HIGHLIGHTS
- First quarter cash flow(1)(2) of $1.13 billion ($3.28 per diluted share(3)).
- Generated quarterly free cash flow(4) (“FCF”) of $525.4 million ($1.53 per diluted share) enabling the Company to declare a special dividend of $1.50 per common share to be paid on May 19, 2023 to holders of record on May 11, 2023. Tourmaline has distributed total dividends of $8.70 per share (inclusive of this May 2023 special dividend) since June 2022, an implied 14% trailing yield(5).
- Record first quarter 2023 average production of 525,916 boepd.
- Full-year 2023 free cash flow forecast of $2.0 billion(6) coupled with quarterly special dividends for the balance of 2023 (2022 free cash flow – $3.2 billion).
- Commenced delivery in January 2023 to the Gulf Coast, under the Cheniere LNG agreement, of 140 mmcfpd of natural gas receiving a JKM (“Japan Korea Marker”) price. The 2023 JKM strip price for Q2 forward, as at April 14, 2023, was US$14.87/mcf.
- March 31, 2023 net debt(7) of $709.0 million or 0.2 times 2023 full-year forecast cash flow of $3.9 billion, based on commodity strip pricing at April 14, 2023.
PRODUCTION UPDATE
- First quarter 2023 production averaged 525,916 boepd, including liquids production of 114,291 bpd, which was impacted by the Pembina NGL pipeline system interruption. Commencing January 17, 2023, a force majeure event on the Pembina Pipeline Corporation Northern line reduced daily Tourmaline NGL production volumes by approximately 8,000 boepd. The pipeline became operational again on February 25, 2023, but continues to operate at a restricted rate. Current total oil and liquids production has recovered to the 118,000 to 123,000 bpd range over the past month.
- Q2 2023 average production ranging between 500,000 to 515,000 boepd is currently expected as the Company starts injecting natural gas into storage and accounts for Q2 planned maintenance, both of which will impact Q2 volumes. Tourmaline holds 1.0 bcf of storage capacity at the Dawn hub and has expanded its Wild Goose California natural gas storage capacity from 3.0 to 5.0 bcf. Tourmaline expects to inject 7,000 – 7,500 boepd into storage during Q2. In Q1 2023, the Company realized incremental revenue of US$26.5 million, after deducting storage fees, by withdrawing gas from storage that was previously injected at lower prices, when compared to selling at AECO.
- April 2023 average production was approximately 531,000 boepd, prior to injections.
- Full year 2023 average production guidance ranging between 520,000 and 540,000 boepd remains unchanged.
FINANCIAL RESULTS
- First quarter 2023 cash flow was $1.13 billion ($3.28 per diluted share) on total capital expenditures(8) of $594.5 million (EP spending(9) of $589.2 million in Q1), generating free cash flow of $525.4 million for the quarter ($1.53 per diluted share).
- Tourmaline realized Q1 2023 net earnings of $250.3 million ($0.73 per diluted share). Included in the Q1 2023 net earnings was an unrealized loss on financial instruments of $1.03 billion related to the accounting for the embedded derivative in the Cheniere LNG natural gas supply agreement.
- Exit Q1 2023 net debt was $709.0 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 $862.8 million using the closing price of the Topaz common shares on March 31, 2023 of $19.11/share).
- In 2023, at strip pricing on April 14, 2023, the Company continues to expect to generate cash flow of $3.9 billion ($11.22 per diluted share) and free cash flow of $2.0 billion ($5.80 per diluted share) on EP spending of $1.7 billion. Forecast 2023 cash flow remains unchanged from previous forecast despite 2023 NYMEX gas prices declining 12% since the last update. This is a reflection of Tourmaline’s strong and continuously improving natural gas market diversification portfolio. Similarly, 2024 forecast cash flow has improved 3% since the last forecast update.
- Given the strong FCF generation outlook for 2023, the Company has elected to increase the quarterly base dividend effective Q2 2023 to $1.04/share, on an annualized basis, from the current annualized $1.00/share, as well as declare and pay a special dividend of $1.50/share on May 19, 2023, to shareholders of record on May 11, 2023. This special cash dividend is designated as an “eligible dividend” for Canadian income tax purposes. The Company intends to return up to 100% of FCF to shareholders in 2023 through base dividends, special dividends, and share buybacks.
MARKETING UPDATE
- Average realized natural gas price was CA$6.18/mcf in Q1 2023, significantly higher than AECO 5A benchmark price of CA$3.28/mcf over the period, as the Company benefited from its multi-year market diversification strategy.
- Tourmaline has an average of 801 mmcfpd hedged at a weighted average fixed price of CA$5.58/mcf, an average of 137 mmcfpd hedged at a basis to Nymex of US$0.46/mcf and an average of 731 mmcfpd of unhedged volumes exposed to export markets in 2023. Of this 731 mmcfpd, 71% is exposed to premium markets such as the US Gulf Coast, JKM, Malin, PGE, and Sumas.
- Tourmaline commenced delivery of 140 mmcfpd to the Cheniere Sabine Pass LNG facility where the Company’s average Q1 realized price before liquefaction and shipping fees was US$19.44/mcf. The 2023 JKM strip price for Q2 forward, as at April 14, 2023, was US$14.87/mcf, Tourmaline has 31 mmcfpd hedged at a weighted average fixed JKM price of US$31.26/mcf in 2023.
- Tourmaline has 56% of its summer 2023 AECO exposure hedged at a weighted average fixed price of CA$3.88/mcf.
- On April 1, 2023, Tourmaline increased natural gas volumes exported to Western US markets by 100 mmcfpd up to 445 mmcfpd through the completion of the Westgate expansion project.
EP UPDATE
- Tourmaline operated 15 drilling rigs during Q1 2023. The Company is currently operating 5 drilling rigs in Q2 2023. The Company currently has no active frac spreads.
- Tourmaline drilled a total of 71.37 net wells during Q1, completed 67.65 net wells in the quarter and has an inventory of 38.33 net DUCs entering Q2 2023.
- The Company expects to drill and complete a total of approximately 300 wells (gross) during 2023.
- Tourmaline now has 388 valid drilling permits in NEBC having received 82 incremental permits thus far in 2023.
EXPLORATION UPDATE
- As of year-end 2022, Tourmaline has made 15 new pool/new zone discoveries since starting the exploration program, yielding 1.26 TCFe of booked 2P reserves in the 2022 independent GLJ reserve report.
- Current mapping of these new pools indicates the potential for a further 3.2 TCF of raw natural gas that the Company will delineate with follow up drilling.
- The Company has made an additional three new pool discoveries thus far in 2023.
- All of the production from the new pools will ultimately access current Tourmaline owned and operated infrastructure.
- As of year-end 2022, the exploration program has added an estimated 749 Tier 1 and 2 drilling locations (including 616 unbooked locations) to existing inventories.
ENVIRONMENTAL PERFORMANCE IMPROVEMENT
- Tourmaline continues to systematically replace diesel in EP operations with natural gas, significantly reducing emissions and fuel costs. Between July 2017 and the end of Q1 2023, Tourmaline has displaced 106.5 million litres of diesel resulting in a net cost savings of $103.0 million including the cost of the replacement natural gas. This initiative has resulted in a net CO2 reduction of 67,258 tonnes over the same time period.
- On April 18, 2023, Tourmaline announced the next step in its diesel displacement initiative. Tourmaline and Clean Energy Fuels Corp. announced an initiative to jointly build and operate a network of up to 20 compressed natural gas (CNG) stations along key highway corridors across Western Canada. The initiative allows for the use of readily available natural gas to significantly lower emissions from heavy-duty trucks and other commercial transportation fleets.
_______________________________ |
|
(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 “Q1 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 Q1 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 $60.49 on April 14, 2023. |
(6) |
Based on oil and gas commodity strip pricing at April 14, 2023. |
(7) |
“Net debt” is a capital management measure. See “Non-GAAP and Other Financial Measures” in this news release and in the Q1 MD&A. |
(8) |
“Capital Expenditures” is a non-GAAP financial measure defined as Cash flow used in investing activities adjusted for the change in non-cash working capital (deficit). See “Non-GAAP and Other Financial Measures” in this news release. |
(9) |
“EP spending” is defined as Capital Expenditures, excluding acquisitions, dispositions, exploration capital and other corporate expenditures. |
CORPORATE SUMMARY – FIRST QUARTER 2023
Three Months Ended March 31, |
|||||||
2023 |
2022 |
Change |
|||||
OPERATIONS |
|||||||
Production |
|||||||
Natural gas (mcf/d) |
2,469,747 |
2,360,941 |
5 % |
||||
Crude oil, condensate and NGL (bbl/d) |
114,291 |
113,569 |
1 % |
||||
Oil equivalent (boe/d) |
525,916 |
507,059 |
4 % |
||||
Product prices(1) |
|||||||
Natural gas ($/mcf) |
$ 6.18 |
$ 4.86 |
27 % |
||||
Crude oil, condensate and NGL ($/bbl) |
$ 63.16 |
$ 66.54 |
(5) % |
||||
Operating expenses ($/boe) |
$ 4.63 |
$ 4.21 |
10 % |
||||
Transportation costs ($/boe) |
$ 5.37 |
$ 4.89 |
10 % |
||||
Operating netback ($/boe)(2) |
$ 28.08 |
$ 23.99 |
17 % |
||||
Cash general and |
$ 0.67 |
$ 0.59 |
14 % |
||||
FINANCIAL |
|||||||
Commodity sales from production |
1,515,280 |
1,895,171 |
(20) % |
||||
Total revenue from commodity sales and realized gains |
2,023,584 |
1,713,684 |
18 % |
||||
Royalties |
221,212 |
203,734 |
9 % |
||||
Cash flow |
1,127,135 |
1,075,976 |
5 % |
||||
Cash flow per share (diluted) |
$ 3.28 |
$ 3.18 |
3 % |
||||
Net earnings |
250,320 |
675,939 |
(63) % |
||||
Net earnings per share (diluted) |
$ 0.73 |
$ 1.99 |
(63) % |
||||
Capital expenditures (net of dispositions)(2) |
594,497 |
479,373 |
24 % |
||||
Weighted average shares outstanding (diluted) |
343,514,860 |
338,842,592 |
1 % |
||||
Net debt |
(709,003) |
(769,089) |
(8) % |
(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 Q1 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, May 4, 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/3ZV77fa 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 93772473.
REPLAY DETAILS
If you are unable to dial into the live conference call on May 4th, a replay will be available by dialing 1-888-390-0541 (international 1-416-764-8677), referencing Encore Replay Code 772473. The recording will expire on May 18, 2023.