Tourmaline delivers earnings of $129.6 million in Q1 2018 and announces Q2 2018 dividend increase

CALGARY, May 8, 2018 /CNW/ – Tourmaline Oil Corp. (TSX:TOU) (“Tourmaline” or the “Company”) is pleased to release strong financial and operating results for the first quarter of 2018.

HIGHLIGHTS

• Q1 2018 cash flow⁽¹⁾ of $352.2 million ($1.30/diluted share) on EP capital spending of $280.2 million.
• As previously announced, the Company disposed of non-core assets for proceeds of $71.2 million.
• Free cash flow⁽²⁾ of $136.1 million in the quarter.
• Q1 2018 exit net debt⁽³⁾ down 7% from previous quarter as a result of the $114.4 million in free cash flow after paying the dividend.
• Q2 2018 dividend to be increased by 12.5% to $0.09/common share.
• Company remains on track to achieve full-year production guidance of 270,000-280,000 boepd.
• 2018 exit production target of 285,000-290,000 boepd.
• 2019 total forecast production, liquids production and cash flow expectations increased from previously released five-year plan.

FINANCIAL RESULTS, CAPITAL PROGRAM

• First quarter 2018 cash flow was $352.2 million ($1.30/diluted share), a 20% increase over Q1 2017 cash flow.
• First quarter net capital expenditures⁽⁴⁾ of $216.1 million, yielding free cash flow of $136.1 million for the quarter of which $21.7 million funded the inaugural $0.08/common share quarterly dividend and the $114.4 million balance used to reduce outstanding debt.
• Net debt at March 31, 2018 of $1,623.6 million is a 7% reduction from year-end 2017 net debt of $1,737.2 million.
• The Company has elected to increase the quarterly dividend to $0.09/common share given the strong free cash flow generation capability and outlook.
• First quarter 2018 earnings of $129.6 million constitute a 30% increase from first quarter 2017 earnings of $99.5 million, highlighting the underlying profitability of the EP business, despite low natural gas prices. Tourmaline continues to demonstrate strong and appreciating returns on invested capital in all three operated complexes.
• Q1 2018 operating costs were $3.36/boe, up marginally from $3.19/boe in 2017, but very strong given the significant activity ramp up in the Peace River High Triassic oil complex.

PRODUCTION

• Q1 2018 production of 268,526 boepd was a 15% increase from Q1 2017 production of 233,278 boepd and 2% from Q4 2017. Record production levels in excess of 280,000 boepd were achieved several times during April 2018. Q1 liquids production (oil, condensate, NGLs) was 47,070 bpd, a 3% increase from Q4 2017, and the Company remains on track for full-year 2018 average liquids production of 50,000 bpd. The full-year 2018 total production guidance remains unchanged at 270,000-280,000 boepd.
• First quarter 2018 production was impacted by approximately 1,500 boepd at Gundy, BC due to third-party plant constraints related to high condensate rates from the Company’s new Montney horizontals. Cold weather-related production interruptions in the Peace River High Triassic oil complex reduced quarterly production by approximately 1,500 boepd.
• The Company plans to continue to manage production in the 265,000-275,000 range during Q2 and Q3 2018, a period of expected lower AECO gas prices, and subsequently ramp production back to over 280,000 boepd in Q4 when more favorable natural gas prices are anticipated. The Company has approximately 18,500 boepd of production either awaiting facility capacity or shut-in. Tourmaline is currently estimating 2018 exit production of between 285,000 and 290,000 boepd.
• The Company is increasing 2019 production guidance from 283,000 to 291,000 boepd, a 3% increase from previous guidance, driven largely by an increase in average liquids production (oil, condensate and NGL) to 64,500 bpd. The Company has accelerated a series of liquid-growth projects into Q4 2018, which allows for this 2019 increase. In aggregate, 2019 production growth will now be up 6% over assumed 2018 average production of 275,000 boepd.

FIVE-YEAR PLAN GUIDANCE

• Tourmaline has made modest revisions to the five-year plan released on November 8, 2017. The main changes are a reduction in the AECO natural gas price employed in 2018 from $2.50/mcf Cdn to $2.00/mcf and a reduction to $2.25/mcf for 2019-2022, as well as an increase in total liquids production and the liquids prices employed in the plan.
• Tourmaline’s realized natural gas price in Q1 2018 was $2.97/mcf, a 43% premium to the first quarter AECO index price.
• Anticipated production and cash flow in 2019/2020 have been increased and projected 2019 cash flow of $1.62 billion ($5.96/share) is 8% higher than the $1.50 billion in the previous plan. Free cash flow before dividends in 2019 is up materially to $231 million from $110 million previously. 2018 production and full-year cash flow are essentially unchanged in the new plan.
• 2018 E&P capital program (net of dispositions) of $1.08 billion and the 2019 E&P capital program of $1.35 billion are unchanged from the previous plan.

EP UPDATE

• Tourmaline will continue to execute an average full-year 12 drilling rig program in 2018 and 2019. The Company is currently operating four-five drilling rigs through break-up, and will ramp EP activity up in the second half of June/early July 2018.
• Tourmaline has accelerated four liquids production projects in order to be on-stream during the fourth quarter of 2018:

1. A compression and pipeline project in Spirit River West that will bring on-stream approximately 3,000 bpd of incremental light oil production.
2. A sweetening facility in Doe, BC that will allow for a 3,500 bpd condensate production increase.
3. A compression expansion and pipeline project in the Northern Alberta Deep Basin that is expected to increase condensate and NGL production by 1,250 bpd.
4. An early, interim tie-in project at Gundy, BC that will add approximately 1,500 bpd of condensate production in Q4 2018.

• Tourmaline remains on track to drill and complete 225-230 wells in 2018. Drill and complete capital costs remain essentially unchanged from 2017 thus far in 2018.
• Post break-up, EP activities will include testing of the latest Deep Basin Cardium gas/condensate pad drilled in March and drilling of the Company’s first Montney horizontal on the Company’s 71 sections of land (gross) in greater Attachie, BC. Several exploration new pool wildcat locations are included in the 2H 2018 drilling program.

CORPORATE SUMMARY – FIRST QUARTER 2018

Conference Call Tomorrow at 9:00 a.m. MT (11:00 a.m. ET)

Tourmaline will host a conference call tomorrow, May 9, 2018 starting at 9:00 a.m. MT (11:00 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 3899274.