Canada NewsWire
CALGARY, AB, Nov. 4, 2020
CALGARY, AB, Nov. 4, 2020 /CNW/ - Tourmaline Oil Corp. (TSX: TOU) ("Tourmaline" or the "Company") is pleased to release its operating and financial results for the third quarter of 2020.
HIGHLIGHTS
NORTH DEEP BASIN TRANSACTIONS
MODERN ACQUISITION
JUPITER ACQUISITION
PRODUCTION UPDATE
Q3 2020 FINANCIAL RESULTS
CAPITAL PROGRAMS
2H 2020 EP ACTIVITY
MARKETING UPDATE
2021 FINANCIAL OUTLOOK AND FIVE-YEAR PLAN
DIVIDEND INCREASE
TOPAZ UPDATE
OPERATING ENVIRONMENT AND THE COVID-19 PANDEMIC
_______________________________ | |
(1) | "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 Q3 2020 Management's Discussion and Analysis. |
(2) | "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 Q3 2020 Management's Discussion and Analysis. |
(3) | Based on oil and gas commodity strip pricing at October 27, 2020. |
(4) | Reserves have been evaluated as follows: Jupiter 2P reserves of 357 mmboe as at December 31, 2019 have been evaluated by GLJ Petroleum Consultants, an independent reserve evaluator and Modern 2P reserves of 88 mmboe as at August 31, 2020 have been internally estimated by qualified reserve engineers, for combined 2P reserves of 445 mmboe. Reserves are working interest gross reserves before deduction of royalties payable to others and without including any royalty interests. |
(5) | "Free cash flow yield" is determined by dividing Free Cash Flow by consideration paid, including the assumption of net debt. |
(6) | "Net debt" is defined as bank debt plus working capital (adjusted for the fair value of financial instruments and lease liabilities). See "Non-GAAP Financial Measures" in this news release and in the Company's Q3 2020 Management's Discussion and Analysis. |
(7) | Based on a Tourmaline share price of $17.60. |
CORPORATE SUMMARY – THIRD QUARTER 2020
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | ||||||
OPERATIONS | |||||||||||
Production | |||||||||||
Natural gas (mcf/d) | 1,413,983 | 1,402,468 | 1% | 1,437,867 | 1,404,200 | 2% | |||||
Crude oil, condensate and NGL (bbl/d) | 62,538 | 55,833 | 12% | 62,315 | 53,806 | 16% | |||||
Oil equivalent (boe/d) | 298,202 | 289,578 | 3% | 301,960 | 287,839 | 5% | |||||
Product prices(1) | |||||||||||
Natural gas ($/mcf) | $ | 2.60 | $ | 1.89 | 38% | $ | 2.48 | $ | 2.52 | (2)% | |
Crude oil, condensate and NGL ($/bbl) | $ | 31.31 | $ | 38.24 | (18)% | $ | 29.73 | $ | 39.56 | (25)% | |
Operating expenses ($/boe) | $ | 3.26 | $ | 3.11 | 5% | $ | 3.10 | $ | 3.35 | (7)% | |
Transportation costs ($/boe) | $ | 4.56 | $ | 3.84 | 19% | $ | 4.50 | $ | 3.77 | 19% | |
Operating netback(3) ($/boe) | $ | 10.76 | $ | 9.10 | 18% | $ | 9.92 | $ | 11.81 | (16)% | |
Cash general and | $ | 0.55 | $ | 0.48 | 15% | $ | 0.59 | $ | 0.48 | 23% | |
FINANCIAL | |||||||||||
Total revenue from commodity sales and realized gains | 518,061 | 440,089 | 18% | 1,486,529 | 1,547,749 | (4)% | |||||
Royalties | 8,596 | 12,654 | (32)% | 36,900 | 60,471 | (39)% | |||||
Cash flow(3) | 279,923 | 223,984 | 25% | 788,818 | 869,684 | (9)% | |||||
Cash flow per share (diluted)(3) | $ | 1.03 | $ | 0.82 | 26% | $ | 2.91 | $ | 3.20 | (9)% | |
Net earnings (loss) | 4,826 | 15,750 | (69)% | (10,880) | 258,400 | (104)% | |||||
Net earnings (loss) per share (diluted) | $ | 0.02 | $ | 0.06 | (67)% | $ | (0.04) | $ | 0.95 | (104)% | |
Capital expenditures (net of dispositions) | 354,695 | 384,307 | (8)% | 812,341 | 966,870 | (16)% | |||||
Weighted average shares outstanding (diluted) | 270,832,477 | 272,055,634 | -% | ||||||||
Net debt(3) | (1,788,068) | (1,914,413) | (7)% |
(1) | Product prices include realized gains and losses on risk management and financial instrument contracts. |
(2) | Excluding interest and financing charges. |
(3) | See "Non-GAAP Financial Measures" in this news release and in the Company's Q3 2020 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, November 5, 2020 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 6868253.
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 for various periods including estimated production levels for 2020, 2021, 2022 and 2020 exit production; planned storage withdrawals realizing higher commodity prices; capital expenditure budgets for various periods including 2020 and 2021; estimated cash flow for various periods including 2021 and 2022; estimated available liquidity and credit capacity; estimated 2021 exit net debt-to-cash flow; expectations for future natural gas price increases; expectations for future opportunities for Topaz in 2021 and benefits to be realized therefrom; future capital efficiencies to be realized; the future declaration and payment of dividends and the timing and amount thereof including the aggregate amount of dividends to be paid in 2020 and the availability of free cash flow to fund such dividends; cost reduction initiatives; projected operating and drilling costs including anticipated reductions in operating costs; the timing for facility expansions and facility start-up dates; the benefits to be derived from the Modern and Jupiter acquisitions including statements with respect to the operational, capital, land and facility synergies of the acquisitions and the acquisition being accretive to cash flow and free cash flow; the timing for the completion of the Jupiter acquisition; growth plans for the Modern and Jupiter assets; the intention to put in place further hedges in the coming months; the statements made under the heading "2021 Financial Outlook and Five Year Plan"; 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 including in the case of 2021 and 2022 production estimates, commodity price assumptions for natural gas (NYMEX (US) - $3.11/mcf and $2.78/mcf for 2021 and 2022, respectively, AECO - $2.99/mcf and $2.68/mcf for 2021 and 2022, respectively), and crude oil (WTI (US) - $41.24/bbl and $42.20 for 2021 and 2022, respectively) and an exchange rate assumption of 0.76 (US/CAD) for 2021 to 2022; the degree to which Tourmaline's operations and production will be disrupted by circumstances attributable to the COVID-19 pandemic and the responses of governments and the public to the pandemic; 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 benefits to be derived from acquisitions; the state of the economy and the exploration and production business including the impacts of the COVID-19 pandemic and the responses of governments and the public to the pandemic thereon; 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 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 uncertain impacts of COVID-19 on Tourmaline's business, and the societal, economic and governmental response to COVID-19; the uncertainty of estimates and projections relating to reserves, production, revenues, costs and expenses; health, safety and environmental risks; 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, including the Modern and Jupiter acquisitions; failure to complete or realize the anticipated benefits of acquisitions or dispositions; ability to access sufficient capital from internal and external sources; uncertainties associated with counterparty credit risk; failure to obtain required regulatory and other approvals; changes in legislation, including but not limited to tax laws, royalties and environmental regulations; and political party policy changes or mandates resulting from governmental elections in Canada and in the United States. 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.
FINANCIAL OUTLOOK
Also included in this news release are estimates of Tourmaline's 2021 exit net debt-to-cash flow ratio as well as 2021 cash flow and 2022 cash flow from the Jupiter and Modern acquisitions, 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 390,000 – 410,000 boepd for 2021 and 75,000 – 85,000 boepd average 2022 production related to the Modern and Jupiter acquisitions. Commodity price assumptions for natural gas (NYMEX (US) - $3.11/mcf and $2.78/mcf for 2021 and 2022, respectively, AECO - $2.99/mcf and $2.68/mcf for 2021 and 2022, respectively), and crude oil (WTI (US) - $41.24/bbl and $42.20/bbl for 2021 and 2022, respectively) and an exchange rate assumption of $0.76 (US/CAD) for 2021 and 2022. To the extent such estimates constitute financial outlooks, they were approved by management and the board of directors of Tourmaline on November 4, 2020 and are included to provide readers with an understanding of Tourmaline's anticipated 2021 exit net debt-to-cash flow ratio and 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. In particular, readers are cautioned that estimates for 2022 are provided for illustration only as budgets and forecasts beyond 2021 have not been finalized and are subject to a variety of factors including prior year's results.
NON-GAAP FINANCIAL MEASURES
This news release includes references to "free cash flow", "cash flow", "net debt" and "net capital expenditures" 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 financial measures presented by other companies. Management uses the term "free cash flow", "cash flow", "net debt" and "net capital expenditures" 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 financial 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. Cash flow is defined as cash provided by operations before changes in non-cash operating working capital. Net debt is defined as bank debt plus working capital (adjusted for the fair value of financial instruments and lease liabilities). 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 most recently filed Management's Discussion and Analysis for additional information regarding these non-GAAP financial measures including reconciliations to the most directly comparable GAAP financial measures.
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.
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.
ESTIMATED ULTIMATE RECOVERY (EUR)
This news release contains a metric commonly used in the oil and natural gas industry, "estimated ultimate recovery" (EUR). The term EUR is the estimated quantity petroleum that is potentially recoverable or has already been recovered from a well. EUR does not have a standardized meaning and may not be comparable to similar measures presented by other companies. As such, it should not be used to make comparisons. Management uses EUR for its own performance measurements and to provide shareholders with measures to compare the Company's performance over time; however, such measure is not a reliable indicator of the Company's future performance and future performance may not compare to the performance in previous periods and therefore should not be unduly relied upon. EUR was determined internally by the Company by a non-independent qualified reserves evaluator incorporating current well results and historical well performance from the Company's analogous pools in the nearby area.
SUPPLEMENTAL INFORMATION REGARDING PRODUCT TYPES
This news release includes references to Tourmaline's 2020 exit rate production, Q3 2020, Q3 YTD 2020, current and 2021 average daily production and various average daily production references from recently announced acquisitions. 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 | Conventional | Shale Natural Gas | Natural Gas | Oil Equivalent | |||||
Company Gross | Company Gross | Company Gross | Company Gross | Company Gross | |||||
2020 Exit Rate | 31,708 | 874,753 | 650,054 | 39,158 | 325,000 | ||||
Q3 2020 Average Daily | 27,248 | 841,423 | 572,560 | 35,290 | 298,202 | ||||
Q3 2020 YTD Average | 27,695 | 880,616 | 557,251 | 34,620 | 301,960 | ||||
Current Average Daily | 31,482 | 905,782 | 635,873 | 39,076 | 327,500 | ||||
2021 Average Daily | 32,680 | 1,201,174 | 679,834 | 53,819 | 400,000 | ||||
Current Modern Average | 810 | 42,210 | - | 1,170 | 9,000 | ||||
Current Jupiter Average | 2,973 | 292,225 | - | 15,323 | 67,000 | ||||
2022 Jupiter Average | 3,217 | 316,214 | - | 16,581 | 72,500 | ||||
Future Modern/Jupiter | 4,200 | 373,722 | - | 18,513 | 85,000 |
(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. |
RESERVES DATA
Jupiter 2P reserves of 357 mmboe as at December 31, 2019 have been evaluated by GLJ Petroleum Consultants, an independent reserve evaluator and Modern 2P reserves of 88 mmboe as at August 31, 2020 have been internally estimated by qualified reserve engineers. Reserves are working interest gross reserves before deduction of royalties payable to others and without including any royalty interests.
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.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to effects of aggregations. The estimated values of future net revenue disclosed in this news release do not represent fair market value. There is no assurance that the forecast prices and cost assumptions used in the reserve evaluations will be attained and variances could be material.
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.
BOE EQUIVALENCY
Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). Barrel of oil equivalents (boe) 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.
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 |
CO2 | carbon dioxide |
DUC | drilled but uncompleted wells |
EUR | estimated ultimate recovery |
FCP | flowing casing pressure |
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 |
NGL or NGLs | natural gas liquids |
NOx | nitrogen oxide |
SO2 | sulphur dioxide |
tcf | trillion cubic feet |
MANAGEMENT'S DISCUSSION AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS
To view Tourmaline's Management's Discussion and Analysis and Interim Condensed Consolidated Financial Statements for the periods ended September 30, 2020 and 2019, please refer to SEDAR (www.sedar.com) or Tourmaline's website at www.tourmalineoil.com.
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.
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