Tourmaline Oil Corp (Alberta) TRMLF

RBC

[retiredcf]

May 1, 2024

Tourmaline Oil Corp.
TOU Q1/24 Results - Ahead of Street

TSX: TOU | CAD 65.79 | Outperform | Price Target CAD 80.00

Sentiment: Positive

Tourmaline's Q1/24 results were slightly ahead of Street expectations, with 2024 capital and production guidance reiterated; Q2/24 volumes are now targeting 560-570 mboe/d on plant maintenance and planned gas injections (7 mboe/d). Mix was slighty better than expected, as liquids volumes continue to be robust on the back of richer NE BC Montney drilling. Additionally, TOU declared a $0.50/share special dividend for Q2 (as expected) and increased its base dividend by 7% (now $1.28/share annualized; 2% yield). Tourmaline remains best of breed in our opinion and continues to be featured on our RBC Global Energy Best Ideas List.

Conference Call

• 1:00pm ET (11:00 am MT) on Thursday, May 2, 2024 | Dial-in: 1-(888)-664-6383

Key Points:

• Q1/24 production of 592,077boe/d (24% liquids) compared to RBCe at 591,214 (Street: 591,824 boe/d) and drove AFFO of $2.45 which compared to street estimates of $2.39/sh (RBC: $2.33/sh). Liquids volumes came in ahead of our expectations.

• Capital investment of $556 million was below Street expectations at $623 million; $310 million ($0.87/share) in FCF was generated in the quarter.

• The company increased its base dividend by 7% to $1.28/sh (annualized, from $1.20/sh) and announced a $0.50/sh special dividend to shareholders of record on May 9, 2024.

• TOU completed the sale of its Duvernay assets for $53.1mm (1.6-1.8 mboe/d). The company also added 35.6 net sections of Deep Basin acreage in the quarter (49.1 tier 1 drilling locations).

• 2024 guidance was reiterated at 580-590 mboe/d on $2bn of EP capital, resulting in +5% YoY growth and $1.4 billion in FCF. Q2 production guidance aimed toward 560-670 mboe/d including the impacts of planned maintenance and 7 mboe/d of planned gas injections. The 5-year plan was also reiterated with the company reaching 715,000 boe/d by 2028.

• Recent operational highlights include: (1) The company expects to drill ~271 net wells in 2024 with 59 wells drilled in Q1; (2) During Q1, TOU operated between 13-15 rigs while heading into breakup where 5 rigs are in operation; (3) TOU drilled an 8 well pad in North Montney in 44.5 days (12 days ahead of schedule) with the total pad cost of $13.4mm; (4) Entering Q2, TOU has an inventory of 27 DUCs.