CALGARY, AB–(Marketwired – June 15, 2016) – Tourmaline Oil Corp. (TSX: TOU) (“Tourmaline” or the “Company”) is pleased to provide an operations and financial update.
EP UPDATE
During the third quarter, Tourmaline plans to run five to six rigs in the Alberta Deep Basin, two to three rigs for the Peace River Charlie Lake oil play and one rig in the B.C Montney gas-condensate complex. Third quarter EP activity will focus primarily on drilling the longer lead time multi-well pads with the shorter duration pad completions largely deferred until the fourth quarter. The Company has already achieved a 10% reduction in drilling and completion costs in 2016 vs 2015 and is seeking a further 5-10% per well capital cost reduction with the 2H 2016 drilling program. Record low costs were established on pacesetter wells in all three core-operated complexes during the first quarter of 2016. The Company has now drilled and completed 30 stage Montney horizontals in NEBC for $2.9 million, 26 stage Charlie Lake horizontals for $2.5 million and 25 stage Deep Basin horizontals for $3.9 million. The Company will seek to establish new pacesetter metrics with the second half 2016 EP Program.
The current 2017 EP capital program assumes a 12 rig program. Tourmaline has the capability to effectively operate 22 rigs, and due to its strong current financial position, the Company can respond very quickly to a sharp improvement in commodity prices.
The new Doe BC plant remains on schedule for a late Q1 2017 start-up, and will add approximately 10,000 boepd of incremental production, primarily from the liquid-rich lower Montney turbidite that the Company is currently developing. The D05-5 discovery well has produced 2.12 bcf of gas and 164,000 bbls of condensate in two years and is forecast to ultimately recover 5.0 bcf of raw gas and 1.035 mmboe of condensate and NGL. The A05-5 well has produced 1.37 bcf of gas and 102,000 bbls of condensate in 1.8 years and is forecast to ultimately recover 3.5 bcf of raw gas and 744,000 bbls of condensate and NGL. The recently-drilled 09-10 well has produced 0.57 bcf of gas and 41,000 bbls of condensate in 3.5 months and is forecast to ultimately recover 4.5 bcf of raw gas and 847,000 bbls of condensate and NGL. (Ref. GLJ, Jan.01, 2016) At drill-and-complete costs of $2.9 million per 30-stage completed horizontal, these Montney wells are among the most profitable in NEBC. The Company has identified 290 Montney turbidite locations on existing working interest lands.
Finance and Capital Spending Update
The Company’s existing total credit capacity remains at $2.1 billion, while the term of the $1.80 billion syndicated facility has been extended from June 2019 to June 2020. The senior debt to EBITDA financial covenant ratio has also been increased from 3.0 to 3.75 times allowing for greater overall flexibility. In addition, the $250 million term loan was previously extended by one year from November 2019 to November 2020. The term loan covenants remain consistent with those of the credit facility. The Company’s effective interest rate on all of its outstanding debt for the first quarter of 2016 was 2.45% or $0.61 per boe. The facility is currently drawn to approximately $1.4 billion leaving $700 million of unutilized credit capacity. Tourmaline is spending considerably less than cash flow during the second quarter and expects net debt to continue to drop in the second quarter over the first quarter. The Company continues to follow a cash flow based capital budget for full year 2016 and 2017. Approximately 64% in Q2 2016 and 88% in Q3 2016 of Tourmaline’s total gas production is not exposed to AECO pricing due to firm transportation service to multiple alternate gas hubs or differential transactions that allow for price settings based on these alternate hubs.
Production Guidance
The Company has elected to defer the start-up of the majority of new Q2 and Q3 2016 wells until the fourth quarter to avoid selling high-rate, initial flush production into a particularly weak natural gas price environment as the Company is expecting stronger natural gas prices in late 2016 and in 2017. There have also been significant unplanned firm service restrictions on the TCPL system during the second quarter (80-85% of firm transport for several weeks), as well as an expanded scheduled maintenance program in Q2/Q3 2016 on the Spectra system in B.C. On May 17, 2016, a fire at the Pembina Saturn 2 facility resulted in a production interruption, effectively reducing Q2 NGL production by approximately 2,500 bpd. As a result, the Company is forecasting second and third quarter 2016 production volumes to range between 187,000 and 193,000 boepd. Due to the unscheduled transportation interruptions, the fire at Saturn 2 and to these Q2/Q3 changes in production start-up scheduling, the full year 2016 production guidance will be reduced to 190,000-195,000 boepd from 200,000 boepd, representing 25% year-over-year production growth. April 2016 production was approximately 196,000 boepd, with the interruptions and restrictions described above reducing May and June to date production levels by approximately 9,000 boepd. Anticipated fourth quarter 2016 production currently remains unchanged at 200,000-210,000 boepd with a 2016 exit target of 210,000-215,000 boepd, 2017 base case production guidance remains unchanged at 215,000 boepd.