HIGHLIGHTS
- First quarter 2024 average production was 592,077 boepd, a 13% increase over first quarter 2023 average production of 525,916 boepd and within the 590,000 – 595,000 boepd first quarter 2024 range announced on March 6, 2024.
- First quarter cash flow(1) (“CF”) was $871.1 million ($2.45 per diluted share(2)) on total capital expenditures(3) of $556.2 million (EP spending(4) of $548.7 million in Q1 2024) generating free cash flow(5) (“FCF”) of $309.8 million for the quarter ($0.87 per diluted share(6)).
- In 2024, at strip pricing(7) on April 15, 2024, the Company expects to generate CF of $3.52 billion ($9.92 per diluted share) and FCF of $1.40 billion ($3.93 per diluted share) on EP spending of $2.0 billion.
- As a result of improved strip pricing, Tourmaline’s cash flow forecasts, compared to the five-year EP plan released on March 6, 2024, have improved by $200 to $500 million in every year of the Company’s updated five-year EP plan. Over the next five years, Tourmaline forecasts that it will generate $8.6 billion in FCF (approximately 37% of the Company’s current market capitalization) while growing average production approximately 22%.
- Given the strong FCF generation in Q1 2024 and the full year financial outlook, the Company has elected to increase the quarterly base dividend effective Q2 2024 by 7% to $0.32/share ($1.28/share on an annualized basis) from the current $0.30/share, as well as declare and pay a special dividend of $0.50/share on May 16, 2024 to shareholders of record on May 9, 2024. This special cash dividend is designated as an “eligible dividend” for Canadian income tax purposes.
- The Company reduced net debt(8) by approximately $85.0 million during Q1 2024.
PRODUCTION UPDATE
- First quarter 2024 average production was 592,077 boepd, a 13% increase over first quarter 2023 average production of 525,916 boepd and within the 590,000 – 595,000 boepd first quarter 2024 range announced on March 6, 2024.
- First quarter 2024 average liquids production (oil, condensate, NGLs) was a record 145,016 bpd, up 27% over first quarter 2023 average liquids production of 114,291 bpd.
- Full year 2024 average production guidance remains at 580,000 – 590,000 boepd with the capital budget reduction announced on March 6, 2024. Second quarter 2024 average production of 560,000 – 570,000 boepd is currently anticipated, including the impacts of planned plant maintenance and approximately 7,000 boepd of planned natural gas injections to take advantage of the large difference between current and winter pricing for natural gas.
FINANCIAL RESULTS
- First quarter 2024 CF was $871.1 million ($2.45 per diluted share) on total capital expenditures of $556.2 million (EP spending of $548.7 million in Q1 2024), generating FCF of $309.8 million for the quarter ($0.87 per diluted share).
- Tourmaline realized Q1 2024 net earnings of $244.9 million ($0.69 per diluted share), underscoring the profitability of the business even in an extremely weak natural gas pricing environment.
- In 2024, using strip pricing on April 15, 2024, the Company expects to generate CF of $3.52 billion ($9.92 per diluted share) and FCF of $1.40 billion ($3.93 per diluted share) on EP spending of $2.0 billion.
- Exit Q1 2024 net debt was $1.69 billion. As previously announced, the Company remains committed to a long-term net debt target of $1.2-1.4 billion and intends to progress towards that target throughout 2024. The Company reduced net debt by approximately $85.0 million during Q1 2024. In addition, Tourmaline’s 45.1 million shares of Topaz Energy Corp. had a market value of approximately $1.0 billion as at March 31, 2024.
- As a result of improved strip pricing, Tourmaline’s cash flow forecasts, compared to the five-year EP plan released on March 6, 2024, have improved by $200 to $500 million in every year of the Company’s updated five-year EP plan. Over the next five years, Tourmaline forecasts that it will generate approximately $8.6 billion in free cash flow (37% of current market cap) while growing average production approximately 22%.
MARKETING UPDATE
- Tourmaline’s average realized natural gas price in Q1 2024 was $3.77/mcf, significantly higher than the AECO 5A index price of $2.55/mcf over the period, as the Company benefited from its multi-year diversification portfolio.
- Tourmaline expects to exit 2024 with a total of 1.22 bcfpd of natural gas going to export markets.
- For 2024, Tourmaline has an average of 737 mmcfpd hedged at a weighted average fixed price of $5.43/mcf, including an average of 135 mmcfpd in premium markets at a fixed price of US$9.47/mcf. Tourmaline also as an average of 196 mmcfpd hedged at a basis to NYMEX of US –$0.33/mcf and an average of 980 mmcfpd of unhedged volumes exposed to export markets in 2024. Of this 980 mmcfpd, 59% is exposed to premium markets such as the US Gulf Coast, JKM (Japan Korea Marker), Dutch TTF, Malin, PGE and Sumas.
- As of March 31, 2024, Tourmaline’s realized value above AECO (including financial hedges and less associated deductions) on its first liquified natural gas (“LNG”) deal with Cheniere Energy was $648.4 million since January 1, 2023. Tourmaline has 37 mmcfpd hedged at a weighted average fixed JKM price of US$20.34/mcf in 2024 and 22 mmcfpd hedged at a weighted average fixed JKM price of US$17.53/mcf in 2025.
- In Q1 2024, Tourmaline completed its second LNG agreement, increasing its exposure to JKM, by entering into a netback agreement with Trafigura Pte Limited based on 62,500 mmbtu/d for a seven-year term starting January 2027, with the potential for extension to December 2039. The agreement is not dependent upon incremental FERC approvals.
- In March 2024, Tourmaline commenced its third LNG agreement, delivering 50,000 mmbtu/d indexed to Dutch TTF (less associated deductions).
- The Company has now entered into four natural gas-to-power agreements providing exposure to the AESO power market. In 2023, the first agreement realized a natural gas equivalent price of $7.57/mcf, which represents a $4.89/mcf premium to the AECO index for the year, generating $16.7 million in realized revenue above the AECO 5A index.
EP UPDATE
- Tourmaline operated, on average, between 13 and 15 drilling rigs during Q1 2024. The Company is currently operating 5 rigs.
- Tourmaline drilled a total of 59.3 net wells during Q1 2024, completed 71.6 net wells in the quarter, and has an inventory of 27 DUCs (net) entering Q2 2024.
- Strong well performance on the Glauconite trend continues in the southern Deep Basin with all the recent down-dip wells significantly outperforming historical trends.
- Tourmaline continues to systematically grow the Deep Basin complex through small acquisitions and Crown land sales. During the first four months of 2024, the Company has added 35.6 net sections of land through 17 separate transactions or land sales. This has added an estimated 49.1 Tier 1 drilling locations (net) and 600 boepd of average production associated with one of the transactions, for total cash expenditures of $18.9 million.
- The Company has completed the sale of the Duvernay assets in the Westerose area, which were acquired pursuant to the acquisition of Bonavista Energy Corporation completed by the Company in November 2023, for $53.1 million. Current average production from the assets is ranging between 1,600-1,800 boepd. Proceeds from the sale will be used to reduce bank debt.
- Improving EP execution continues in the BC North Montney sub complex. The Company drilled the 8 well C-54-H North Montney/Laprise pad in 44.5 days, 12 days ahead of schedule. The 8 wells, with average horizontal length of 1930m, were drilled for a total pad cost of $13.4 million, 19% under the anticipated total pad budget.
DIVIDEND
- In addition to the announced special dividend of $0.50/share payable on May 16, 2024 to shareholders of record at the close of business on May 9, 2024, the Company’s Board of Directors has approved an increase to the quarterly base dividend effective Q2 2024 to $0.32/share ($1.28/share on an annualized basis), representing an increase of 7% over the previous quarterly base dividend. The increased base dividend reflects the ongoing financial strength and profitability of the Company. The quarterly dividend is expected to be declared in early June and payable on June 28, 2024, to shareholders of record at the close of business on June 14, 2024. The special dividend is, and the quarterly base dividend will be, designated as an eligible dividend for Canadian income tax purposes.
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(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” ,”EP spending”, “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. |
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(2) |
“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. |
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(3) |
“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 and in the Q1 MD&A. |
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(4) |
“EP spending” (or “Exploration and production expenditures”) is a non-GAAP financial measure defined as Capital Expenditures, excluding property acquisitions and dispositions and other expenditures. See “Non-GAAP and Other Financial Measures” in this news release. |
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(5) |
“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. |
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(6) |
“Free cash flow per diluted share” is a non-GAAP financial ratio. Free 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. |
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(7) |
Based on oil and gas commodity strip pricing at April 15, 2024. |
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(8) |
“Net debt” is a capital management measure. See “Non-GAAP and Other Financial Measures” in this news release and in the Q1 MD&A. |
CORPORATE SUMMARY – FIRST QUARTER 2024
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Three Months Ended March 31, |
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2024 |
2023 |
Change |
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OPERATIONS |
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Production |
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Natural gas (mcf/d) |
2,682,364 |
2,469,747 |
9 % |
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Crude oil, condensate and NGL (bbl/d) |
145,016 |
114,291 |
27 % |
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Oil equivalent (boe/d) |
592,077 |
525,916 |
13 % |
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Product prices(1) |
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Natural gas ($/mcf) |
$ 3.77 |
$ 6.18 |
(39) % |
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Crude oil, condensate and NGL ($/bbl) |
$ 53.53 |
$ 63.16 |
(15) % |
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Operating expenses ($/boe) |
$ 4.81 |
$ 4.63 |
4 % |
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Transportation costs ($/boe) |
$ 5.23 |
$ 5.37 |
(3) % |
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Operating netback ($/boe)(2) |
$ 17.35 |
$ 28.08 |
(38) % |
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Cash general and |
$ 0.76 |
$ 0.67 |
13 % |
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FINANCIAL |
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Commodity sales from production |
1,474,379 |
1,515,280 |
(3) % |
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Total revenue from commodity sales and realized gains |
1,626,169 |
2,023,584 |
(20) % |
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Royalties |
150,471 |
221,212 |
(32) % |
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Cash flow |
871,144 |
1,127,135 |
(23) % |
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Cash flow per share (diluted) |
$ 2.45 |
$ 3.28 |
(25) % |
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Net earnings |
244,874 |
250,320 |
(2) % |
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Net earnings per share (diluted) |
$ 0.69 |
$ 0.73 |
(5) % |
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Capital expenditures (net of dispositions)(2) |
556,245 |
594,497 |
(6) % |
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Weighted average shares outstanding (diluted) |
354,893,800 |
343,514,860 |
3 % |
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Net debt |
(1,694,906) |
(709,003) |
139 % |
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Notes: |
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(1) |
Product prices include premiums and losses on risk management activities and financial instrument contracts. |
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(2) |
See “Non-GAAP and Other Financial Measures” in this news release and in the Q1 MD&A. |
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(3) |
Excluding interest and financing charges. |
Conference Call Tomorrow at 11:00 a.m. MT (1:00 p.m. ET)
Tourmaline will host a conference call tomorrow, May 2, 2024, starting at 11:00 a.m. MT (1:00 p.m. ET).
To participate without operator assistance, you may register and enter your phone number at https://emportal.ink/3PJkuww 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.
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