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Benchmark natural gas prices have been low in Canada, but Tourmaline has sought buyers in markets beyond Alberta
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Tourmaline Oil Corp. continues its relentless consolidation of land in the prolific Montney gas play in British Columbia, announcing two new acquisitions on Wednesday alongside its first-quarter results.
The gas major said it is acquiring inventory in northeast B.C. from Saguaro Resources Ltd. and an undisclosed seller that will add an aggregate 20,000 barrels of oil equivalent per day (boe/d) in production, 369 million boe/d in proven and probable reserves, and about 410 top-tier drilling locations.
Chief executive Michael Rose hinted at the company’s ambitious plans for growth in the Montney on a conference call with investors on Thursday.
“We’re looking at very strong production volumes heading into the next decade, as high as 850,000 boe/d, but you’ll see that full plan in the second half of this year,” he said, adding that the acquisitions are part of the company’s development plans in the northeast B.C. Montney.
“Real tier-one inventory is scarce in North America and we’ve been systematically ensuring we have decades of tier-one inventory secured at Tourmaline.”
The Calgary-based producer seems to be keeping its powder dry for even more acquisitions in the future, analysts said.
“While these (latest acquisitions) likely could have been executed with cash given the strength of the balance sheet, we think management currently prefers to leverage their premium to conserve optionality — underscoring our view that there is more to come,” Raymond James said in a research note on Thursday.
Tourmaline reported mixed first-quarter results Wednesday, with better-than-expected production volumes, but cash flow came in below analysts’ estimates due to lower benchmark natural gas prices in Alberta (AECO) and B.C. (Station 2), and increased capital expenditures during the first three months of 2025.
Tourmaline increased average production by eight per cent in the first quarter to 637,867 boe/d, compared to 592,077 boe/d a year ago, primarily due to its acquisitions last year of Crew Energy Inc. and Todd Energy Ltd.
Benchmark natural gas prices have been stubbornly low in Canada, but Tourmaline has methodically sought buyers in higher-priced markets far beyond Alberta, including the United States Pacific Northwest, Chicago and global markets via contracts with liquefied natural gas (LNG) exporters such as Cheniere Energy Inc. on the U.S. Gulf Coast.
Rose said half of the company’s production growth in natural gas in 2025 is expected to flow to the U.S. Gulf Coast for re-export starting in November, which is a strategy the company has pursued in order to avoid selling into oversupplied local gas trading hubs.
The company said its realized price for natural gas in the first quarter was $4.30 per thousand cubic feet (mcf), which was $2.11/mcf higher than the AECO 5A benchmark that averaged $2.19/mcf.
Still, Tourmaline and other Canadian oilpatch gas producers are hoping for a recovery in domestic natural gas prices in the second half of the year with the start-up of the LNG Canada facility on B.C.’s northwest coast.
“We continue to be highly encouraged by the growing demand-driven natural gas price outlook in all of North America, and that includes the Western Canadian gas trading hubs,” Rose said.
The company’s board also declared a special dividend of 35 cents per share on top of its base dividend of 50 cents per share.
Raymond James said it expects Tourmaline to benefit as energy investors continue to favour companies with the scale to weather the volatility that’s been a hallmark of markets recently, particularly natural gas producers, rather than oil producers, as North American LNG exports continue to ramp up.
“We continue to believe investors will position for quality and scale under the current macro backdrop, with an emphasis on gas-weighted producers given a favourable setup within North America, with Tourmaline a clear beneficiary,” it said in a note.
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