CALGARY, AB, May 18, 2021 /CNW/ - Tourmaline Oil
Corp. (TSX: TOU) ("Tourmaline" or the "Company") is pleased to
announce the completion of a further consolidation of NEBC Montney
Assets and a guidance update.
NORTH MONTNEY
OVERVIEW
- Tourmaline continues to expand its position in the greater
North Montney play area, a
strategy that began in late 2016 with the acquisition of the
initial Gundy property which is
the current anchor of the Company's North
Montney complex. With completion of the Gundy Phase 2
expansion in early 2022, the property is expected to produce
approximately 400 mmcfpd and 27,500 bpd of condensate and natural
gas liquids ("NGLs").
- Over the next five years, Tourmaline's North Montney growth will shift to the greater
Conroy area where the Company is planning to actively develop a
separate new operated complex ultimately producing at similar
levels to Gundy. Current timing for achieving full production
levels at Conroy will be synchronized with the startup of LNG
Canada, which the Company believes will be very supportive of
Western Canadian natural gas prices. As the key sub-basin for
supplying Canadian LNG, the Company expects the North Montney to be the primary growth driver
in the entire Western Canadian Sedimentary Basin for the next
decade.
SAGUARO ACQUISITION AND JOINT VENTURE
- In April 2021, Tourmaline
acquired 50% of the assets of Saguaro Resources Ltd. ("Saguaro") in
the Laprise-Conroy North Montney play area of NEBC for cash
consideration of $205 million and
entered into a joint venture agreement to develop these
assets. Tourmaline will operate the joint venture and related
facilities.
- The acquired assets consist of net average production of 9,000
boepd in March 2021 (25% condensate
and NGLs) with Q4 2021 anticipated production levels of 12,500
boepd after approximately $35 million
of net 2H 2021 capital expenditures, proved plus probable ("2P")
reserves of 187.1 mmboe (internally estimated at December 31, 2020), 645 gross future Montney horizontal locations, and a 50%
working interest in, and operatorship of, existing Saguaro
facilities. The acquired Saguaro assets are expected to
generate a free cash flow ("FCF")(1) yield of
approximately 17% in 2022 at April 30,
2021 strip pricing. In the 2022 – 2024 time period,
the development plan currently contemplates a maintenance capital
program leading to a higher growth profile in subsequent
years.
- The Saguaro assets constitute a portion of Tourmaline's
long-term regional Conroy/North
Montney development plan that will include significant new
regional gas and liquid processing infrastructure. The
acquired assets are immediately adjacent to the Polar Star and
Chinook assets acquired in 2020, which in aggregate constitute a
major new subsurface development with an estimated 1,298 gross
future drilling locations, and a significant new infrastructure
project for the Company.
- Tourmaline drilled one Montney
delineation pad this winter on the Laprise (Polar Star) lands
immediately north of the Saguaro assets to better define well
deliverability and condensate production profiles as well as
ascertain completed well costs as part of the longer-term
development planning process. As previously released, the
Laprise b-34-L five-well pad significantly exceeded performance
expectations, condensate yields averaged 65 bbl/mmcf through 60
days of production. The Company is targeting future
drill/complete capital costs of $3.5
million per well, or less, the lowest in the North Montney play area.
STRATEGIC MIDSTREAM ACQUISITION
- On April 1, 2021, Tourmaline also
closed an infrastructure acquisition in the greater Laprise-Conroy
area for cash consideration of $55
million. The acquisition includes a 49km six-inch
condensate pipeline (capacity of 34,000 bpd) and a liquids
hub/truck terminal at Aitken Creek. The asset is an important
component of the Company-owned planned regional North Montney infrastructure complex.
The 190 mmcfpd capacity, 55km regional 12-inch gas gathering
pipeline included in the 2020 Chinook acquisition is another
component in the Company's long-term regional infrastructure
plan.
- The acquisition allows Tourmaline to immediately reduce
operating and transportation costs on Company-interest condensate
production for the acquired Saguaro assets as well as collect fees
on additional third-party volumes.
GUNDY AND DOE
CONSOLIDATION
- Tourmaline has completed three separate modest transactions
over the past three quarters at Gundy and Doe, BC for total cash consideration
of $54.5 million. These
transactions consolidate Tier 1 assets within existing developed
Tourmaline operated complexes and will flow into current Tourmaline
infrastructure.
- The acquired assets include a combined 85.3 mmboe of existing
2P reserves (internally estimated by March 31, 2021) and a
Tier 1 future drilling inventory of approximately 163 gross
locations. The new assets are already incorporated into
ongoing 2021 property development programs.
TOPAZ NORTH MONTNEY
TRANSACTION
- Tourmaline has entered into a transaction with Topaz Energy
Corp.("Topaz") in NEBC involving recently Tourmaline acquired BC
Montney subsurface assets and a
working interest in the Tourmaline facility complex at Gundy Creek
for cash consideration of $245
million. The transaction is expected to close in early
July 2021.
- Topaz will acquire a GORR on the new lands acquired by
Tourmaline at Doe, Gundy, Conroy
(Saguaro), Laprise (Polar Star), and Birley (Chinook) over the past
year (approx. 535,000 gross acres of which 288,000 gross acres are
for Montney rights).
- Topaz will also acquire a 10% working interest in the
Tourmaline Gundy facility complex (Phase 1 and 2) which will be
backstopped by a take or pay contract on 40 mmcfpd of Tourmaline
production at Gundy for a 10-year
period.
GUIDANCE/FIVE-YEAR PLAN UPDATE
- To reflect the impact of incremental 2021 acquisitions,
improving commodity prices, and strong well performance, Tourmaline
has updated 2021 guidance and revised the Five-Year Development
Plan. The updated 2021 guidance and Five-Year Development
Plan also reflects a full deconsolidation of Topaz post the close
of the Topaz financing in June 2021.
The Topaz investment will be accounted for as an equity investment
and the common shares that Tourmaline continues to own will be
recorded on the Company's balance sheet as a long-term financial
asset.
- Average 2021 production grows to an expected range between
405,000 – 420,000 boepd from previous guidance of 400,000 at the
midpoint. Forecast 2021 cash flow ("CF")(2) grows
to $2.23 billion(3)
($7.69/fully diluted share) from the
previous $2.21 billion ($7.42/fully diluted share). Full-year 2021
FCF is now $1.1 billion (13% FCF
yield) unchanged from previous guidance. 2022 forecast
full-year CF/FCF grew by 8%/20%, respectively, over prior
estimates.
- Overall full-year EP capital guidance has been increased to
$1.19 billion from $1.075 billion with the increase related to:
-
- Approximately $35 million of net
capital spending in 2H 2021 on the new Saguaro Conroy-Laprise joint
venture to optimize overall production levels and reduce short-term
operating costs.
- Installation of the Gundy Phase 2 Deep Cut expansion facility
in Q4 2021 rather than Q1 2022 as the Company is pleased to report
that construction of the multiple facility components is well ahead
of schedule. This will allow the Company to take advantage of
potentially stronger winter 2022 natural gas pricing rather than
typically lower spring prices via the original Q2 2022 startup
schedule. Note that 75% of the incremental 200 mmcfpd of
Gundy Phase 2 production is ultimately flowing on the GTN system to
PG&E/California on incremental
long-term gas transportation capacity secured by the Company.
The resultant shifting of capital ($55
million for plant installation and incremental drilling) and
production at Gundy forward into
2021 from 2022 significantly improves overall corporate 2022 FCF
forecast.
- The five-year plan now generates $4.5
billion in FCF over the full five years, up from
$4.1 billion in previous
guidance.
- Tourmaline is expected to generate FCF comparable to, or higher
than, Q1 2021, in Q2 2021 on capital spending of $220 million. The Company currently expects
to reach the net debt(4) to cash flow target of 0.5
times in 2021.
_________________________________
|
(1)
|
"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.
|
(2)
|
"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.
|
(3)
|
Based on oil and gas
commodity strip pricing at May 6, 2021.
|
(4)
|
"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.
|
Reader Advisories
CURRENCY
All amounts in this news release are stated in Canadian dollars
unless otherwise specified.
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information and
statements (collectively, "forward-looking information") within the
meaning of applicable securities laws. The use of any of the words
"forecast", "expect", "anticipate", "continue", "estimate",
"objective", "ongoing", "on track", "may", "will", "project",
"should", "believe", "plans", "intends" and similar expressions are
intended to identify forward-looking information. More particularly
and without limitation, this news release contains forward-looking
information concerning Tourmaline's plans and other aspects of its
anticipated future operations, management focus, objectives,
strategies, financial, operating and production results and
business opportunities, including the following: anticipated
petroleum and natural gas production and production growth for
various periods including estimated production levels for 2021 and
beyond; the timing for the completion of the Gundy Phase 2
expansion; the shift to greater Conroy area over the next five
years to develop a separate operated complex in the North Montney; the benefits to be derived from
the startup of LNG Canada and the growth prospects of the
North Montney; the anticipated FCF
from the acquired Saguaro assets; targeted future drill/complete
capital costs in the North Montney
play area; the timing for the completion of the transaction with
Topaz; the statements contained under the heading
"Guidance/Five-Year Plan Update" including average 2021 production
forecasts, forecast 2021 cash flow, full-year FCF forecasts,
full-year EP capital expenditures and the allocation of such
capital expenditures, the FCF generated pursuant to the five-year
plan and 2021 net debt to cash flow targets; as well as
Tourmaline's future drilling prospects and plans, business
strategy, future development and growth opportunities, prospects
and asset base. The forward-looking information is based on certain
key expectations and assumptions made by Tourmaline, including
expectations and assumptions concerning the following: prevailing
and future commodity prices and currency exchange rates; prevailing
and future commodity prices and currency exchange rates; applicable
royalty rates and tax laws; interest rates; future well production
rates and reserve volumes; operating costs, the timing of receipt
of regulatory approvals; the performance of existing wells; the
success obtained in drilling new wells; anticipated timing and
results of capital expenditures; the sufficiency of budgeted
capital expenditures in carrying out planned activities; the
timing, location and extent of future drilling operations; the
successful completion of acquisitions and dispositions and the
benefits to be derived therefrom; the state of the economy and the
exploration and production business; the availability and cost of
financing, labour and services; and ability to market crude oil,
natural gas and NGL successfully. Without limitation of the
foregoing, future dividend payments, if any, and the level thereof
is uncertain, as the Company's dividend policy and the funds
available for the payment of dividends from time to time is
dependent upon, among other things, free cash flow, financial
requirements for the Company's operations and the execution
of its growth strategy, fluctuations in working capital and the
timing and amount of capital expenditures, debt service
requirements and other factors beyond the Company's control.
Further, the ability of Tourmaline to pay dividends will be subject
to applicable laws (including the satisfaction of the solvency test
contained in applicable corporate legislation) and contractual
restrictions contained in the instruments governing its
indebtedness, including its credit facility.
Statements relating to "reserves" are also deemed to be forward
looking information, as they involve the implied assessment, based
on certain estimates and assumptions, that the reserves described
exist in the quantities predicted or estimated and that the
reserves can be profitably produced in the future.
Although Tourmaline believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because Tourmaline can give no
assurances that it will prove to be correct. Since forward-looking
information addresses future events and conditions, by its very
nature it involves inherent risks and uncertainties. Actual results
could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to:
the risks associated with the oil and natural gas industry in
general such as operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
estimates and projections relating to reserves, production,
revenues, costs and expenses; health, safety and environmental
risks; pandemics (including COVID-19); commodity price and exchange
rate fluctuations; interest rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to
complete or realize the anticipated benefits of acquisitions or
dispositions; ability to access sufficient capital from internal
and external sources; failure to obtain required regulatory and
other approvals; and changes in legislation, including but not
limited to tax laws, royalties and environmental regulations.
Readers are cautioned that the foregoing list of factors is not
exhaustive.
Additional information on these and other factors that could
affect Tourmaline, or its operations or financial results, are
included in the Company's most recently filed Management's
Discussion and Analysis (See "Forward-Looking Statements" therein),
Annual Information Form (See "Risk Factors" and "Forward-Looking
Statements" therein) and other reports on file with applicable
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com) or Tourmaline's website
(www.tourmalineoil.com).
The forward-looking information contained in this news release
is made as of the date hereof and Tourmaline undertakes no
obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, unless expressly required by applicable securities
laws.
RESERVES DATA
The reserves data set forth in this new release is based upon
internal estimates. There are numerous uncertainties inherent in
estimating quantities of crude oil, natural gas and NGL reserves
and the future cash flows attributed to such reserves. The reserve
and associated cash flow information set forth above are estimates
only. In general, estimates of economically recoverable crude oil,
natural gas and NGL reserves and the future net cash flows
therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties,
production rates, ultimate reserve recovery, timing and amount of
capital expenditures, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially. For
those reasons, estimates of the economically recoverable crude oil,
NGL and natural gas reserves attributable to any particular group
of properties, classification of such reserves based on risk of
recovery and estimates of future net revenues associated with
reserves prepared by different engineers, or by the same engineers
at different times, may vary. The Company's actual production,
revenues, taxes and development and operating expenditures with
respect to its reserves will vary from estimates thereof and such
variations could be material.
BOE EQUIVALENCY
In this news release, production and reserves information may be
presented on a "barrel of oil equivalent" or "BOE" basis. BOEs may
be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. In
addition, as the value ratio between natural gas and crude oil
based on the current prices of natural gas and crude oil is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
FINANCIAL OUTLOOKS
Also included in this news release are estimates of Tourmaline's
2021 exit net debt-to-cash flow ratio as well as 2021 – 2025 cash
flow and free cash flow, which are based on, among other things,
the various assumptions as to production levels, capital
expenditures, annual cash flows and other assumptions disclosed in
this news release and including Tourmaline's estimated average
production of 405,000 – 420,000 boepd for 2021 and 440,000,
459,000, 475,000 and 492,000 boepd for 2022 - 2025,
respectively. Commodity price assumptions for natural gas
(NYMEX (US) - $2.89/mcf, $2.76/mcf, $2.59/mcf, $2.59/mcf and $2.61/mcf for 2021 – 2025, respectively; AECO -
$3.01/mcf, $2.61/mcf, $2.37/mcf, $2.38/mcf and $2.46/mcf for 2021 – 2025, respectively), and
crude oil (WTI (US) - $62.11/bbl,
$60.09/bbl, $56.94/bbl, $55.08/bbl and $54.02/bbl for 2021 – 2025, respectively) and an
exchange rate assumption of $0.81
(US/CAD) for 2021, $0.82 for 2022 –
2023 and $0.81 for 2024 – 2025.
Further, in the case of years subsequent to 2021, readers are
cautioned that such estimates are provided for illustration only
and are based on budgets and forecasts that have not been finalized
and are subject to a variety of additional factors and
contingencies including prior years' results. To the extent such
estimates constitute financial outlooks, they were approved by
management and the Board of Directors of Tourmaline on May 18, 2021 and are included to provide readers
with an understanding of Tourmaline's anticipated cash flow and
free cash flow based on the capital expenditure, production and
other assumptions described herein and readers are cautioned that
the information may not be appropriate for other purposes.
Non-GAAP Financial Measures
This news release includes references to "free cash flow", "cash
flow", and "net debt" which are financial measures commonly used in
the oil and gas industry and do not have a standardized meaning
prescribed by International Financial Reporting Standards ("GAAP").
Accordingly, the Company's use of these terms may not be comparable
to similarly defined measures presented by other companies.
Management uses the term "free cash flow", "cash flow", and "net
debt" for its own performance measures and to provide shareholders
and potential investors with a measurement of the Company's
efficiency and its ability to generate the cash necessary to fund a
portion of its future growth expenditures, to pay dividends or to
repay debt. Investors are cautioned that these non-GAAP measures
should not be construed as an alternative to net income or cash
from operating activities determined in accordance with GAAP as an
indication of the Company's performance. Free cash flow is
calculated as cash flow less total net capital expenditures and is
prior to dividend payments. Net capital expenditures is defined as
the sum of E&P capital program and other corporate
expenditures, net of non-core dispositions. See "Non-GAAP
Financial Measures" in the December 31,
2020 Management's Discussion and Analysis for the definition
and description of these terms.
OIL AND GAS METRICS
This news release contains certain oil and gas metrics which do
not have standardized meanings or standard methods of calculation
and therefore such measures may not be comparable to similar
measures used by other companies and should not be used to make
comparisons. Such metrics have been included in this document to
provide readers with additional measures to evaluate the Company's
performance; however, such measures are not reliable indicators of
the Company's future performance and future performance may not
compare to the Company's performance in previous periods and
therefore such metrics should not be unduly relied upon.
ESTIMATES OF DRILLING LOCATIONS
Unbooked drilling locations are the internal estimates of
Tourmaline based on Tourmaline's prospective acreage and an
assumption as to the number of wells that can be drilled per
section based on industry practice and internal review. Unbooked
locations do not have attributed reserves or resources (including
contingent and prospective). Unbooked locations have been
identified by Tourmaline's management as an estimation of
Tourmaline's multi-year drilling activities based on evaluation of
applicable geologic, seismic, engineering, production and reserves
information. There is no certainty that Tourmaline will drill
all unbooked drilling locations and if drilled there is no
certainty that such locations will result in additional oil and
natural gas reserves, resources or production. The drilling
locations on which Tourmaline will actually drill wells, including
the number and timing thereof is ultimately dependent upon the
availability of funding, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and
other factors. While a certain number of the unbooked drilling
locations have been de-risked by Tourmaline drilling existing wells
in relative close proximity to such unbooked drilling locations,
the majority of other unbooked drilling locations are farther away
from existing wells where management of Tourmaline has less
information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves,
resources or production.
SUPPLEMENTAL INFORMATION REGARDING PRODUCT TYPES
This news release includes references to early 2022 North Montney average daily production,
March 2021 and Q4 2021 net average
daily production from acquired assets and 2021 average daily
production. The following table is intended to provide supplemental
information about the product type composition for each of the
production figures that are provided in this news release:
|
Light and
Medium
Crude Oil(1)
|
Conventional
Natural Gas
|
Shale Natural
Gas
|
Natural Gas
Liquids(1)
|
Oil Equivalent
Total
|
|
Company Gross
(Bbls)
|
Company Gross
(Mcf)
|
Company Gross
(Mcf)
|
Company Gross
(Bbls)
|
Company Gross
(Boe)
|
Early 2022 North
Montney
Average Daily
Production
|
11,337
|
-
|
400,000
|
16,163
|
94,167
|
March 2021
Average
Daily Production from
acquired assets
|
1,170
|
-
|
40,550
|
1,080
|
9,000
|
Q4 2021 Average
Daily
Production from acquired
assets
|
1,625
|
-
|
56,250
|
1,500
|
12,500
|
2021 Average
Daily
Production
|
35,368
|
1,233,751
|
680,729
|
58,052
|
412,500
|
|
|
(1)
|
For the purposes
of this disclosure, condensate has been combined with Light and
Medium Crude Oil as the associated revenues and certain costs of
condensate are similar to Light and Medium Crude Oil.
Accordingly, NGLs in this disclosure exclude
condensate.
|
INITIAL PRODUCTION RATES
Any references in this news release to initial production rates
are useful in confirming the presence of hydrocarbons; however,
such rates are not determinative of the rates at which such wells
will continue production and decline thereafter and are not
necessarily indicative of long-term performance or ultimate
recovery. While encouraging, readers are cautioned not to place
reliance on such rates in calculating the aggregate production for
the Company. Such rates are based on field estimates and may be
based on limited data available at this time.
GENERAL
See also "Forward-Looking Statements" and "Non-GAAP Financial
Measures" in the most recently filed Management's Discussion and
Analysis.
CERTAIN DEFINITIONS:
bbl
|
barrel
|
bbls/day
|
barrels per
day
|
bbl/mmcf
|
barrels per million
cubic feet
|
bcf
|
billion cubic
feet
|
bcfe
|
billion cubic feet
equivalent
|
bpd or
bbl/d
|
barrels per
day
|
boe
|
barrel of oil
equivalent
|
boepd or
boe/d
|
barrel of oil
equivalent per day
|
bopd or
bbl/d
|
barrel of oil,
condensate or liquids per day
|
DUC
|
drilled but
uncompleted wells
|
gj
|
gigajoule
|
gjs/d
|
gigajoules per
day
|
mbbls
|
thousand
barrels
|
mmbbls
|
million
barrels
|
mboe
|
thousand barrels of
oil equivalent
|
mboepd
|
thousand barrels of
oil equivalent per day
|
mcf
|
thousand cubic
feet
|
mcfpd or
mcf/d
|
thousand cubic feet
per day
|
mcfe
|
thousand cubic feet
equivalent
|
mmboe
|
million barrels of
oil equivalent
|
mmbtu
|
million British
thermal units
|
mmbtu/d
|
million British
thermal units per day
|
mmcf
|
million cubic
feet
|
mmcfpd or
mmcf/d
|
million cubic feet
per day
|
MPa
|
megapascal
|
mstb
|
thousand stock tank
barrels
|
natural
gas
|
conventional natural
gas and shale gas
|
NGL or
NGLs
|
natural gas
liquids
|
tcf
|
trillion cubic
feet
|
ABOUT TOURMALINE OIL CORP.
Tourmaline is an investment grade Canadian senior crude oil and
natural gas exploration and production company focused on providing
strong and predictable long-term growth and a steady return to
shareholders through an aggressive exploration, development,
production and acquisition program in the Western Canadian
Sedimentary Basin by building its extensive asset base in its three
core exploration and production areas and exploiting and developing
these areas to increase reserves, production and cash flows at an
attractive return on invested capital.
SOURCE Tourmaline Oil Corp.