Tourmaline Grows 2017 Cash Flow by 65%, Delivers Earnings of $346.8 Million, and Announces Inaugural Dividend in Q1 2018

HIGHLIGHTS

• Tourmaline grew 2017 cash flow⁽¹⁾ by 65% to $1.2 billion ($4.47/diluted share).
• Tourmaline delivered full-year 2017 earnings of $346.8 million ($1.29/diluted share) underscoring the inherent profitability of the core EP business.
• Record low full-year 2017 operating costs of $3.19/boe.
• Tourmaline realized 31% production growth in 2017 over 2016, with 2017 average production of 242,325 boepd – within original full year guidance.
• Liquids production growth of 64% in 2017 over 2016 (oil, condensate, NGLs).
• Record low EP capital efficiency of $9,500/boepd in 2017.
• Tourmaline added 558 mmboe of 2P reserves and grew liquid reserves 73% after taking into account 2017 annual production.
• 2P reserve value increased by $2.4 billion in 2017 up to $15.1 billion.  Approximately 96% of the 2017 2P reserve additions were delivered organically by the internal EP program.
• Record low finding, development and acquisition costs (“FD&A”) in 2017 of $3.76/boe for 2P reserves (including changes in future development capital (“FDC”)), $6.79/boe for total proved reserves (including FDC) and $8.23/boe for PDP reserves (including FDC) – all down significantly from 2016.
• 2017 2P recycle ratio of 3.6 based on cash flow of $13.63/boe and 2P FD&A costs of $3.76/boe (including FDC), total proved recycle ratio of 2.0 and PDP recycle ratio of 1.7.
• After nine years of operation, Tourmaline has total 2P reserves of 2.22 billion boe including 2P natural gas reserves of 10.7 tcf and 2P liquid reserves of 431.6 mmboe of oil, condensate and liquids (December 31, 2017), with only 14% of the current overall drilling inventory booked.
• Tourmaline’s owned-and-operated infrastructure represents the fourth largest gas processing capability in the Basin.

2017 FINANCIAL RESULTS

Tourmaline grew 2017 cash flow by 65% in 2017 to $1.2 billion ($4.47/diluted share) from $731.8 million($3.12/diluted share) in 2016, a 43% per diluted share increase.  Q4 2017 cash flow of $348.2 million($1.29/diluted share) was up 38% over Q4 2016 cash flow of $252.5 million ($1.02/diluted share) and up 39% over the third quarter of 2017.  These record cash flows for the Company were realized during a year of generally weak natural gas prices.  Tourmaline’s gas diversification and hedging strategies provided a realized natural gas price of $2.89/mcf, a 42% premium over the full-year AECO 5A index price of $2.04/mcf.  As previously disclosed, the EP program delivered free cash flow⁽²⁾ in Q4 2017.  Free cash flow is expected to increase during the first quarter of 2018 compared to the fourth quarter of 2017.

The Company delivered very strong full-year 2017 earnings of $346.8 million ($1.29/diluted share) underscoring the Company’s ability to generate profitable, full-cycle growth, even in weak commodity price environments.

INTRODUCTION OF DIVIDEND

Tourmaline will proceed with the implementation of its previously-announced dividend program.  The first quarterly dividend of $0.08/common share will be paid on March 29, 2018 to shareholders of record at the close of business on March 14, 2018.  This quarterly cash dividend is designated as an “eligible dividend” for Canadian income tax purposes.

GAS MARKETING AND TRANSPORTATION UPDATE

The TCPL Sundre Crossover project is expected to be complete in April of 2018, allowing approximately 380 mmcfpd of gas currently flowing to AECO through the NGTL system to instead flow southwards through the GTN system to Malin, Oregon.  Tourmaline has approximately 100 mmcfpd of firm transportation of this redirected gas flow.

A second expansion of this system is planned for 2019, redirecting an additional 280 mmcfpd of natural gas from AECO into the GTN system.  Tourmaline has secured approximately 100 mmcfpd of firm transportation of that additional redirected gas flow as well.  In aggregate, these two projects significantly reduce gas volumes at the AECO complex.  Subsequent to the completion of the second expansion, Tourmaline will have in aggregate approximately 300 mmcfpd of firm transportation on the GTN system.

These two projects are a subset of Tourmaline’s ongoing multiple initiatives to ensure diversification of natural gas transportation and market options, a strategy that was embarked upon over five years ago.  The Company will have approximately 550 mmcfpd of gas flowing to hubs with NYMEX-based pricing in 2019.

PRODUCTION UPDATE

Tourmaline grew 2017 average production to 242,325 boepd, a 31% increase over 2016 average production of 185,672 boepd (13% annual production per diluted share growth).  Fourth quarter 2017 average production of 263,309 boepd was up 37% over fourth quarter 2016 average production of 191,814 boepd and up 11% over the previous quarter (Q3 2017).  2017 average liquid production of 38,737 bpd (oil, condensate, NGLs) was up 64% over 2016 average liquid production of 23,586 bpd.  Current production is 270,000-275,000 boepd and full-year 2018 average production guidance remains unchanged at 270,000-280,000 boepd.  The Company has approximately 37 wells to tie-in and bring on-production during March and early April 2018.

COST MANAGEMENT

Full-year 2017 operating costs of $3.19/boe established a new corporate record as the Company continues to pursue multiple cost reduction opportunities in all aspects of the business.  The Company is very pleased with reducing overall 2017 corporate average operating costs as they also included a growing light oil complex and increased liquids production throughout the EP portfolio.

The Company has the lowest per-stage horizontal drill-and-complete capital costs across all three core-operated EP areas.  2017 drill-and-complete capital costs were generally held flat with 2016.  Tourmaline is targeting a further 5-10% per well capital cost reduction in the 2018/2019 time frame.

CAPITAL BUDGET OUTLOOK

The current full-year 2018 capital budget remains at $1.1 billion and the Company expects to spend less than $300.0 million during the first quarter of 2018.  The Company will review the overall 2H 2018 capital program allocation between liquids and gas projects in the second quarter of 2018 during spring break-up.

Exit 2017 net debt⁽³⁾ of $1.74 billion was down by $34.9 million from Q3 of 2017.  As previously announced, the Company has already reduced Q1 2018 debt by a further $72 million.  Tourmaline expects a 2018 exit net debt-to-cash flow ratio of approximately 1.1 times.

EP UPDATE

Liquids Business Growth

Over the past two years, Tourmaline has increased its focus on the liquids opportunities throughout the EP portfolio, growing overall liquids production by over 100% in the past 18 months to 50,000 bpd currently (oil, condensate, NGLs).  The Company has embarked upon a series of drilling and related facility projects that are anticipated to profitably grow overall corporate liquids production a further 50% to 75,000 bpd by Q4 2019.

Tourmaline is forecasting full-year average liquids production of 50,000 bpd in 2018 and expects to eclipse the current forecast average of 60,000 boepd for 2019 as ongoing liquids project timing is finalized during the second quarter.

Sunrise Dawson Montney Turbidite

Tourmaline has now drilled 44 wells into the liquid-rich Montney turbidite horizons at Sunrise-Dawson and has evolved a well-defined performance and cost curve for these development wells.  Average EUR per well is 3.11 bcf of sales gas, 275 mstb of condensate and 90 mstb of NGL.  Average well cost for these 1,500mlaterals is $2.86 million Cdn (drill, complete and equip) yielding average IRRs of 197% and a 10-month payout utilizing January 1, 2018 engineering pricing.  These wells are amongst the most profitable subsurface targets in the Western Canadian Sedimentary Basin with a net present value of $11.9 million (NPV 10 – before tax) yielding capital efficiencies of approximately $7,500/boepd.  Currently, Tourmaline has 18 Montney turbidite wells shut-in awaiting facility capacity.  The ongoing Doe 2-11 sweetening and debottlenecking facility project will add 3,500 bpd of condensate production during the fourth quarter of 2018.

Alberta Deep Basin Cardium Gas Condensate Play

Tourmaline is currently drilling the next Cardium gas condensate delineation pad at Anderson 6-1; these horizontal wells will be drilled in March 2018 and completed in May 2018.  The initial 16-25-50-23W5M discovery well has an IP 365 of 10.4 mmcfpd and 306 bpd of total liquids (293 bbls/day of condensate), one of the highest deliverability gas wells in Western Canada in 2017 with one of the top liquids production rates drilled during the past year (cumulative 3.97 bcf gas, 119 mstb to date, EUR 15.0 bcf (raw), 315 mstb condensate/NGLs in the Company’s year-end independent reserve report).  The step-out well at 7-30-50-22W5 has an IP 60 of 17.5 mmcfpd and 750 bbls/day of total liquids (680 bpd condensate).  This well is assigned recoverable reserves of 8.0 bcf and 289 mstb condensate and NGLs in the Company’s year-end independent reserve report. Tourmaline is currently averaging $3.5-4.0 million drill-and complete-costs for these Cardium horizontal targets.  The Company has an expansive future drilling inventory defined along the 225 km long play trend, most of which is covered by 3D seismic, one of the key success drivers for this play.

Peace River High Triassic Lower Montney Oil Play

Tourmaline continues to delineate and expand the Lower Montney oil play on the Peace River High, in conjunction with the ongoing Upper and Lower Charlie Lake oil development activities.  As previously disclosed, the Company acquired 35 sections of primarily undeveloped land for the Lower Montney oil play in Q4 2017 as well as initiating a facility debottlenecking project with associated accelerated development drilling.  This project will add an additional 3,000 bbls/day of oil (net) with approximately 5 mmcfpd (net) of associated gas during the fourth quarter of 2018.  The 1-4-78-8W6M Lower Montney oil well has an IP 90 of 668 bpd oil and 5.2 mmcfpd of natural gas (cumulative recovery of 66 mstb oil and 0.55 bcf of gas to date).  The 15-16-78-8W6M Lower Montney oil well has an IP 90 of 345 bpd and 5.0 mmcfpd of natural gas (cumulative recovery of 29 mstb oil and 0.41 bcf of gas to date).  The 2-4-78-8W6M well has an IP 60 of 935 bpd oil and 5.2 mmcfpd of natural gas (cumulative recovery of 61 mstb oil and 0.36 bcf of gas to date).  The Company estimates a current Lower Montney oil inventory of approximately 93 drilling locations that is expected to increase as the 2018 delineation drilling program proceeds.  In aggregate in 2018, Tourmaline plans to drill, complete and tie-in 75 oil wells in the Peace River Triassic oil complex (Upper and Lower Charlie Lake and Lower Montney).

CORPORATE SUMMARY – DECEMBER 31, 2017

Conference Call Tomorrow at 7:00 a.m. MT (9:00 a.m. ET)

Tourmaline will host a conference call tomorrow, March 7, 2018 starting at 7:00 a.m. MT (9:00 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 5489594.