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72,600
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530,000
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(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.
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Certain Definitions:
1H
|
first half
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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
|
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
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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.