CALGARY, AB–(Marketwired – October 14, 2015) – Tourmaline Oil Corp. (TOU.TO) (“Tourmaline” or the “Company”) is pleased to provide updated production, cash flow(1) and exploration and production (“EP”) capital spending guidance for 2016 and 2017.
2016/2017 PRODUCTION AND CAPITAL GUIDANCE
The Company’s guidance for production growth, EP capital spending and cash flow for 2016/2017 is based on two commodity price scenarios which are set out in the table below.
If natural gas prices are in the $3.00-3.50/mcf (AECO) range in 2016, Tourmaline expects production to average 200,000 boepd with annual EP capital spending of $1.1 billion. Annual cash flow of $1,145 million is forecast in this Base Case scenario yielding essentially a cash flow budget.
If natural gas prices are in excess of $3.50/mcf (AECO) in 2016, an EP capital program of $1.35 billion is planned with resulting average production of 220,000 boepd. Annual cash flow in this Upside Case is estimated at $1,453 million, yielding free cash flow(1) of $103 million.
Exit 2016 net debt to cash flow(1) is forecast to be less than 1.5 times trailing cash flow in both scenarios providing unused credit capacity of between $800 and $865 million. Production growth in 2016 is approximately 26% over 2015 in the base case and 39% in the upside case. Free cash flow in both scenarios will be utilized for a combination of additional growth through an acceleration of existing projects in the EP inventory, new EP growth opportunities, property acquisitions in identified reservoir sweet spots as well as a potential dividend commencing in 2H 2016 or 2017 in the upside case. A base and upside case are also provided for 2017 guidance as depicted in the table below. The infrastructure skeleton is now complete in all three core operated complexes with infrastructure spending in 2016 and 2017 anticipated to be less than 20% of the total annual EP budgets. These reduced expenditures will provide sufficient processing capacity for the growing 2016/2017 production volumes.
(1) See “Non-GAAP Financial Measures” in the Additional Reader Advisories Section of this press release
| Production and Financial Forecast | ||||||||
| 2016 | 2017 | |||||||
| Base Case(1)($3.00-$3.50/mcf) AECO | Upside Case(2) ( > $3.50/mcf AECO) | Base Case(1)($3.00-$3.50/mcf) AECO | Upside Case(2) ( >$3.50/mcf AECO) | |||||
| Production (boepd) | 200,000 | 220,000 | 215,000 | 235,000 | ||||
| Cash Flow ($M)(4) | $1,145 | $1,453 | $1,267 | $1,764 | ||||
| CFPS ($/sh)(3) | $5.14 | $6.52 | $5.62 | $7.82 | ||||
| EP Capital Program(6) | $1.1 B | $1.35 B | $1.1 B | $1.35 B | ||||
| Free Cash Flow ($M)(5) | $45 | $103 | $167 | $414 | ||||
| Exit Net Debt ($M)(4) | $1,293 | $1,235 | $1,045 | $739 | ||||
| Net Debt to Cash Flow | 1.1x | 0.8x | 0.8x | 0.4x | ||||
(1) Base Case Price Assumptions- 2016 Gas price- $3.25 AECO; 2017 Gas Price $3.35 AECO; 2016 Oil Price- $62.50(W.T.I.-U.S); 2017 Oil Price- $70.00 (W.T.I-U.S.)
(2) Upside Case Price Assumptions- 2016 Gas price- $3.75 AECO; 2017 Gas Price $4.25 AECO; 2016 Price- $68.00(W.T.I.-U.S); 2017 Oil Price- $75.00 (W.T.I-U.S.)
(3) Based on 224.8 million basic shares outstanding.
(4) See “Non-GAAP Financial Measures” in the Additional Reader Advisories Section of this press release.
(5) Free Cash Flow is defined as total cash flow less capital expenditures. See “Non-GAAP Financial” measures in the Additional Reader Advisories section of this press release.
(6) Drill, complete, equip and tie-in capital costs of $5.5 million/well in Deep Basin, $3.5 million/well in NEBC and Peace River High. For 2016 Base Case, 110 Deep Basin wells, 40 NEBC wells, 30 Peace River High wells.
EP ACTIVITY AND PRODUCTION UPDATE
Ongoing transportation interruptions, on all three systems the Company utilizes, have reduced average production by approximately 7,500 boepd through the first nine months of 2015, resulting in revised full year average 2015 production of between 155,000-160,000 boepd, down from original production guidance of 164,500 boepd. This represents growth of between 37% and 42% over 2014 average production of 112,929 boepd (31% and 35% per share respectively).
Interruptible Transport (IT) availability during the fourth quarter would likely have allowed Tourmaline to achieve original guidance as the Company has considerable excess production available at Banshee Alberta, Wild River Alberta and in NEBC. Recently updated TCPL maintenance schedules indicate that it is now unlikely that any significant IT will be available in the fourth quarter.
Current production is 170,000 – 175,000 boepd with an additional 19,000 boepd tested and currently tied in awaiting facility access or expansion. Production is expected to reach 185,000 boepd in November with the start-up of the Edson plant and additional tie-ins throughout the EP portfolio. The Company remains on track to achieve 2015 exit production volumes of between 190,000 and 200,000 boepd. Tourmaline will have the production capability to achieve the 200,000 boepd exit but it remains unclear if TCPL will be capable of meeting full Firm Service commitments at that time, hence the expanded production exit range. Unplanned transportation outages on all three systems, including 56 days with firm service restrictions during the third quarter reduced quarterly production volumes to approximately 150,000-151,000 boepd. This represents an increase of 42,000 boepd (39%) from Q3 2014.
Tourmaline is currently operating 18 drilling rigs throughout the three core complexes, and plans to reduce this rig fleet to 15 by year end. The Company expects to tie-in a total 89 new wells during the fourth quarter of 2015, including 43 tie-ins in the Deep Basin, 21 in the NEBC Montney complex and 25 on the Peace River High.
Tourmaline continues to drill a large proportion of the highest deliverability wells in the Alberta Deep Basin, with individual well performance continuing to improve. Of the 18 new wells drilled in the Deep Basin since spring break-up of 2015, the average 30-day initial production (“IP”) rate is 12.7 mmcfpd, more than double the rate contemplated on the Company’s production performance template.
A combination of steadily improving operational efficiencies and reduced capital costs have allowed the Company to drill and complete the most recent 30 stage NEBC Montney horizontals for under $3.0 million, the lowest cost Montney horizontals in the Basin. Average reserves of between 5.5-7.0 bcf 2P per horizontal at Sunrise-Dawson are anticipated.(1)
Tourmaline’s NEBC Montney Complex achieved the 50,000 boepd production milestone during October. Unlike the majority of the Montney play areas in Alberta and B.C. the natural gas is sweet in the Sunrise-Dawson play area and combined with the high deliverability of these wells, has operating costs trending below $3.50 per boe.
(1) Based upon Independent Engineering reports for wells in this area and formation.
