CALGARY, AB – Tourmaline Oil Corp. (TSX: TOU) (“Tourmaline” or the “Company”) is pleased to release financial and operating results for the first quarter of 2021.
HIGHLIGHTS
- First quarter cash flow(1) was a record $629.3 million ($2.11/fully diluted share).
- Tourmaline generated record free cash flow(2) of $233.5 million in the first quarter of 2021, which was utilized to fund the dividend increase announced in the March 10, 2021 year-end press release and to reduce net debt(3) by $153.1 million in the quarter.
- First quarter 2021 average production of 411,579 boepd, ahead of the upper range of the full-year guidance of 390,000 – 410,000 boepd.
- First quarter liquids production (crude oil, condensate and NGLs) averaged a record 91,971 bpd, also ahead of guidance.
PRODUCTION UPDATE
- First quarter 2021 production averaged 411,579 boepd, ahead of the upper range of full-year guidance of 390,000 – 410,000 boepd.
- Driven by stronger than anticipated well performance, March production averaged 417,841 boepd. There were no storage withdrawal volumes in the March production totals.
- First quarter average liquid production was 91,971 bpd (crude oil, condensate and NGLs), ahead of original full-year 2021 guidance of 87,000 bpd.
- Given stronger production performance in all three operated complexes, second quarter 2021 production of 400,000 – 405,000 boepd is anticipated, an increase from previous expectations of approximately 395,000 boepd. Second quarter 2021 production will continue to be impacted by planned pipeline maintenance and Company plant turnarounds which has been incorporated into current guidance estimates.
- Second quarter production estimates also include the impact of the Company’s storage injection programs in California and Dawn, which is expected to reduce quarterly production volumes by 4,500 boepd.
FINANCIAL RESULTS
- First quarter 2021 cash flow was a record $629.3 million ($2.11/fully diluted share), a 122% increase over first quarter 2020 cash flow of $283.7 million ($1.05/fully diluted share) and a 59% increase over the previous quarter’s cash flow of $396.9 million.
- First quarter 2021 after tax net earnings were $247.8 million ($0.83/fully diluted share), compared to a net loss of $35.8 million in the first quarter of 2020 ($(0.13)/share).
- The Company generated record free cash flow of $233.5 million during the first quarter which was utilized to fund the dividend increase announced on March 10, 2021 and to reduce net debt by $153.1 million in the quarter. Tourmaline expects comparable free cash flow generation in Q2 2021.
- The full year 2021 forecast cash flow remains at $2.2 billion(4), yielding approximately $1.1 billion of free cash flow for the full year.
- Operating costs in Q1 2021 were $3.64/boe. Tourmaline is focused on further dropping operating costs by continuing to integrate the acquired Jupiter/Modern assets into the Company as well as reducing gas volumes going to third party processing in the greater Gundy complex when the Phase 2 plant expansion is complete.
CAPITAL PROGRAM AND FINANCIAL OUTLOOK
- First quarter 2021 E&P capital spending was $385.7 million; the full-year 2021 EP capital budget remains at $1.075 billion.
- Tourmaline expended $30 million on Gundy facility pre-builds in the first quarter, putting the Company in a position to potentially start up the Phase 2 deep cut expansion in early January 2022, ahead of the original mid-Q2 2022 completion target. This would allow the Company to take advantage of potentially stronger Winter 2022 natural gas pricing; note that 75% of Gundy Phase 2 expansion volumes will ultimately flow to Malin and PG&E hubs via incremental long-term transport on the GTN system that Tourmaline has secured. The Company will finalize timing for this 45,000 boepd project as well as provide revised 2021, 2022 and five-year plan guidance, reflecting the impact of increased production volumes and improved strip pricing, during Q2.
- Tourmaline did not complete any significant acquisitions during the first quarter.
- Net debt at March 31, 2021, was $1.63 billion, down 8.6% from exit 2020 net debt. The Company plans to continue to reduce debt during 2021 and is targeting a net debt to cash flow ratio at year end 2021 of approximately 0.5 times.
- During the first quarter, the Company issued $250 million of senior unsecured notes at a fixed rate of 2.077% for seven years.
- The most recent five-year EP plan (March 10, 2021) delivers free cash flow of $1.1 billion in 2021 and $4.1 billion over the duration of the plan. This free cash flow will be utilized for further modest dividend increases, continued debt reduction, accretive acquisitions, select emission reduction and environmental performance improvement investments, and potential tactical share buy backs.
MARKETING UPDATE
- Average realized natural gas price in Q1 2021 was $3.86/mcf CAD as the Company benefitted from both hedging and the Company’s broad market diversification portfolio throughout North America.
- Tourmaline has an average of 634 mmcfpd hedged for 2021 at a weighted average fixed price of CAD $2.59 /mcf, an average of 158 mmcfpd hedged at a basis to NYMEX of $(0.17) USD/mcf and an average of 513 mmcfpd incremental volume exposed to export markets, including Dawn, Iroquois, Empress, Chicago, Ventura, Sumas, Malin, and PG&E.
- Natural gas fundamentals for 2021 and 2022 continue to improve. Approximately 55% of Tourmaline’s natural gas volumes are exposed to spot prices in markets on the Western half of the continent (PG&E, Malin, Sumas, Stn 2, AECO) where fundamentals continue to be most supportive. Completion of the ongoing NGTL buildout and Canadian West Coast LNG are expected to further strengthen pricing at these hubs.
- 95% of total PG&E deliveries continue to remain unhedged for 2021 at a market where fundamentals remain strong.
- NGL realizations in Q1 2021 were up 141% over Q1 2020 and are expected to further strengthen through the balance of 2021. Tourmaline is Canada’s largest NGL producer averaging 57,102 bpd during the first quarter.
EP UPDATE
- Tourmaline drilled 67.75 net wells during the first quarter and expects to drill and complete approximately 220 net wells during full year 2021.
- Tourmaline operated 12 drilling rigs during the first quarter of 2021 and is currently operating four rigs during spring break up.
- Well performance in all three complexes has on average exceeded expectations, driving the stronger production performance realized in March and April.
- Tourmaline drilled one Montney pad this winter in the Laprise-Conroy area in NEBC on the lands acquired in the 2020 Polar Star transaction. The Laprise b-34-L five well pad tested at a combined final total productive capacity of 46 mmcfpd of natural gas and 3,970 bpd of condensate after three day per well flow tests, significantly ahead of expectations. Average completed well costs for this initial remote pad were $3.9 million/well. The Company expects future drill/complete capital costs of $3.5 million/well or less with further drilling time optimization and stimulated well cost reduction via centralized frac water management facilities.
- Deep Basin production reached a record in early April at 261,400 boepd (1,252 bcf/day of natural gas and 52,664 bpd of liquids) driven by stronger than forecast performance on the acquired Jupiter/Modern assets. The 11-7-60-1W6 three-well pad on the Jupiter lands acquired has a combined 30-day IP of 6,090 boepd (22.7 mmcfpd, 2,263 bbl/d liquids). The 6-3-60-1W6 two-well pad has a combined 30-day IP of 5,137 boepd (24.1 mmcfpd, 1,131 bbl/d liquids). Drilling costs on the Jupiter lands acquired have averaged 43% less since December 2020; completion costs have averaged 50% less and equipping costs have averaged 70% less.
ENVIRONMENTAL PERFORMANCE IMPROVEMENT
- The Company has expanded the significant ongoing diesel displacement initiative into the well stimulation EP business segment. Tourmaline has entered into a joint venture with Trican Well Service Ltd. to construct and utilize Canada’s first low-emission fracturing fleet. The spread will utilize CAT Tier 4 dynamic gas blending engines that will provide a leading-edge reduction in emissions while reducing fuel costs. Tourmaline has agreed to employ the new spread for a three-year period, which is expected to be available in 2H 2021.
- Tourmaline continues to expand the Company’s Water Management initiatives which reduce emissions, save capital costs and significantly reduce fresh water usage. The long-term goal is to ultimately eliminate all fresh water from completion and stimulation operations. The Company now has 37 water facilities across the three core complexes including eight produced water storage hubs. Recent water management operations highlights include:
- The first successful electric, longline water transfer trial in Alberta during Q1 2021;
- Electrification of all onsite water transfer equipment (Q4 2020 – Q1 2021); and
- Elimination of diesel-fired water heaters on 90% of the pad operations during the past two quarters.
_________________________________ |
|
(1) |
“Cash flow” is defined as cash provided by operations before changes in non-cash operating working capital. See “Non-GAAP Financial Measures” in this news release and in the Company’s Q1 2021 Management’s Discussion and Analysis. |
(2) |
“Free cash flow” is defined as cash flow less total net capital expenditures. Total net capital expenditures is defined as total capital spending before acquisitions and non-core dispositions. Free cash flow is prior to dividend payments. See “Non-GAAP Financial Measures” in this news release and the Company’s Q1 2021 Management’s Discussion and Analysis. |
(3) |
“Net debt” is defined as bank debt plus working capital (adjusted for the fair value of short-term 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 Q1 2021 Management’s Discussion and Analysis. |
(4) |
Based on five-year plan released on March 10, 2021 and based on oil and gas commodity strip pricing at March 1, 2021. |
CORPORATE SUMMARY – FIRST QUARTER 2021
Three Months Ended March 31, |
|||||||||
2021 |
2020 |
Change |
|||||||
OPERATIONS |
|||||||||
Production |
|||||||||
Natural gas (mcf/d) |
1,917,648 |
1,474,681 |
30% |
||||||
Crude oil, condensate and NGL (bbl/d) |
91,971 |
62,569 |
47% |
||||||
Oil equivalent (boe/d) |
411,579 |
308,349 |
33% |
||||||
Product prices(1) |
|||||||||
Natural gas ($/mcf) |
$ |
3.86 |
$ |
2.45 |
58% |
||||
Crude oil, condensate and NGL ($/bbl) |
$ |
41.06 |
$ |
34.54 |
19% |
||||
Operating expenses ($/boe) |
$ |
3.64 |
$ |
2.97 |
23% |
||||
Transportation costs ($/boe) |
$ |
4.35 |
$ |
4.35 |
-% |
||||
Operating netback(3) ($/boe) |
$ |
17.70 |
$ |
10.79 |
64% |
||||
Cash general and administrative expenses ($/boe)(2) |
$ |
0.63 |
$ |
0.58 |
9% |
||||
FINANCIAL |
|||||||||
Total revenue from commodity sales and realized gains |
1,005,264 |
524,915 |
92% |
||||||
Royalties |
53,776 |
16,929 |
218% |
||||||
Cash flow(3) |
629,325 |
283,718 |
122% |
||||||
Cash flow per share (diluted)(3) |
$ |
2.11 |
$ |
1.05 |
101% |
||||
Net earnings (loss) |
247,837 |
(35,812) |
792% |
||||||
Net earnings (loss) per share (diluted) |
$ |
0.83 |
$ |
(0.13) |
738% |
||||
Capital expenditures (net of dispositions) |
422,106 |
317,614 |
33% |
||||||
Weighted average shares outstanding (diluted) |
298,394,813 |
270,940,484 |
10% |
||||||
Net debt(3) |
(1,631,862) |
(1,838,128) |
(11)% |
(1) |
Product prices include realized gains and losses on risk management and financial instrument contracts. |
(2) |
Excluding interest and financing charges. |
(3) |
See “Non-GAAP Financial Measures” in this news release and in the Company’s Q1 2021 Management’s Discussion and Analysis. |
Conference Call Tomorrow at 9:00 A.M. MT (11:00 A.M. ET)
Tourmaline will host a conference call tomorrow, May 6, 2021 starting at 9:00 a.m. MT (11:00 a.m. ET). To participate, please dial 1-888-231-8191 (toll-free in North America), or international dial-in 647-427-7450, a few minutes prior to the conference call.
Conference ID is 5616176.