Tourmaline Delivers Strong Q2 Free Cash Flow, Increases 2018 Exit Production Estimate and Increases Quarterly Dividend

August 1, 2018 CNW

Tourmaline Oil Corp. (CNW Group/Tourmaline Oil Corp.)

CALGARY, Aug. 1, 2018 /CNW/ – Tourmaline Oil Corp. (TSX:TOU) (“Tourmaline” or the “Company”) is pleased to release financial and operating results for the second quarter of 2018.

HIGHLIGHTS

Six month 2018 cash flow⁽¹⁾ of $624.5 million on EP capital spending of $464.3 million.
Net debt⁽²⁾ reduced by $85.0 million in Q2 2018 from Q1 2018 (5% reduction). Tourmaline has reduced net debt by $198.6 million in the first six months of 2018.
Quarterly dividend will be increased by 11% to $0.10/common share for the third quarter of 2018.
1H 2018 production of 264,707 boepd, an increase of 13% over 1H 2017.
2018 exit production range increased to 290,000-297,500 boepd.
Q2 2018 operating costs of $3.18/boe, down 5% from Q1 2018.
After-tax earnings of $25.6 million on an average realized gas price of $2.25/mcf, an 89% premium over the average Q2 2018 AECO index price.

FINANCIAL RESULTS

Six month free cash flow⁽³⁾ of $216.9 million, and $170.7 million after dividend payments of $46.2 million.
Despite the lower than forecast production in May and June and weaker natural gas prices, Q2 cash flow was $272.3 million ($1.00/diluted share) and anticipated full-year 2018 cash flow is unchanged at $1.34 billion.
The 2018 full-year E&P capital budget (net of dispositions) remains unchanged at $1.08 billion.
The Company generated significant free cash flow in Q2 2018, and similar to Q1 2018, continued to reduce net debt by $85.0 million after dividend payments in the quarter. Net debt has been reduced by $198.6 million to $1.54 billion through the first six months of 2018.
Anticipated improving winter oil and natural gas prices provide upside beyond guidance for Q4 2018/Q1 2019 cash flow.
Given the strong free cash flow generation and steadily improving balance sheet, the Company has elected to increase the quarterly dividend by 11% to $0.10 per common share.
Tourmaline has completed asset sales of $71.2 million to date in 2018 with no production impact and negligible reserve impact. The Company is targeting a further $70-80 million in non-core asset sales in 2H 2018/Q1 2019.

PRODUCTION UPDATE

Q2 2018 average production of 260,930 boepd was below the originally-anticipated 265,000-275,000 boepd range.
Q2 2018 production was impacted by a sales compressor failure at the Musreau plant in the Alberta Deep Basin and by multiple unplanned outages on the Enbridge system in the NEBC and Peace River High complexes. The Musreau facility issue affected production for seven weeks and reduced quarterly production by approximately 3,000 boepd; the replacement compressor returned production to normal levels by June 14. Several unplanned production interruptions on the Enbridge system were experienced in June at Gordondale, McMahon and Fourth Creek, reducing quarterly production by approximately 4,250 boepd. A forest fire during the last week of June in the Banshee-Anderson area of the Deep Basin resulted in well and plant shut-ins, further reducing June production volumes.
The Company expects full-year average production of 267,500-275,000 boepd; the slightly lower range reflects the impact of unplanned outages in Q2 and Q3.
The 2H 2018 EP program is anticipated to yield average Q4 2018 production of 285,000-295,000 boepd, with approximately 152 wells (gross) coming on production during the second half. The Company has been staging the 2018 EP program to maximize production volumes by November in order to fully capitalize on anticipated improving winter 2018/2019 natural gas prices. The Company will complete the remaining required annual facility maintenance on its plant network during Q3.
During the second half of July, NGL production was reduced by approximately 4,200 bpd due to an unplanned outage at the third-party Saturn 1 Deep Cut facility in the Wild River area of the Deep Basin. The facility was repaired and back to full production by July 28.
A slightly higher 2018 exit production range of 290,000-297,500 boepd is now expected, including liquids production of approximately 62,500 bpd. The Company plans to exit 2018 at or above anticipated full-year 2019 production levels of 291,000 boepd.

EP UPDATE

2H 2018 Drilling Program

Tourmaline is currently operating 14 drilling rigs and will drill approximately 140 wells (gross) in the second half of 2018. The Company currently has 45 drilled but uncompleted wells in inventory – completion operations will ramp up in the second half of August. Tourmaline plans to bring approximately 152 new wells on-stream across all three core complexes by year-end 2018.

Q4 Liquid-Focused Facility Projects

The four main liquid-focused facility projects, disclosed in the May 8, 2018 press release, remain on schedule for a fourth quarter 2018 startup. All four projects are included in the existing 2018 EP capital program.
The Doe 2-11 sweetening and debottlenecking project is expected to start up in early October and add 3,000-3,500 bpd of condensate production.
The Spirit River 13-28 compression expansion project is expected to start up in the second half of October and will add 2,500-3,000 bpd of incremental light oil production.
The Wroe compression expansion project and Cecilia pipeline loop project in the Alberta Deep Basin are expected to be operational in the second half of October.
The South Gundy drilling and condensate tie-in project is expected to start up at the beginning of November and will add approximately 1,500 bpd of incremental condensate production.

Deep Basin Cardium Gas Condensate Play

The next two wells in the Deep Basin Cardium gas condensate play (fifth and sixth wells overall) have tested at the top end of the performance range. The 13-36 well was flowing natural gas at 26.1 mmcfpd at a tubing pressure of 11,475 KPa with 846 bbls/day of condensate at the end of a 5-day flow test. The 16-2 well was flowing natural gas at 26.5 mmcfpd at a flowing tubing pressure of 12,150 KPa with 815 bbls/day of condensate at the end of a 4.75-day flow test.
To date, four of the initial six wells in the play have expected average estimated ultimate recovery (EUR) of 10.0-12.5 bcf natural gas and 250,000-300,000 bbls of condensate. These are amongst the most attractive economic targets in the Western Canadian Sedimentary Basin, with completed well costs averaging $4.0 million thus far in the play.
An additional four to six delineation wells are planned for the Cardium natural gas/condensate play in 2H 2018 as the Company continues to delineate the scope of the regional trend.

Gundy Creek BC Montney Development

The Gundy Creek Phase 1 development remains on schedule with a 2H 2019 start-up of the initial Phase 1 200 mmcfpd deep cut plant for which field construction has commenced. The Phase 1 development will also yield 15,000-17,500 bpd of condensate, propane and NGLs (total Phase 1 production of approximately 50,000 boepd). The Company continues to evaluate the final timing for the Phase 2 development, which will double both gas and condensate volumes.

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(1)	“Cash flow” is defined as cash provided by operations before changes in non-cash operating working capital. See “Non-GAAP Financial Measures” in the Company’s Q2 2018 Management’s Discussion and Analysis.
(2)	“Net debt” is defined as bank debt plus working capital (adjusted for the fair value of financial instruments). See “Non-GAAP Financial Measures” in the Company’s Q2 2018 Management’s Discussion and Analysis.
(3)	“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”.

CORPORATE SUMMARY – SECOND QUARTER 2018

		Three Months Ended June 30,					Six Months Ended June 30,
		2018		2017		Change	2018		2017		Change
OPERATIONS
Production
	Natural gas (mcf/d)	1,290,436		1,196,477		8%	1,309,478		1,195,435		10%
	Crude oil and NGL (bbl/d)	45,857		36,127		27%	46,461		35,176		32%
	Oil equivalent (boe/d)	260,930		235,540		11%	264,707		234,415		13%
Product prices⁽¹⁾
	Natural gas ($/mcf)	$	2.25	$	3.19	(29)%	$	2.61	$	3.17	(18)%
	Crude oil and NGL ($/bbl)	$	47.93	$	40.01	20%	$	47.00	$	40.85	15%
Operating expenses ($/boe)		$	3.18	$	3.22	(1)%	$	3.27	$	3.36	(3)%
Transportation costs ($/boe)		$	3.41	$	2.88	18%	$	3.37	$	2.85	18%
Operating netback⁽³⁾ ($/boe)		$	12.10	$	15.36	(21)%	$	13.68	$	14.98	(9)%
Cash general and administrative expenses ($/boe)⁽²⁾		$	0.52	$	0.46	13%	$	0.50	$	0.47	6%

FINANCIAL ($000, except share and per share)
Revenue		463,845		479,269		(3)%	1,014,011		945,914		7%
Royalties		19,990		19,409		3%	40,109		47,260		(15)%
Cash flow⁽³⁾		272,261		313,271		(13)%	624,509		606,204		3%
Cash flow per share (diluted)⁽³⁾		$	1.00	$	1.16	(14)%	$	2.30	$	2.25	2%
Net earnings		25,639		108,580		(76)%	155,227		208,114		(25)%
Net earnings per share (diluted)		$	0.09	$	0.40	(78)%	$	0.57	$	0.77	(26)%
Capital expenditures (net of dispositions)		191,773		189,532		1%	409,324		588,917		(30)%
Weighted average shares outstanding (diluted)							271,343,615		269,302,667		1%
Net debt⁽³⁾							(1,538,658)		(1,558,203)		(1)%


(1)	Product prices include realized gains and losses on financial instrument contracts.
(2)	Excluding interest and financing charges.
(3)	See “Non-GAAP Financial Measures” in the Company’s Q2 2018 Management’s Discussion and Analysis

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

Tourmaline will host a conference call tomorrow, August 2, 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 7937686.