TOURMALINE DELIVERS RECORD PRODUCTION, INCREASES 2P RESERVES TO 5 BILLION BOE AND DECLARES AN INCREASED QUARTERLY BASE DIVIDEND AND A SPECIAL DIVIDEND

CALGARY, AB, March 6, 2024 /CNW/ – Tourmaline Oil Corp. (TSX:TOU) (“Tourmaline” or the “Company”) is pleased to release financial and operating results for the full year and fourth quarter of 2023, announce an increase in both 2023 reserves and the quarterly base dividend, as well as declare a special dividend and a quarterly dividend.

HIGHLIGHTS

Full-year 2023 cash flow(1) (“CF”) was $3.71 billion ($10.73 per diluted share(2)). Fourth quarter 2023 CF was $918.0 million ($2.62 per diluted share).
Tourmaline generated $1.69 billion of free cash flow(3) (“FCF”) in 2023 (2022 – $3.21 billion).
Full year 2023 earnings were $1.74 billion ($5.03 per diluted share).
Successfully closed the acquisition of Bonavista Energy Corporation (“Bonavista”), adding over 60,000 boepd of low-decline, long-life production.
Tourmaline will pay a special dividend of $0.50/share on March 21, 2024, to shareholders of record on March 14, 2024. Tourmaline intends to pay special dividends in all four quarters of 2024, inclusive of this Q1 2024 special dividend. Tourmaline has also increased its quarterly base dividend by 7% to $0.30/share.
Year-end 2023 proved, developed producing (“PDP”) reserves of 1.20 billion boe were up 39.3% after accounting for 2023 annual production of 189.9 million boe. Total proved (“TP”) reserves of 2.61 billion boe were up 20.8% after accounting for 2023 production. Proved plus probable (“2P”) reserves of 5.01 billion boe were up 15.5% after accounting for 2023 production.
After 15 years of operation, Tourmaline now has 22.7 TCF of economic 2P natural gas reserves, all of which is pipeline connected to markets across North America. At year-end 2023, 83.5% of the current drilling inventory was not booked in the 2023 year-end reserve report.
Year-end 2023 2P oil, condensate, and natural gas liquids (“NGL”) reserves of 1.22 billion barrels represent the second largest conventional liquids reserve base in Canada, based on public disclosure.
Given continuing weak natural gas prices, the Company has elected to reduce the forecast 2024 capital expenditures from $2.35 billion to $2.13 billion including reduced 2024 forecast spending on exploratory drilling from $100.0 million down to $40.0 million and a reduction in EP capital of $150.0 million. The budget reductions include a reduction in the rig count and deferral of select exploration drilling and facility projects. Tourmaline continues to focus on optimizing free cash flow and shareholder returns.
Fourth quarter 2023 average production was 556,957 boepd, up 9% from Q4 2022. Full year 2023 average production of 520,366 boepd was up 4% over full year 2022 average production of 500,832 boepd.
Tourmaline has an average of 726 mmcfpd hedged in 2024 at a weighted average fixed price of $5.34/mcf.
Montney well performance in NEBC continues to improve with 2023 wells outperforming wells from the previous three years. Both natural gas, and particularly liquids production, are exceeding previous year’s performance. As a result, despite the activity reduction, Tourmaline anticipates 2024 liquids production to be slightly higher than prior guidance.
At current strip pricing(4), the Company expects to generate 2024 CF of $3.32 billion ($9.34 per diluted share) and FCF of $1.19 billion ($3.35 per diluted share(5)).
The Company expects to generate over $1 billion(6) of FCF in every year of the Company’s five year EP growth plan.
Exit 2023 net debt(7) was $1.78 billion (0.48 times Q4 2023 annualized cash flow). The net debt reflects cash paid of $651.0 million and net debt assumed in connection with the Bonavista acquisition, which closed on November 17, 2023. The Company intends to deleverage throughout 2024 and remains committed to a long-term net debt target of $1.2-1.4 billion.

PRODUCTION UPDATE

Fourth quarter 2023 average production was 556,957 boepd, up 9% from Q4 2022. Full year 2023 average production of 520,366 boepd was up 4% over full year 2022 average production of 500,832 boepd.
With the announced significant 2024 capital budget reduction, 2024 average production of 580,000-590,000 boepd is now anticipated with Q1 average production of 590,000-595,000 boepd expected.
2023 average liquids production (oil, condensate, NGLs) of 118,808 bbls/d was up 6% over 2022 liquids production of 112,460 bbls/d.
Forecast liquids production of approximately 144,000 bbls/d is ahead of the original forecast, despite a reduction in 2024 forecast average production. Daily liquids production has eclipsed 150,000 bbls/d on several days thus far in Q1 2024.
In addition to being Canada’s largest and most active natural gas producer, Tourmaline is now the largest NGL producer in Canada and the second largest condensate producer, based on public disclosure. Condensate and NGL production volumes are expected to increase significantly over the next 4 years with the Company’s Conroy North Montney, Doe South Montney, and North Deep Basin growth projects.

FINANCIAL HIGHLIGHTS

Full year 2023 CF was $3.71 billion ($10.73 per diluted share) and full year FCF was $1.69 billion ($4.88 per diluted share).
Fourth quarter 2023 CF was $918.0 million ($2.62 per diluted share on Q4 average production of 556,957 boepd). Q4 2023 FCF was $282.0 million.
Full year 2023 earnings were $1.74 billion ($5.03 per diluted share).
Tourmaline’s Board of Directors has declared a special dividend of $0.50/share to be paid on March 21, 2024, to shareholders of record on March 14, 2024. Tourmaline intends to pay special dividends in all four quarters of 2024, inclusive of this Q1 2024 special dividend.
Tourmaline paid $6.55 per share in combined base and special dividends in 2023, a 10% trailing yield based on an average 2023 share price of $63.58 per share in 2023.
Tourmaline increased the base dividend twice during 2023 and has elected to increase the base dividend by 7% to $0.30/share for the first quarter of 2024. Tourmaline has now increased the base dividend a total of thirteen times since the dividend was initiated in Q1 of 2018.
Full year 2023 capital expenditures were $2.07 billion, including Q4 2023 capital expenditures of $636.0 million. Q4 2023 capital spending included $22.2 million of spending associated with the Bonavista assets acquired in November 2023.
Exit 2023 net debt was $1.78 billion including cash paid of $651.0 million and net debt assumed relating to the acquisition of Bonavista. Tourmaline intends to reduce net debt throughout 2024 and remains committed to its long-term net debt target of $1.2-1.4 billion.

2023 RESERVES

Year-end 2023 PDP reserves of 1.20 billion boe were up 39.3% after accounting for 2023 annual production of 189.9 million boe. TP reserves of 2.61 billion boe were up 20.8% after accounting for 2023 production. 2P reserves of 5.01 billion boe were up 15.5% after accounting for 2023 production. The 2023 organic EP program had an increased emphasis on conversions to PDP rather than 2P reserve growth compared to previous years, hence the record PDP growth.
After 15 years of operation, Tourmaline now has 22.7 TCF of economic 2P natural gas reserves, all of which is pipeline connected to markets across North America. At year-end 2023, 83.5% of the current drilling inventory was not booked in the 2023 year- end reserve report.
Year-end 2023 oil, condensate, and NGL 2P reserves of 1.22 billion barrels represent the second largest conventional liquids reserve base in Canada, based on public disclosure.
Tourmaline has only booked 3,903 gross locations of a total drilling inventory of 23,724 gross locations (16.5% of the overall inventory) to achieve year-end 2023 2P reserves of 5.0 billion boe.
Tourmaline replaced 368% of its 2023 annual production of 189.9 million boe with 2P additions of 698 million boe including 2023 production.
Tourmaline’s 2023 PDP finding, development and acquisition (“FD&A”) costs were $8.94 per boe excluding changes in future development capital (“FDC”), yielding a PDP reserve recycle ratio(8)(9) of 2.2.
TP FD&A costs in 2023 were $10.71 per boe(10), including changes in FDCs, three-year TP FD&A costs are $8.56 per boe, including changes in FDC.
2P FD&A costs in 2023 were $9.80 per boe, including changes in FDC, 3-year 2P FD&A costs were $7.38/boe, including changes in FDC. The higher 2023 2P FD&A costs reflect incremental inflation in the FDC account as well as the increased focus on conversions to PDP. Approximately 69% of the 266 net wells drilled in 2023 were conversions from undeveloped to PDP.
Tourmaline’s 2P reserve value (before taxes) equates to $117.48 per diluted share (after tax reserve value of $90.37 per diluted share) using the January 1, 2024, engineering price deck and a 10% discount rate. TP reserve value (before tax) is $76.70 per diluted share and $60.54 per diluted share (after tax). PDP reserve value is $44.85 per diluted share (before tax) and $37.46 per diluted share (after tax). Year-over-year reserve values were down due to a combination of lower commodity prices, drill and complete capital cost inflation (5% year-over-year) and a lower natural gas premium related to the Company’s marketing portfolio reflecting lower year-over-year forecast benchmark prices in the markets outside of Alberta where the Company sells its natural gas.

2024 CAPITAL PROGRAM

As previously disclosed in January 2024, the Company’s focus in 2024 is on optimizing FCF and shareholder returns. As such, the Company has elected to reduce the forecast 2024 capital expenditures from $2.35 billion to $2.13 billion. The budget reductions include a reduction in the rig count and deferral of select exploration drilling and facility projects. Although the Company’s extensive Tier 1 drilling inventory (approximately 17 years of Tier 1 inventory alone) is profitable at AECO gas prices of $1.50/mcf, Tourmaline does not believe that selling incremental gas volumes into a weak gas market is the best decision or return proposition for shareholders. The Company’s base gas production is protected by a strong 2024 natural gas hedge book as well as a diversified export portfolio accessing premium priced North American markets.
Full year 2024 average production guidance is now 580,000-590,000 boepd, a 2.5% decrease despite the 9.4% reduction of the 2024 forecast capital expenditures. Forecast average 2024 natural gas production has been reduced by approximately 100 mmcfpd from previous guidance, and average liquids production has been increased by approximately 1,000 bpd.
Should natural gas pricing recover on a sustained basis during the second half of 2024, the Company can pivot and materially grow production toward 2024 exit. The Company anticipates accumulating approximately 50 DUCs, during the balance of the year, under the revised plan.

MARKETING UPDATE

Tourmaline’s average realized natural gas price in 2023 was $4.83/mcf, 80% above the average 2023 AECO 5A index price of $2.68/mcf. The Company’s marketing diversification portfolio and strategic hedging program allow Tourmaline to consistently outperform local hub pricing.
Tourmaline expects to exit 2024 with 1.21 bcfpd in exports to targeted markets including 754 mmbtupd delivered to JKM, Western US, and Pacific Northwest premium markets. In these premium markets, Tourmaline has an average of 139 mmbtupd hedged in 2024 at a fixed price of $9.04 US/mmbtu.
In January 2024, Tourmaline completed its second liquified natural gas (“LNG”) agreement, increasing its exposure to JKM (Japan Korea Marker), by entering into a netback agreement with Trafigura Pte Limited based on 62,500 mmbtupd for a seven-year term, starting January 2027, with the potential for extension to December 2039. This agreement is not dependent upon incremental FERC approvals.
The Company’s first LNG deal with Cheniere Energy at the Sabine Pass facility commenced in January 2023 and, with the inclusion of financial hedges, generated approximately $0.6 billion, above the AECO 5A index price, to Tourmaline in the first year of a 15-year contract.
Tourmaline has an average of 726 mmcfpd hedged in 2024 at a weighted average fixed price of $5.34/mcf.

EP UPDATE

Tourmaline drilled 266.3 net wells in 2023 and the Company expects to drill approximately 271 net wells in 2024.
Montney well performance in NEBC continues to improve with 2023 wells outperforming wells from the previous three years. Both natural gas and particularly liquids production are exceeding previous years’ performance. The Company continues to lengthen horizontals and develop Montney completion techniques in advance of the significant North Montney development project scheduled for the second half of the five-year plan, when stronger intra-basin gas pricing is anticipated.
Tourmaline has received 252 new drilling permits in BC since January 2023, as well as permits related to the North Montney infrastructure projects.
The 2024 program has delivered several Alberta Deep Basin pads above performance curve expectations at Smoky, Kakwa, and along the Bonavista Glauconite trend. The Horse 10-26 three-well Wilrich C pad tested at average per well rates of 29.3 mmcfpd of natural gas over a 70-hour test during January. The Kakwa 10-2 three-well, Wilrich pad, tested at average per well rates of 19.9 mmcfpd of natural gas over a 112-hour test and was turned over to production in February. The Caroline 16-35 two-well Glauconite pad had an average per well IP30 of 5.1 mmcfpd of natural gas and 166 bbls/d of condensate. The most recent two down-dip Glauconite trend wells have significantly outperformed expectations. The first tested at an average gas rate of 7.7 mmcfpd and 946 bbls/d of condensate on a 134-hour flow test and was turned over to production on February 16, 2024 and the second well has averaged 8 mmcfpd of natural gas, 850 bbls/d of condensate and 1,170 bbls/d of NGLs over the first 7 days of production. The Company also successfully drilled the first monobore design for the Glauconite which is expected to ultimately reduce drilling costs by 15-20%.
Capital efficiencies(11) of approximately $10,000 per flowing barrel are expected with the 2024 EP program.

ENVIRONMENTAL PERFORMANCE IMPROVEMENT

Tourmaline’s ‘clean-tech’ engineering team continues to develop and implement new proprietary emission reduction technologies, execute expanded water management initiatives, explore industry leading methane mitigation technologies, and manage related third-party environmental research.
Since embarking on the diesel displacement initiative for drilling rigs and frac spreads over 6 years ago, the Company has displaced 135.7 million litres of diesel since June 2017 providing an emission reduction of 87,419 tonnes of CO2 and saving approximately $129.3 million (including the cost of the replacement natural gas).
The compressed natural gas in long-haul trucking joint development with Clean Energy Fuels Corp., announced in April 2023, continues to progress with the first fueling station in Edmonton operational and the second and third locations in Calgary and Grande Prairie expected to startup in 2H 2024.
Tourmaline continues to strive to have the lowest freshwater intensity in industry (lowest in 2022 at 0.11 bbl/boe, 12 months after fracturing, based on public data for Alberta producers producing over 20 million boe per year of hydrocarbons). The Company’s extensive water storage and recycling facilities could prove highly beneficial in the event of drought related water restrictions later in the year.

DIVIDEND

In addition to the announced special dividend payable on March 21, 2024, to shareholders of record at the close of business on March 14, 2024, the Company’s Board of Directors has declared a quarterly base dividend on its common shares in the amount of $0.30 per common share, representing an increase of 7% over the previous quarterly dividend. The increased base dividend reflects the ongoing financial strength and profitability of the Company. The dividend will be payable on March 28, 2024, to shareholders of record at the close of business on March 15, 2024. Both the special dividend and the quarterly base dividend are designated as an eligible dividend for Canadian income tax purposes.

BOARD OF DIRECTORS

The Company sadly reports the passing of Ronald C. Wigham, director, business colleague and great friend, on January 18, 2024. Ron became a director of Tourmaline on March 7, 2016. Prior to that, in his Capital Markets position at Peters & Co., Ron played a major role in the initial capitalization and IPOs of both Tourmaline and Duvernay Oil Corp.

.CORPORATE SUMMARY – DECEMBER 31, 2023

2023 RESERVE SUMMARY

The following tables summarize the Company’s gross reserves defined as the working interest share of reserves prior to the deduction of interest owned by others (burdens).  Royalty interest reserves are not included in Company gross reserves.  Company net reserves are defined as the working net carried and royalty interest reserves after deduction of all applicable burdens.

Reserves and Future Net Revenue Data (Forecast Prices and Costs)

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