Tourmaline Oil Corp (Alberta) T.TOU

Ink Research

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Morning Report: Insider bets enjoy a BC productivity boost at Tourmaline Oil 

March 11, 2024

Since the pandemic, Canada has struggled on the productivity front. On March 6th, Statistics Canada reported that labour productivity in Canada declined for the third year in a row (-1.8% for 2023). However, there is a productivity bright spot in northeastern BC (NEBC). While not directly comparable with labour productivity, productivity appears to be on the rise in Tourmaline Oil's (TOU) BC Montney play. In its latest corporate presentation, Tourmaline, which is Canada's largest natural gas producer, highlighted initial 90-day cumulative production (IP90) growth at its NEBC wells. 2023 IP90 improved 6% from 2022 while oil and condensate IP90 improved 24%. Tourmaline's NEBC operations currently produce about 255,000 barrels of oil equivalent per day and Tourmaline expects to produce a total midpoint of 585,000 boe/d in 2024.

The expected 2024 output is lower than Tourmaline's 2023 exit rate of just over 600,000 boe/d (150,000 bbls/d liquids). The cut (entirely natural gas) takes into account a planned reduction in 2024 capital expenditures from $2.35 billion to $2.13 billion announced on March 6th. The move is in response to lower natural gas prices. It also comes despite Tourmaline's belief that it has over a decade's worth of drilling inventory profitable at AECO gas prices of $1.50/mcf. Meanwhile, Tourmaline announced a special dividend of $0.50 per share payable to shareholders of record on March 14th. It also boosted its regular quarterly dividend by 7% to $0.30 per share payable to shareholders of record on March 15th. The stock is down 6.8% since we last featured it here on December 1, 2023, taking a hit in late January after the Biden Administration said it would pause approvals for new LNG export facilities. However, it has regained some steam over the past month and insiders continue to buy, perhaps expecting more energetic days ahead for the natural gas industry.