Tourmaline Oil Corp (Alberta) T.TOU

Ink Research

[retiredcf]

August 9, 2023

Morning Report: More CEO buying and more dividends at Tourmaline Oil

Since we last featured it here on May 12th, Tourmaline Oil (TOU) has declared another special quarterly dividend. On August 22nd it will pay $1.00 per share to shareholders of record on August 14th. It also has a quarterly base dividend of $0.26 per share. Meanwhile, the share price has risen 23.7% since our last report as NYMEX natural gas prices firmed. Tourmaline has also benefited from its diversified distribution strategy of delivering product to a variety of natural gas hubs. On August 2nd, it reported a Q2 average realized natural gas price of $4.31/mcf, higher than the AECO 5A benchmark of $2.46/mcf over the same period. Tourmaline's deliveries to Cheniere Energy in the US Gulf Coast receive a Japan Korea Marker benchmark price (Q2 average of US$11.08/mmbtu) and represents about 5% of the company's price exposure.

In Q2, Tourmaline produced 495,918 boe/d (78% natural gas) down 1% from Q2 2022 due to wildfire-related disruptions. 2023 average production is expected to be 520,000 boe/d, within but at the low end of previous guidance. Tourmaline reported Q2 free cash flow of $545.5 million ($1.59 per share) and net debt of $791.1 million at Q2 end. Tourmaline aims to return the majority of its free cash flow to shareholders with special dividends being the preferred vehicle. Tourmaline believes its base dividend along with its maintenance budget are sustainable in 2024 at NYMEX US$1.50/mcf pricing. Between 2023 and 2028, Tourmaline aims to grow production at a compound annual growth rate of 6%. Its plan includes adding about 24 thousand bpd of predominantly condensate and pentane-rich liquids production from its Conroy asset build-out in BC which aligns with the anticipated start of LNG Canada exports mid-decade. One constant at the company is the persistent buying of company shares by CEO Mike Rose who has been buying again this month.