CALGARY,
AB, Aug. 2, 2023 /CNW/ - Tourmaline Oil Corp.
(TSX: TOU) ("Tourmaline" or the "Company") is pleased
to release financial and operating results for the second quarter
of 2023 and declare a special dividend.
HIGHLIGHTS
- Second quarter cash flow(1)(2) of $784.0 million ($2.28 per diluted share(3)).
- Generated quarterly free cash flow(4) ("FCF")
of $545.5 million ($1.59 per diluted share) enabling the Company to
declare a special dividend of $1.00
per common share to be paid on August 22,
2023 to holders of record on August
14, 2023. Tourmaline has distributed total dividends of
$7.74 per share (inclusive of this
August 22, 2023 special dividend)
since September 1, 2022, an implied
12% trailing yield(5).
- Full-year 2023 free cash flow forecast of $1.8 billion(6) coupled with quarterly
special dividends for the balance of 2023 (2022 free cash flow -
$3.2 billion).
- Tourmaline realized Q2 2023 net earnings of $510.7 million ($1.49 per diluted share).
- June 30, 2023 net
debt(7) of $791.1 million
or 0.2 times 2023 full-year forecast cash flow of $3.62 billion, based on commodity strip pricing
at July 14, 2023.
- Continued strong results from the North Montney delineation program with pad
payouts in as little as three months.
PRODUCTION UPDATE
- Second quarter 2023 production averaged 495,918 boepd and, as
previously disclosed, was impacted by wildfires in both the Alberta
Deep Basin and in the NEBC Montney gas complex. The total Q2 fire
related production impact was 17,000 boepd or approximately 3%.
Second quarter production was also reduced by 6,213 boepd due to
seasonal storage injections at Dawn and in California.
- All Tourmaline-operated production facilities in both complexes
were returned to normal operations by the second half of
June 2023. A portion of the Company
production accessing third-party facilities in the North Montney, adjacent to the Donnie Creek
fire area, remains slightly below expected levels (2,000 – 3,000
boepd reduction during July).
- The multiple wildfire outbreaks in both gas complexes delayed
the startup of post spring breakup drilling and completion
activities and will reduce Q3 production volumes. Q3 2023 average
production of 495,000 – 505,000 boepd is now anticipated.
Tourmaline continues to expect 2023 exit production levels in
excess of 550,000 boepd and the 2024 average production guidance of
550,000 boepd remains unchanged. The Company is now operating the
full 13 rig drilling fleet but does not believe it to be prudent to
add additional rigs and capital to the second half 2023 program in
order to offset the fire related activity and production deferral.
2023 full year average production is now anticipated to be 520,000
boepd, at the low end of original 2023 production guidance range of
520,000 – 540,000 boepd.
FINANCIAL RESULTS
- Second quarter 2023 cash flow was $784.0
million ($2.28 per diluted
share) on total capital expenditures(8) of $277.3 million (EP spending(9) of
$225.4 million in Q2), generating
free cash flow of $545.5 million for
the quarter ($1.59 per diluted
share).
- Tourmaline realized Q2 2023 net earnings of $510.7 million ($1.49 per diluted share).
- Exit Q2 2023 net debt was $791.1
million, well below the Company's long-term net debt target
of $1.0 – 1.2 billion. Tourmaline is
in a surplus position when including the value of its 45.1 million
shares of Topaz Energy Corp (valued at $931.4 million using the closing price of the
Topaz common shares on June 30, 2023,
of $20.63/share).
- The continued strong free cash flow generation in Q2 allows the
Company to declare and pay a special dividend of $1.00/share on August 22,
2023 to shareholders of record on August 14, 2023. This special cash dividend is
designated as an "eligible dividend" for Canadian income tax
purposes.
MARKETING UPDATE
- Average realized natural gas price was C$4.31/mcf in Q2 2023, significantly higher than
the AECO 5A benchmark price of C$2.46/mcf over the period.
- Tourmaline has an average of 779 mmcfpd hedged at a weighted
average fixed price of C$5.32/mcf, an
average of 142 mmcfpd hedged at a basis to NYMEX of US$0.44/mcf, and an average of 776 mmcfpd of
unhedged volumes exposed to export markets in the second half of
2023. Of this 776 mmcfpd, 69% is exposed to premium markets such as
the U.S. Gulf Coast, JKM, Malin, PGE, and Sumas.
- Tourmaline has an average of 582 mmcfpd hedged at a weighted
average fixed price of C$5.27/mcf, an
average of 129 mmcfpd hedged at a basis to NYMEX of US$-0.10/mcf, and an average of 863 mmcfpd of
unhedged volumes exposed to export markets in 2024. Of this 863
mmcfpd, 66% is exposed to premium markets such as the U.S. Gulf
Coast, JKM, Malin, PGE, and Sumas.
- In Q2 2023, Tourmaline entered into an incremental 106 mmcfpd
in export contracts, increasing total exports to 1.03 bcf/d of
natural gas by exit 2023.
- Tourmaline has joined Rockies LNG Partners and is excited to
assist in moving the Ksi Lisims LNG project forward. The Company
will continue to expand the size and breadth of its LNG business,
both short and long term.
EP UPDATE
- Tourmaline is currently operating 13 drilling rigs and four
frac spreads across the three EP complexes.
- The Company drilled 105.4 net wells, completed 95.5 net wells
during 1H 2023, and has an inventory of 43 net DUCs entering into
Q3 2023.
- Tourmaline has successfully drilled two additional new pool
wildcats in July 2023, bringing the
total exploration new pool/new zone successes to 17 over the past
three years.
SOUTH MONTNEY UPDATE
- Tourmaline is evolving a new growth project in the South Montney complex in addition to the
planned major North Montney
development. The Company will decide on ultimate project timing and
scale over the next few quarters.
- As part of the project, the Company has acquired 28 gross
sections (15 net) of additional land for $25
million, with 135 internally estimated, incremental Montney
drilling locations. Tourmaline also completed a complementary
acquisition for $32.5 million in Q2
2023 that facilitates future expansions of operated gas and liquid
processing capacity in the South
Montney complex.
NORTH MONTNEY UPDATE
- Tourmaline continues to prepare the execution plan for the
100,000 boepd Conroy North Montney
development project in the 2025-2027 time frame. Initial
expenditures will commence in 2024 on newly acquired permits in the
project area.
- A total of 18 Conroy-Aitken delineation pads have been drilled
and completed over the past two years in advance of the major
facility-filling development program as the Company refines gas and
liquid performance curves and optimum completion designs.
- The b-10-B pad at Aitken underscores the very strong economic
returns in the general North
Montney area. The six-well pad was drilled, completed, and
brought onstream in late Q4 2021. Average per well IP 365 was 5.3
mmcf/d of natural gas and 224 bbls/d of condensate. Average per
well recovery after 18 months onstream is 2.6 bcf of natural gas
and 99 mbbls of condensate, and estimated average 2P reserves per
well are 12.6 bcf of natural gas and 260 mbbls of condensate.
Total capital investment in construction, drilling, completions,
equipping, and pipeline tie-in for the six-well pad was
$30.6 million. The income earned to
date (revenue, net of royalties and directly attributable operating
expenses) on the six-well pad is in excess of $130 million (before tax) resulting in a payout
period of three months. The forecasted internal rate of return of
the pad is well in excess of 1000%, making it one of the most
economic projects in the Company's history.
- The Company has received 97 new permits in the area to date in
2023, including a significant portion of new surface disturbance
permits.
NORMAL COURSE ISSUER BID
- Tourmaline is also pleased to announce that the Toronto Stock
Exchange (the "TSX") has approved the renewal of
Tourmaline's normal course issuer bid (the "NCIB").
- The NCIB allows Tourmaline to purchase up to 16,989,041 common
shares (representing 5% of its issued and outstanding common shares
as of July 25, 2023) over a period of
twelve months commencing on August 8,
2023. The NCIB will expire no later than August 7, 2024. Under the NCIB, common shares may
be repurchased in open market transactions on the TSX and other
alternative trading platforms in Canada and in accordance with the rules of the
TSX governing NCIBs. The total number of common shares Tourmaline
is permitted to purchase is subject to a daily purchase limit of
662,120 common shares, representing 25% of the average daily
trading volume of 2,648,482 common shares on the TSX calculated for
the six-month period ended July 31,
2023; however, Tourmaline may make one block purchase per
calendar week which exceeds the daily repurchase restrictions. Any
common shares that are purchased under the NCIB will be cancelled
upon their purchase by Tourmaline.
- Under its most recent normal course issuer bid, Tourmaline
obtained approval to purchase up to 16,800,668 of its common
shares, of which Tourmaline purchased no common shares.
- Tourmaline believes that at times, the prevailing share price
does not reflect the underlying value of the common shares and the
repurchase of its common shares for cancellation represents an
attractive opportunity to enhance Tourmaline's per share metrics
and thereby increase the underlying value of its common shares to
its shareholders. Tourmaline will use the NCIB as another tool to
enhance total long-term shareholder returns and it will be used in
conjunction with management's disciplined free cash flow capital
allocation strategy.
_______________________________
|
(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 "Q2 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 Q2
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 $64.30 on July
14, 2023.
|
(6)
|
Based on oil and gas commodity strip pricing at July
14, 2023.
|
(7)
|
"Net debt" is a capital management measure. See
"Non-GAAP and Other Financial Measures" in this news release and in
the Q2 MD&A.
|
(8)
|
"Capital Expenditures" is a non-GAAP financial
measure defined as Cash flow used in investing activities adjusted
for the change in
non-cash working capital (deficit). See "Non-GAAP and Other
Financial Measures" in this news release.
|
(9)
|
"EP spending" is defined as Capital Expenditures,
excluding acquisitions, dispositions, and other corporate
expenditures.
|
CORPORATE SUMMARY – SECOND QUARTER 2023
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
2022
|
Change
|
|
2023
|
2022
|
Change
|
OPERATIONS
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
2,306,340
|
2,343,704
|
(2) %
|
|
2,387,592
|
2,352,275
|
2 %
|
Crude oil, condensate
and NGL (bbl/d)
|
111,528
|
112,320
|
(1) %
|
|
112,902
|
112,941
|
– %
|
Oil equivalent
(boe/d)
|
495,918
|
502,937
|
(1) %
|
|
510,834
|
504,987
|
1 %
|
Product
prices(1)
|
|
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
|
4.31
|
$
|
6.31
|
(32) %
|
|
$
|
5.27
|
$
|
5.59
|
(6) %
|
Crude oil, condensate
and NGL ($/bbl)
|
$
|
52.42
|
$
|
74.63
|
(30) %
|
|
$
|
57.83
|
$
|
70.58
|
(18) %
|
Operating expenses
($/boe)
|
$
|
4.63
|
$
|
4.24
|
9 %
|
|
$
|
4.63
|
$
|
4.22
|
10 %
|
Transportation costs
($/boe)
|
$
|
5.15
|
$
|
5.03
|
2 %
|
|
$
|
5.26
|
$
|
4.96
|
6 %
|
Operating netback
($/boe)(2)
|
$
|
19.23
|
$
|
29.70
|
(35) %
|
|
$
|
23.76
|
$
|
26.85
|
(12) %
|
Cash general and
administrative
expenses ($/boe)(3)
|
$
|
0.73
|
$
|
0.57
|
28 %
|
|
$
|
0.70
|
$
|
0.58
|
21 %
|
FINANCIAL
($000, except share and per share)
|
|
|
|
|
|
|
|
Commodity sales from
production
|
|
1,158,766
|
|
2,605,781
|
(56) %
|
|
2,674,046
|
4,500,952
|
(41) %
|
Total revenue from
commodity sales and
realized gains
|
|
1,436,601
|
|
2,108,834
|
(32) %
|
|
3,460,185
|
3,822,518
|
(9) %
|
Royalties
|
|
127,140
|
|
325,211
|
(61) %
|
|
348,352
|
528,945
|
(34) %
|
Cash flow
|
|
784,008
|
|
1,353,926
|
(42) %
|
|
1,911,143
|
2,429,902
|
(21) %
|
Cash flow per share
(diluted)
|
$
|
2.28
|
$
|
3.95
|
(42) %
|
|
$
|
5.56
|
$
|
7.13
|
(22) %
|
Net earnings
|
|
510,671
|
|
1,743,547
|
(71) %
|
|
760,991
|
2,419,486
|
(69) %
|
Net earnings per share
(diluted)
|
$
|
1.49
|
$
|
5.09
|
(71) %
|
|
$
|
2.22
|
$
|
7.10
|
(69) %
|
Capital expenditures
(net of dispositions)(2)
|
|
277,317
|
478,545
|
(42) %
|
|
871,814
|
957,918
|
(9) %
|
Weighted average shares
outstanding
(diluted)
|
|
|
|
|
343,559,982
|
340,985,975
|
1 %
|
Net debt
|
|
|
|
|
(791,131)
|
(429,761)
|
84 %
|
|
|
(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 Q2
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, August 3, 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/44vchRF 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 33950131.
REPLAY DETAILS
If you are unable to dial into the live conference call on
August 3rd, a replay will
be available by dialing 1-888-390-0541 (international
1-416-764-8677), referencing Encore Replay Code 950131. The
recording will expire on August 17, 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: anticipated
petroleum and natural gas production and production growth for
various periods including estimated production levels for Q3,
full-year and exit 2023; expected free cash flow for 2023; the
future declaration and payment of base and special dividends and
the timing and amount thereof including any future increase; the
use of the NCIB; 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; the forecasted internal rate of return of the
b-10-B pad at Aitken; anticipated future commodity prices; the
ability to generate, and the amount of, anticipated free cash flow
including in 2023; 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
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.
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 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 production of
520,000 boepd, 2023 commodity price assumptions for natural gas
($2.79/mcf NYMEX US; $2.77/mcf AECO 5A; $14.57/mcf JKM US), crude oil ($74.84/bbl WTI US) and an exchange rate
assumption of $0.75 (US/CAD). To the
extent such estimates constitute financial outlooks, they were
approved by management and the Board of Directors of Tourmaline on
August 2, 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", "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
June 30,
|
Six Months Ended
June 30,
|
(000s)
|
2023
|
2022
|
2023
|
2022
|
Cash flow from
operating activities (per GAAP)
|
$
972,384
|
$ 1,351,481
|
$
2,510,459
|
$ 2,465,130
|
Current income
taxes
|
(54,602)
|
–
|
(252,960)
|
–
|
Current income taxes
paid
|
4,207
|
–
|
29,236
|
–
|
Change in non-cash
working capital
|
(137,981)
|
2,445
|
(375,592)
|
(35,228)
|
Cash flow
|
$
784,008
|
$ 1,353,926
|
$
1,911,143
|
$ 2,429,902
|
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
June 30,
|
Six Months Ended
June 30,
|
(000s)
|
2023
|
2022
|
2023
|
2022
|
Cash flow used in
investing activities (per GAAP)
|
$
585,637
|
$
660,163
|
$
1,087,235
|
$ 1,119,610
|
Change in non-cash
working capital
|
(308,320)
|
(181,618)
|
(215,421)
|
(161,692)
|
Capital
expenditures
|
$
277,317
|
$
478,545
|
$
871,814
|
$
957,918
|
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
June 30,
|
Six Months Ended
June 30,
|
(000s)
|
2023
|
2022
|
2023
|
2022
|
Cash flow
|
$
784,008
|
$ 1,353,926
|
$
1,911,143
|
$
2,429,902
|
Capital
expenditures
|
(277,317)
|
(478,545)
|
(871,814)
|
(957,918)
|
Property
acquisitions
|
39,279
|
236,755
|
39,294
|
261,676
|
Proceeds from
divestitures
|
(498)
|
(424)
|
(7,789)
|
(3,721)
|
Free Cash
Flow
|
$
545,472
|
$ 1,111,712
|
$
1,070,834
|
$
1,729,939
|
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
June 30,
|
Six Months Ended
June 30,
|
(000s)
|
2023
|
2022
|
2023
|
2022
|
Commodity sales from
production
|
$
1,158,766
|
$ 2,605,781
|
$
2,674,046
|
$
4,500,952
|
Premium (loss) on risk
management activities
|
102,576
|
(203,919)
|
500,924
|
(226,883)
|
Realized gain (loss) on
financial instruments
|
175,259
|
(293,028)
|
285,215
|
(451,551)
|
Royalties
|
(127,140)
|
(325,211)
|
(348,352)
|
(528,945)
|
Transportation
costs
|
(232,617)
|
(230,118)
|
(486,687)
|
(453,286)
|
Operating
expenses
|
(209,093)
|
(194,018)
|
(428,095)
|
(385,936)
|
Operating
netback
|
$
867,751
|
$ 1,359,487
|
$
2,197,051
|
$
2,454,351
|
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
June 30,
|
Six Months Ended
June 30,
|
($/boe)
|
2023
|
2022
|
2023
|
2022
|
Revenue, excluding
processing income
|
$
31.83
|
$
46.08
|
$
37.42
|
$
41.82
|
Royalties
|
(2.82)
|
(7.11)
|
(3.77)
|
(5.79)
|
Transportation
costs
|
(5.15)
|
(5.03)
|
(5.26)
|
(4.96)
|
Operating
expenses
|
(4.63)
|
(4.24)
|
(4.63)
|
(4.22)
|
Operating
netback
|
$
19.23
|
$
29.70
|
$
23.76
|
$
26.85
|
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
June 30,
2023
|
As at
December 31,
2022
|
Working capital
(deficit)
|
$
223,317
|
$
809,449
|
Fair value of financial
instruments – short-term liability (asset)
|
(466,497)
|
(709,286)
|
Lease liabilities –
short-term
|
4,056
|
3,109
|
Decommissioning
obligations – short-term
|
31,900
|
30,000
|
Unrealized foreign
exchange in working capital – liability (asset)
|
3,153
|
(8,605)
|
Adjusted working
capital (deficit)
|
$
(204,071)
|
$
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
June 30,
2023
|
As at
December 31,
2022
|
Bank debt
|
$
(138,568)
|
$ (170,767)
|
Senior unsecured
notes
|
(448,492)
|
(448,342)
|
Adjusted working
capital (deficit)
|
(204,071)
|
124,667
|
Net debt
|
$
(791,131)
|
$ (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. In
addition, the estimated 2P reserves per well from the b-10-B pad at
Aitken referenced in this news release are 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. There are numerous uncertainties inherent in estimating
quantities of crude oil, natural gas and NGL reserves. The reserve
information referenced in this news release are estimates only. In
general, estimates of economically recoverable crude oil, natural
gas and NGL reserves 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 and classification of such
reserves based on risk of recovery 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.
SUPPLEMENTAL INFORMATION REGARDING PRODUCT TYPES
This news release includes references to Q2 2023 average daily
production, forecast Q3 2023 average daily production and forecast
2023 and 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)
|
Q2 2023 Average
Daily
Production
|
42,547
|
|
1,200,025
|
|
1,106,315
|
|
68,981
|
|
495,918
|
Q3 2023 Forecast
Average Daily Production
|
44,000
|
|
1,226,000
|
|
1,090,000
|
|
70,000
|
|
500,000
|
2023 Forecast
Average
Daily Production
|
46,000
|
|
1,310,000
|
|
1,114,000
|
|
70,000
|
|
520,000
|
2024 Forecast
Average
Daily Production
|
52,000
|
|
1,332,000
|
|
1,200,000
|
|
76,000
|
|
550,000
|
|
|
(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 June 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.